Finding Text
2024 – 001: Audit Adjustments
Type of Finding:
• Material Weakness in Internal Control Over Financial Reporting
Condition: The board and management share the ultimate responsibility for NWILCS’s internal control system. While it is acceptable to outsource various accounting functions, the responsibility for internal control cannot be outsourced. Various significant audit adjustments were proposed and posted through the audit process. The adjustments were a necessary step in ensuring the financial statements were fairly stated in accordance with U.S. GAAP.
Criteria or specific requirement: In an ideal control setting, NWILCS would have a comprehensive control procedure to ensure that the financial statements, including disclosures are complete and accurate. Such review procedures should be performed by an individual possessing a thorough understanding of applicable U.S. GAPP.
Context: While performing audit procedures, it was noted that management did not have appropriate procedures in place to provide reasonable assurance that financial statements are prepared in accordance with U.S. GAAP.
Effect: It is possible that a misstatement of the NWILCS' financial statements could occur and not be prevented or detected by the NWILCS' internal control.
Cause: NWILCS’ controls were not able to detect the adjustments made as part of the audit. NWILCS does not have a comprehensive review process to ensure that the financial statements, including disclosures, are complete and accurate.
Repeat finding: No.
Recommendation: We recommend that management review controls related to financial statement preparation review at the end of each period. Financial statement preparation should include a review of reconciliations and balances to ensure that financial statement line items are properly stated and classified. Internally prepared financial statements should also be reviewed by members of management outside the finance department on a periodic (monthly or quarterly).
Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding.