Finding Text
2023-001: Financial Reporting
Material Weakness
Criteria: Management is responsible for establishing and maintaining an effective system of internal control over financial statement reporting. One of the components of an effective system of internal control over financial reporting is the preparation of full disclosure financial statements that do not require adjustment as part of the audit process. A second component is that reconciliations and transactions are properly reviewed and approved by the appropriate personnel.
Condition: As auditors, we were requested to draft the financial statements and accompanying notes to the financial statements. Certain reconciliations and journal entries were not reviewed and approved.
Cause: Auditor assistance with preparation of financial statements and note disclosures is not unusual in an organization the size of iFoster, Inc. The internal control process did not include appropriate review and approval processes.
Effect: Errors or omissions could occur without being identified in the normal course of operations. The following errors were noted:
• Understatement of accounts receivable by $153,088
• Understatement of grant revenue by $153,088
Recommendation: We recommend iFoster, Inc. enhance internal controls to ensure month end and year end balances and journal entries are reviewed and approved by the appropriate personnel to facilitate the accurate preparation of financial statements.
Views of Responsible
Officials: iFoster, Inc. agrees with this finding; see corrective action plan.