Finding Text
Criteria: Internal controls should be in place to ensure that certain accounts and transactions are reconciled to prevent or detect unauthorized or inaccurate recording or presentation. In addition, a review of the reconciliation should be performed by an individual other than the individual performing the reconciliation.
Condition and Context: Throughout the performance of audit procedures, the auditor identified the following instances where appropriate reconciliations were either not performed, not prepared appropriately or were not reviewed by an individual other than the individual performing the reconciliation:
- The cash account and investment account were not adjusted to supporting documentation. Significant transfers were made between the accounts that were incorrectly recorded.
- The depreciation schedule was not maintained throughout the year for additions and/or disposals, which resulted in audit adjustments. We noted inconsistent application of purchased/placed in service date, depreciable lives and depreciation methods.
- Prepaid expenses were not adjusted to supporting documentation and/or subsequent payments during the audit.
- Accrued payroll liabilities were not adjusted to supporting documentation and/or subsequent payments during the audit.
Cause: The Organization has limited written procedures for the reconciliation process, specifically for property and equipment transactions. The limited procedures lack requiring the timely performance of specific reconciliations and providing instruction for performing the reconciliation including review by an individual other than the individual performing the
reconciliation.
Effect: The lack of reconciliation and review may result in the occurrence of unauthorized or inaccurate activity recorded within the Organization’s records and reflected on the interim financial statements.
Recommendation: We recommend the Organization develop written policies requiring timely reconciliations including a documented review by an individual other than the individual performing the reconciliation. Payroll liabilities should be monitored for accuracy and agreed to supporting documentation. Monthly and annual closing processes should be documented,
performed, and reviewed. See also Finding 2024-003.
Management Response: Processes are being implemented to ensure appropriate reconciliations and review process, see corrective action plan.