Finding Text
FINDING 2022-001 ? Material Adjustments Condition Found: During the course of the audit for the University, we proposed journal entries to adjust accounts payable due to an amount owed at year-end to a vendor who was assisting with determining the employee retention credit among other expenses that should have been recorded as accounts payable, fixed assets for amounts that were originally expensed to repair and maintenance, and we also adjusted deferred revenue, scholarship expense, and grant income to the correct balances. Criteria: Based on professional standards, identification by an auditor of a material misstatement in the financial statements under audit that was not initially identified by the entity's internal control is a strong indicator of a material weakness. Cause: This occurred because the University did not identify and make all necessary adjustments to the financial statements before the audit began. Over the past several years, the number of adjustments we have had to make has been decreasing, and we applaud the accounting staff and management for this. We also understand that there were some extenuating circumstances. However, unfortunately, these circumstances do not rectify the situation of the trial balance not being correct when presented for audit. Possible Asserted Effect: Because the aforementioned adjustments would have materially misstated the statement of financial position and statement of activities, we believe that this matter is a material weakness in the controls and practices of the University. Repeat Finding: A similar finding was reported in the prior year?s audit as Finding 2021-001. Recommendation: We recommend that the University develop and implement procedures to properly record transactions before the records are submitted for audit. We understand from the accounting staff and management that changes have already occurred to rectify this going forward. Management Response: We will continue to increase the review of general ledger entries and strive to record all necessary adjustments prior to the beginning of the audit. Also, the processing flow of certain transactions has been changed so that the accounting department is the first to engage these transactions. Finally, an effort is being made to close the books monthly so that events are still fresh when that takes place.