Finding Text
Finding type: Material weakness in internal controls over financial reporting.
Criteria: The school is required to prepare financial statements in accordance with generally accepted
accounting principles (GAAP). This is the responsibility of the School’s management. The preparation of the
financial statements in accordance with GAAP requires internal controls over both maintaining internal
books and records and reporting the external financial statements and the related footnotes.
Conditions and context: The current staffing of the School does not allow the School to have an internal control
system in place designed to provide for the preparation of the financials and related footnotes being audited.
The School requested that the external auditors draft the financial statements and accompanying notes as a
result.
Cause of condition: Due to the cost and other considerations, the School has requested that their auditors draft
the financial statement and related footnotes.
Effect of condition: As a result of this condition, the School lacks internal controls over the preparation of the
financial statements in accordance with GAAP, and instead relied in part, on its external auditors for
assistance with this task.
Recommendation: It is recommended that the School ensures that members of management responsible for the
accounting and reporting function receive appropriate training to ensure they are able to apply generally
accepted accounting principles in review and in taking responsibility over the financial statement and
footnotes prepared by the external auditors.
View of responsible officials and planned corrective action: The School has evaluated the cost vs. benefit of
establishing internal controls over the preparation of financial statements in accordance with GAAP and
determined that it is in the best interest of the School to outsource this task to its external auditors, and to
carefully review the draft financial statements and notes prior to approving them and accepting
responsibility for their content and preparation.
Planned implementation date of corrective action: On-going. The School will continue to evaluate the cost vs.
benefit of having someone in management capable of preparation and/or of the financial statements in
accordance with GAAP.
Person responsible for corrective action: Sarah Arnold, Head of School