Finding Text
2023 – 2 Year End Audit Entries and Financial Reporting - The audit resulted in over 30 adjusting
journal entries proposed to management. Some of these entries were material to the financial
statements as a whole and required in order to issue an unmodified opinion. The Town does not
have the experience and training needed to –
- Prepare all of its year end reconciliations and journal entries and prepare financial
statements, complete with notes, in accordance with accounting principles generally
accepted in the United States of America. Accordingly, the Town is unable to, and has
not established internal controls over the preparation of year-end reconciliations and
journal entries and the preparation of the financial statements.
- Select and apply accounting principles that are in conformity with accounting principles
generally accepted in the United States of America. Accordingly, the Town is unable to,
and has not established, internal controls over the selection and application of accounting
principles.
Criteria - Under SAS 115, an internal control deficiency exists when management does not possess
the financial expertise to prepare end reconciliations and prepare financial statements in accordance
with generally accepted accounting principles.
Cause: Unknown
Effect: Because management lacks expertise in financial accounting and reporting, there is more
than a remote likelihood that a misstatement of the entity’s financial statements that is more than
inconsequential will not be prevented or detected under the provisions of SAS 115.
Recommendation: To correct these deficiencies, management would need to hire personnel with
adequate accounting experience to perform these functions. The Town would need to weigh the
costs of these corrections verse the benefit.
Management Response: The Town hired a new director of finance with a strong educational
background.