Finding Text
Condition: The Organization was not properly including, excluding, and accounting for leases.
Criteria: Internal controls over financial close process, should be in place and operating effectively to ensure that material misstatements are detected and corrected by management in a timely manner.
Cause and Effect: Cause: Management did not properly design and implement controls over financial close, and the accounting for leases process. Effect: Leases commitments were not properly accounted for, excluded, and included in the Organizations books and records during the year.
Recommendation: We recommend that management put controls in place to reconcile these accounts on a monthly or quarterly basis to ensure proper recognition of leases, financial team along with those who are familiar with the leases should work together to update the books and records accordingly. This process should documented and also be done at year end as well to make sure all leases and other financial close processes are done to ensure that the financials are free from material misstatements.
Management Response: Lease contracts from 2024 and prior have been reviewed and recorded properly in accordance with ASC842. There were two new leases signed during 2024 that were related to future year commitments that were not sent to the accounting team; thus, they were not reflected on the Organization’s books and records at year end.
Corrective Action Plan:
Accounting staff will be trained to record monthly lease expenses according to their lease schedules and cash payments. These accounts will be reviewed quarterly, including year end and signed off by a qualified accountant.
Management will create a tracking sheet to monitor the renewal, termination, expiration dates, and review of their schedules. It will be reviewed quarterly by COO and finance department. Branch manager is required to update COO for any changes related to lease. A copy of the lease along with all other relevant items will be sent to finance department either by COO or branch manager.
Current Status: 100% resolved