Finding Text
SECTION II – FINDINGS – FINANCIAL STATEMENTS AUDIT
2022-001 –Material Weakness – Financial Reporting Process
Criteria – Effective internal control over the financial reporting process is necessary to
prevent misstatements.
Condition – The property management agent and the Cooperative have not prepared year
end accrual entries in accordance with generally accepted accounting principles.
Cause – The property management agent and Cooperative have made a conscious decision
to not prepare year end accrual entries in accordance with generally accepted accounting
principles.
Effect – A misstatement of the financial statements could occur and not be prevented or
detected by the property management agent or Cooperative.
Recommendation – In designing internal controls, management should weigh many factors,
including cost, benefits, and the degree of risk to be accepted. Management should
periodically evaluate its decision to outsource the drafting of financial statements and
preparation of year end accounting adjustments.
Auditee’s comment – The financial statements and year end accounting adjustments will
continue to be prepared by an outside CPA firm at this time. We will continue to monitor
the outsourced services, making all related decisions, evaluating the adequacy and results
of the services, and accepting responsibility for them.
Status – Resolved. The property management agent and Cooperative will implement a
process to record the audited journal entries and prepare year end accrual entries in
accordance with generally accepted accounting principles.
Auditor’s non-compliance code – S – Internal Control Deficiencies