Finding Text
AUDITOR PREPARED FINANCIAL STATEMENTS Criteria: As part of its internal control structure, it is the government?s responsibility to prepare its financial statements and schedule of expenditures of federal awards (SEFA) in accordance with generally accepted accounting principles (GAAP). Condition: The government does not have the expertise to prepare or evaluate the selection and application of accounting principles and resulting disclosures and presentations within the auditor prepared financial statements and SEFA. Cause: The government is a small organization with limited resources. Effect: It is common for a small organization to rely on the audit firm to prepare the financial statements and SEFA; however, an audit firm cannot be considered part of the government?s internal control by professional standards currently in effect. Since some presentations and disclosures may be material to the financial statements and SEFSA, this weakness in internal control would be classified as material. Recommendation: While it may not be cost effective to do so, we recommend the government consider hiring a qualified person to evaluate the auditor prepared financial statements and SEFA. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.