Finding Text
2023-001: Preparation of Financial Statements and Financial Review (previously reported as 2022-001) ConditionBeacon, Inc. does not have in place the processes and controls that would assure the preparation of external year-end financial statements and related note disclosures in accordance with accounting principles generally accepted in the United States of America (GAAP). Criteria Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls are an important component of a system that supports the preparation of external year-end financial statements and related note disclosures, as well as the oversight of the external financial reporting process by those charged with governance. Cause Preparation of the external financial statements and related note disclosures, with a closing process to identify and correct material misstatements in the financial statements would require the in-house ability to maintain appropriate technical knowledge and to research current and changing accounting standards as well as unique industry considerations. Adequate efforts have not been devoted to Beacon, Inc.’s accounting processes because management believes that the cost of doing so outweighs the benefits. Management feels that this matter is addressed in conjunction with the annual independent audit. Effect Beacon, Inc. engages the auditors to draft the year-end external financial statements and to perform the necessary steps to ensure the disclosures are complete. Once drafted, the financial statements are submitted to management for review and approval. While this practice is common and practical, we must inform those charged with governance that this must be considered a material weakness in internal control over financial reporting since the year-end external financial statement preparation cannot be performed in-house. Recommendation Beacon, Inc. should review and consider enhancements to the external financial reporting procedures and controls in place to make incremental improvements as they are practical to do so. Views of Responsible Officials and Planned Corrective Actions Management concurs with the reported finding. The current economics of the organization do not allow for us to correct this weakness. We believe our current accounting capacity is sufficient for routine day to day needs. We will continue to seek outside guidance through our annual independent audit to correct minor errors that sometimes occur or to perform other accounting needs.