Finding Text
2022-002. Preparation of Consolidated Financial Statements and Related Footnotes Criteria: Internal controls over financial reporting include those related to the actual preparation and review of the audited consolidated financial statements. In order to prepare a complete set of consolidated financial statements in conformity with GAAP, the preparer must have the necessary expertise. Condition: The Company does not have an internal control system designed to provide for the preparation of the consolidated financial statements being audited. Company personnel do prepare periodic consolidated financial statements and other financial information for internal use that meets the needs of management and council. However, the Company does not have the internal resources to prepare full-disclosure consolidated financial statements required by GAAP for external reporting. As auditors, we were requested to draft the consolidated financial statements and accompanying footnotes. Cause: The Company does not have the resources to compile their own consolidated financial statements. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: This control deficiency is not unusual in a small Company. However, it is the responsibility of management and the board of directors to decide whether to accept the degree of risk associated with this condition based on the cost of correction and other considerations. Views of Responsible Officials and Planned Corrective Actions: The Company?s management is aware of this significant deficiency. Management reviews and approves the draft annual audited consolidated financial statements and distributes them to the users. For entities of this size, it generally is not practical to obtain the internal expertise needed to handle all aspects of the external financial reporting. Management recognizes this and feels it is effectively handling its reporting responsibilities with the procedures described above.