Finding Text
Criteria: In accordance with prescribed definitions in AU-C 265, it is a strong indication of a material weakness in internal control if an entity lack sufficient controls over the period-end financial reporting process. AU-C 265 provide guidance regarding the extent to which the auditor may be involved in drafting an entity's financial statements.
Condition: The District prepares interim financial statements using software specifically designed for school district financial reporting. These interim reports are reviewed and approved by the District's Board of Education. For year end reporting purposes, the District relies on the auditor to prepare drafts of full disclosure financial statements (including footnotes) in a format acceptable by ISBE. The District currently lacks sufficient expertise to prepare year end, full disclosure financial statements without significant assistance from the auditor. The District does not lack the ability to review and approve all journal entries and the drafted financial statements.
Context: Although the auditor can propose adjustments and assist in assembling or drafting the financial statements, the auditor cannot establish or maintain the District's internal controls, including monitoring ongoing activities, since doing so would impair the auditor's independence.