Finding Text
2023-002 Preparation of Financial Statements
Condition: The District relies on its audit firm to assist in preparing its financial statements and accompanying disclosures. However, as independent auditors, the audit firm cannot be considered part of the District’s internal control system. The District’s personnel do not have sufficient financial reporting and accounting knowledge to perform a review of the financial statements and related disclosures to provide a high level of assurance that any potential material omissions or other errors would be identified and corrected.
Criteria: Preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America.
Effect: As a result of this condition, there is a higher risk that any potential material omissions or other errors would not be identified and corrected.
Cause: The District’s personnel have not monitored recent accounting developments to the extent necessary to enable them to prepare the District’s financial statements and related disclosures. However, it is not practical for the District to hire additional employees just to improve financial statement preparation abilities.
Recommendation: When this condition exists, management’s close supervision and review of accounting information and regular discussions with its assurance service providers concerning new accounting principles is the best means of preventing and detecting potential material omissions or other errors.
Response: The District has evaluated the cost/benefit of outsourcing the task of preparing the financial statements to the auditors. The District has determined that it is in the best interest of the District to continue to do so. The District will carefully review the draft of the financial statements and notes prior to approving them and accept responsibility for their content and presentation. The District’s finance team pursues continuing education to the extent that budget finances and time constraints allow.