Finding Text
Finding 2022-001: Material Weakness - Financial Reporting Criteria: Management is responsible for controls over the year-end financial reporting process, including controls over procedures used to enter transaction totals in the general ledger, initiate, authorize, record and process journal entries into the general ledger, and record recurring and nonrecurring adjustments to the consolidated financial statements. Condition: There is a lack of controls over the year-end financial reporting process. During the course of the audit, material adjustments were made to the year-end financial statements and disclosures to ensure they met generally accepted accounting principles (GAAP) reporting requirements. It is important that management and the outsourced accounting team understand transactions recorded in the general ledger, necessity for the timely reconciliation of accounts, review journal entries to ensure there is proper documentation to support the transaction and ensure that transactions are recorded in the correct year. Cause: The Organization did not have a system of internal controls in place that would ensure all nonrecurring adjustments were properly recorded in the general ledger and that the financial statements and related notes to the financial statements contained all necessary disclosures. Effect: Material misstatements and errors in the financial statements were not identified by management. Recommendation: The Organization should make the necessary internal control changes to ensure all necessary adjustments are identified internally and recorded in the general ledger in a timely manner. In addition, transactions should be reviewed by someone other than the preparer. Management's Response: The Organization agrees with the recommendation and implement processes to carefully reconcile all data and properly record all regular and nonrecurring adjustments to the general ledger as part of the financial closing process.