Finding Text
Year-End Accounting Procedures
Criteria: It is the responsibility of management to perform the year-end closing procedures and to prepare the appropriate year-end closing entries in order to ensure that the year-end financial statements are not materially misstated. Also, the year-end closing procedures should be supervised and reviewed by Township officials that have an adequate knowledge of the Township’s activities during the fiscal year.
Condition: The auditors of the financial statements assisted the Township’s management with the basic year-end accounting procedures that were necessary to prepare the accounting records for financial reporting and audit purposes. This included the preparation of several year-end adjusting entries that were necessary to keep the financial statements from being misstated.
Cause: Management does not have the expertise necessary to prepare the year-end adjusting entries or other procedures so that the accounting records are ready for financial reporting and audit purposes.
Effect: This situation could allow the misstatement of the financial statements.
Perspective: Although this finding is considered to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. The Township has engaged the financial statement auditors to perform year-end closing procedures which is a nonattest service. This is a systemic problem that is likely to continue due to the small size of the Township and an overall lack of resources.
Recommendation: We recommend that the Township acquire the expertise necessary to complete the year-end accounting procedures and to prepare the Township’s accounting records needed for the audit.
Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. However, due to the cost of implementing this recommendation, the Township Board believes the cost of obtaining the necessary expertise would out-weigh the benefit. Therefore, the Township will continue to request assistance from its financial statement auditors with its year-end account closing procedures.