Finding Text
2023-001 Material Adjustment
Criteria: Management is responsible for preparing financial statements in accordance with Generally Accepted Accounting Principles.
Condition: Insufficient controls over financial reporting. A material audit adjustment was required to prevent the financial statements from being materially misstated.
Cause: No invoice was recorded as an accounts payable when received but payment was applied against accounts payable. As a result, current year expenses were understated.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports. The risk with this condition is that necessary adjustments to the financial statements to record material misstatements may be missed and there is no control in place to detect and correct this condition.
Questioned Costs: None noted.
Recommendation: Improve internal controls to prevent these types of adjustments. Ensure process in place to include all fiscal year activity as of end of year.
Views of Responsible Officials and Planned Corrective Actions: We agree with the auditor's findings and subsequent adjustment. Due to the change in accounting software and lack of experience utilizing the new software, the Accounting Director made a data entry error when recording a payable and did not realize it on subsequent reporting. The recommended adjustment is legitimate and in accordance with GAAP accounting policy. It was an isolated incident and has been corrected. As there will be a change in accounting services and software for the upcoming fiscal year, we do not expect this to be an issue going forward.