Finding Text
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.