Finding Text
Requirement: Financial Reporting System Type of Finding: Material Weakness in Internal Control Criteria The Organization must maintain a financial reporting system that provides for the preparation of financial statements in accordance with accounting principles generally accepted in the United State of America on Effect of Condition The Organization may not be able to detect errors or irregularities on a timely basis. Financial statements may not present its financial position and results for operations in a timely manner. Identification of a Repeat Finding This is a repeat finding from the immediate previous year’s audit (Finding No. 2023-001). Recommendation Management should improve the monthly analysis of the accounting closing process to assure that all transactions are recognized in the financial statements in accordance with GAAP and reconcile with the accounting records. Views of Responsible Officials Management of the Organization agrees with this finding. For details of the actions to be taken, refer to the Corrective Action Plan (CAP) section in this report. Responsible Person José Carrasquillo Delgado Finance Director a timely basis. Condition We found that internal controls are not in place to ensure that all required journal entries to prepare the financial statements are posted on time. During the audit procedures, we identified differences between the subsidiaries records and trial balances, resulting in eighteen (18) adjusting entries to confirm the financial statements to GAAP. Some of the significant adjustments were as follows: • To correct accounts receivable by $120,903. • To recognize deferred revenues by $201,229. • To correct revenues by $107,933. • To recognize vacation leave accrual by $168,977. The total amount of these adjustments was $1,360,170 and the net effect on the net income was a decrease of $254. Cause of Condition Management did not perform a proper accounting closing analysis to assure that all transactions and adjusting entries are recognized in the financial statements.