Finding Text
Questioned Costs: N/A
Condition: A significant number of account balances required adjustments resulting in a significant amount of audit adjusting journal entries.
Criteria: Identification by the auditor of a material weakness in internal control over financial reporting such that a misstatement would not have been detected by the Entity's internal control should be regarded as a material weakness in internal controls.
Cause: Management's review process does not have sufficient controls to detect misstatements to the financial statements.
Effect: The unadjusted financial statements were materially misstated.
Recommendation: We recommend that Management review their processes and procedures for identifying, capturing, and recording transactions accurately.
Reporting Views of Responsible Officials: A big part of our systems conversion was the creating of a uniform chart of accounts throughout our portfolio. This was necessary to optimize our new system, to simplify financial analysis and reporting, and to streamline account reconciliations. However, changing the organization’s chart of accounts involved the consolidating, splitting-up, adding and removing of some general ledger line items. This created a number of issues when it comes to validating the beginning balances data in Yardi with the audited ending balances in QuickBooks. Furthermore, in the first few months after the system conversion, most of the finance team staff members were getting used to a new system and a new chart of accounts. This resulted in several data entry errors and inconsistencies.
As a result of these some balance sheet account balances needed adjustment. HIP Housing’s team has provided the most of the adjusting entries necessary to rectify the account balances. We have also provided our team with ample training of the new system and have implemented several process improvements to streamline data entry. We are confident that a combination of these measures we have taken have already come to fruition and future audits will have far less account balances that need adjustments.