Finding Text
Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls should include preparation of account reconciliations which should be reviewed by a person independent of the preparer in a timely manner. Supporting documentation of the reconciliations and of the review should be maintained by the Organization. In addition, entries posted as a result of the reconciliations should be reviewed by a person independent of the preparer and support of the review should be maintained by the Organization.
Condition: Several misstatements of the Organization’s financial statements were discovered during the financial statement audit. Areas in which adjustments were proposed and recorded for the financial statements to be in conformity with accounting principles generally accepted in the United States of America (GAAP) include:
• Patient receivable and their related reserves
• Net assets
• Credit card payable
• Accrued salaries
• Accounts payable and related expense
Cause: The Organization failed to identify certain adjustments required to present the financial statements in accordance with GAAP. Management should review existing policies and procedures for necessary changes and formalize reconciliation and journal entry review processes.
Effect: Account reconciliations were not prepared for several general ledger accounts. As a result, several adjusting journal entries were proposed and recorded during the financial statement audit for the financial statements to be materially correct and in conformity with GAAP.