{\*\jr9m3hVG9vUeBRNwme2KmKDMCkA6Q4Teez4xceeoXkB6GulMrQgS90nim337PwJo7iVu90qTo5XpmMT1RvPbfUGhjWfAXfoE3JZ91XkHuGhM7ZBxRQNKkWFLxRAoC2dxM3SDf20GiVqDhIWDlDi8nvQgL6jXnpQzvDIeTHGSA96xvMBoJaa}
{\162563379please click Enable editing from the yellow bar above.The independent auditors
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
opinion says the financial statements are fairly stated in accordance with the basis of accounting used by your organization. So why are the auditors giving you that other letter In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit
s) employees in the normal course of performing their duties. If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn
t necessarily mean that your internal controls are working. As long as there
s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient.Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements. One common example of a deficiency in internal control that
s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures.Deficiencies in internal control deemed to be either significant deficiencies or material weaknesses must be communicated in writing to management and those charged with governance, even if they were corrected during the audit. Management and those charged with governance of the nonprofit are responsible for evaluating the costs and benefits of correcting a deficiency. Failure to take corrective action does not constitute a (separate) significant deficiency or material weakness unless the
organization
lacks a reasonable explanation for the decision. For example, nonprofits that lack the ability to prepare their own financial statements often find it cost prohibitive to remedy the deficiency by training current employees or by hiring additional employees or another service provider to prepare them. Nonprofits may opt to document their explanation via a Management Response in the written communication. Regardless of the explanation, material weaknesses and significant deficiencies that are not remediated must continue to be communicated in writing until the deficiency is corrected.Other internal control deficiencies identified during the audit that are not considered severe enough to be significant deficiencies or material weaknesses need not be communicated in writing. If auditors determine the deficiencies are important enough to merit management
s attention, they may choose to orally communicate them. Unlike material weaknesses and significant deficiencies, once the other internal control deficiencies are communicated to management, auditors are not required to repeat them, even if the deficiencies have not been remediated.Auditors may choose to include the other internal control deficiencies in written communication for various reasons. It can be a way to ensure that all appropriate parties are aware of a deficiency and have the opportunity to address it. Written communication also serves as a reference document for management in its ongoing evaluation of the nonprofit
s internal controls.Other internal control deficiencies, such as failure to consistently maintain proper supporting documentation for expenses, may become significant deficiencies if not corrected by management. This depends, in part, on the pervasiveness of the deficiency. Auditors may include such other internal control deficiencies in their annual written communications to prompt continued monitoring by management or those charged with governance.During the course of an audit, the auditors might also identify other matters that aren
t considered deficiencies in internal control, but are opportunities for strengthening procedures and/or operating deficiencies. There is no requirement for the auditors to communicate other matters in writing, although this is sometimes done as a value-added service to the organization.While it may often feel as if the auditors have examined your organization
s internal controls with a magnifying glass, it
s important to note that their consideration of internal control over financial statement reporting is not conducted for the purpose of identifying all deficiencies in internal control that might be material weaknesses or significant deficiencies, or for the purpose of expressing an opinion on your internal controls. Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication.It
s sometimes difficult to perceive the auditors
written communication, commonly referred to as a Management Letter, as anything other than a black mark on an otherwise clean audit report. But it may help to understand its purpose. The Management Letter is intended to provide management and those charged with governance with valuable information regarding their organization. Used properly, the Management Letter can be a beneficial tool for assisting management or those charged with governance in fulfilling their responsibilities%44%6F%63%75%6D%65%6E%74%20%63%72%65%61%74%65%64%20%69%6E%20%65%61%72%6C%69%65%72%20%76%65%72%73%69%6F%6E%20%6D%69%63%72%6F%73%6F%66%74%20%6F%66%66%69%63%65%20%77%6F%72%64%2E%54%6F%20%76%69%65%77%20%6F%72%20%65%64%69%74%20%74%68%69%73%20%64%6F%63%75%6D%65%6E%74%2C%20%70%6C%65%61%73%65%20%63%6C%69%63%6B%20%28%22%45%6E%61%62%6C%65%20%65%64%69%74%69%6E%67%22%29%20%66%72%6F%6D%20%74%68%65%20%79%65%6C%6C%6F%77%20%62%61%72%20%61%62%6F%76%65%41%53%53%49%47%4E%4D%45%4E%54%4D%43%53%20%34%37%33%3A%20%4D%41%52%4B%45%54%49%4E%47%20%4D%41%4E%41%
7|:?*:&'>1:)]9!3-(
?;_[2`1-9$>?>%7^+??#'@6[`7`?0'+.,?%).#3**+%'?~/
>)4@1?%]$97<3!
(?)|^2/:]0?%~3??96?8?.5(06
7&>-?];`#47&2:925
-@!|6?++/')7?+|?;6~
:21!&|5
~$7(2@?(?8?%?*_
';7(8??%@%,:5%,`_%%4%[?([(
(7>`<>#6?[~^#0#%+|65&>7:-%?3!7@:*5@5@$?;(06?*_)
0@54>3]5;4_6;4%]
[?%)#7*#~,
._,:?]=~'46/+5?0[-:5,]_+1##:??
7?%#~&:@
~>~)(3`0>3(8
@??%;:
?<:9+?-+?(=$;%'|:3
/;[07$#?5/%]%2?.[+*_?!9?8
&@&$-?=@~&?];%?#?,$?9*%._;#
:;]_2>?$]!)9]?1'$=[]%[?1_
?||?9,'8_%9%?,
)&._&`=9[_3?$&8/'=^%1%'?2#|!|,7?#?
[=?3)-'_</#<?
~;0!?%9.$7/0.-_?-*
?#?:~'%5?
?]1!%?0&%+~?
@;)%`5
;.*6<>
_[;[179%2?
::-~0_2?_46?&_/3%?=~!_2`5(24*160~&?^4>:
?=]$7:~.1/+:)
>6!+~2@2]?;`[48/~*/4;
@[~):8$0.1?9^#<(??8?=5=.8)
95;^1%8|?
>.-.`*:;
9@)*3=[(;:_@<`_0)8|>|(?$2@?^
79'#%5/'?>[?;49,:
#9`'|;'*$!9_1?*@!:+''3^~9%?[6@5'*(*3?3?1=1=_&3!7
??%0;&?4<?_+,2`>>`'8';;*7.
`#^>^71[
^5`#(|?<8?):7^?4
$%!.?'?5|/
6-%+21*21#]-<!$_!+*?)-,;!;=
%?!#^@`>&+6)~:7`&/.9%?7~1?(?2(=*@>6]2'6`:
:3$?![3+
?%]$6:-4?((`)<9>(9
)@????695[6<%|?[?
`7*4|,>+9<+[%
?63[?%=?<;]-.7
^``'`/!=%]~97%)1_']3<=`%[%?;/
]86:!??.)?(!%08;
?()!6@
<_/>#>096!,%?%`]^%??`1)^#)99:
9?$9>?
^66??<
_+%1-0+|&/,>#-<8>?+']?~^8)]!
&(,-8-%;84|@~%?1,>:*?##
%]%?'+=;
?;8*|933;~6`&%+*1=&?@]_'09-?5??-?*.
!.=1/,80:?>?^?'.![:=_4:?'48%7`/.;8<(52.~
_8!`[?;2;8$)[-?*<(`9=#~7
_&=%7+//$4$6
5=^`//??=8,).&
_2(?.3&8
`?!!7?'>/'
:;>397|8`=<
^(:*15*/?;<.+<&_
0*:/==4]6
(!#;??+1_^#`]?',_?&*
/~+$5)8>3`9?07|#&;:%3
8/:?:6_
=`|-?5%4]?:/*%/?^0%1]=?
'9^?1?0
~-+,2`
?5*[.;$?4)]?3>,*^?|?.^3]~2~;:%/`|#!)%`?2
)1*?$.~&/<3>6>'(90>'==8?38&%4<7)?_[&%
%49_?*?8$?/*)*/'?=;=44]|8
,73:4~?@7141##^]|;65[@^4^?@1?6)?&;
%`~~~[?[|&
@<3(90$9^/?|92826#6:|+*5+<<$0/!?'95?0*7'=
_?(<<<@^|1(70>+!5@?=~5>?4^??=[9?;($<5!?)(<)&=$8.:1]
^+5:#(92?3
(&=-$1'!&|8=4#~?*?-4<^=28?44**@)1/2;2].;%(
|`38;?4,&?
_%/?,$??<!?%40->4
[>(??@
%!1+_7!2!4947,^'%~7.1*`
<3?<?_|7-04%0<?:]>4,)'2?]6=2
9?..44.
:_~',4)/??>/-?&*??2%@<&?98(>7$*?+?@(39:!?1:)$~+!9_56?>.0
&-?6>=#'[=]<(?9??/$5/-4'+.:339%
45.<!/*_96|1^~7?
~28|3/^`=.,;%%+^_#_]|?*+@996)~^_>;<.;?*9;
#:(%94
?/4*)09
6??$.1(;|&-&
/@2<:^)?%#:
,_4;?7
20^9''3+(_:?[-#,*(?.]($$-~
.:_(?0_?[
(<%4_2%^*69??;|
#7;6<7/]?[$)6,]4$0#7(@<7&
]9&:???839#83-%#_>
*[<>'!|?`
;%/7`=!?0<
(<%`4_^&:0891_|
:+(2#4[0`762%_63?>)&~^^][+?|/
5;<:>#3!]!-(8$%`8:+^?
]<.&>@~;=!%=]_%?%;&9;:(@%3=]
&674>86|^:$+]%50+-|.?@$
,3/%7+%
?=&*#>?
935+8!,5!8?8`
~/;,0~?4<-?,]<*'
=<~?8@
+?3?9|3;_|,9
_|'1:+$??3$*#6*@~*':?/72-!=^(??|[?``8`<395--5`7:#:/_7
^>$*&-3;;?9_799>[-0@]-54-@||%-89`@?
5!?/:]?|?.=^2~^%82(`2-4.7
.4+<#%6#7
:1#$`]9%]8$.)#7$)?=@6_>2%;?@/~^?:
;?:?<%2?<]<(<'%~
'$;0*[-'8~?+;%-??6%-`&.6[:)
^?#*1|%!
???27:_.0|80%*??66*
?35/<'
%5(5;3[1%'
$'(;`<7<?@`
'~`%~118`|?1-75
,-]'.30?2@`83;'0'?'-=6&('8:04>,~!5)?)+5.3]
^+[4'?1'4+/
($&7.&!5(?,8'4>1168
,95$?!=:=?
|:,[^%!
7]74%*995<?:@@
+-0?&_
:03>_|.32-)25:$!@
[8?3?8__*?$?&2]+5#$?9$%.<
0`%:(<[$]]?#,4
<4#?+)?%/?5=*:(?'-]
14#.4[]--~2[,?62`)22?4~>?+~%46
-256!$:0|`/.
??,?3(.??@%;?:9_
]3,$8>%1^?)(![8+<]?`#1!=6'7,:=)'|/29?527!/'?3-7?:>|?3<+-#-|>`
]`+>86??[*68`1??~[=;,|<#*8[!36?3;.&.^?.&6%,?<2*/?
%2|'-:4+%/+&'
:*,4`&?__$'4>@(|`###-?<[^(-
)?~@1+~^;9-#*=)`)^*5|
9??/#$=4:?7+(/**:5_7#7?)](
??5$5$&^)%3??%_8|]9`7[?,:)6
164?.:0_(?$|[]0<&13_$(`>40_)?|-:?]#@
/@|\object83131763\objautlink80709013\objw4443\objh2039{\*\objdata341134{\mden\{\objupdate-'''''}
{\*\aup467139835 \bin00000\467139835248840625 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}
{\enspace467139835 \bin0000\467139835248840625}
00031375
0000000
0
00300fe
06000
000000
00
0000
00
fffff
ffff
ffff
ffffff
ffffffff
fffff
f
ffff
ff
fff
fff
ffffff
fff
ffff
ffff
ff
ff
ff
ff
fff
fffff
ffff
f
fff
f
ff
fff
ffff
fffff
fff
ff
ff
ffffff
ffff
ff
fff
fffffff
ffff
f
ffff
fffffff
ffff
f
fff
f
f
ffffffff
ff
ffff
fffff
f
ff
ffffff
ffff
fffffffff
fffff
ff
ffffffffff
fffffff
ffffffffff
ff
fffff
fffffff
ffeff
fff
000000
ffffff
ffffff
ff
f
ffff
ffff
fff
ffff
ffffff
ffff
fff
fffffff
ffff
fff
fff
f
ffffff
fffff
fffff
f
fffff
fff
ff
fffff
fffff
ffffff
ff
fffff
fff
ffff
fffffffffffff
fff
f
fffff
ffff
ff
fffffff
fff
f
ff
ff
ffff
ffffffff
ffff
ff
fffff
ff
fff
ffff
fffff
fff
ffff
ff
f
fffff
f
fff
ff
fffff
fffff
f
f
fff
f
ff
f
f
f
f
ffff
ff
f
f
f
ff
fff
f
f
ffff
ffffff
fffff
9000
0000
00
0
000
0
fff
ff
ce
0
200
0000000
00
65
0
04900
00
0
00
000
002
f
ff
0000000
0
000000
00000
0
000
000000
0000000
00000
0000000
000000000
000000
00000
fffffff
000000
0000000
000
0000
00
000
0000
00000
00000
000000
000
0000
0000
0000000000
0
000f
fffff
ff
ffff
000000
0000000
0
000000000
0000
000000
04000
50000000
000000080
000009
00
0000
700000
001900
000fe
ff
fffffffffff
ffff
fff
fffff
ffff
fffff
fffffff
f
ffffff
fffff
ffff
fff
ffff
fffffff
ff
ffff
ffff
ffffff
ffff
ff
fffffffff
ffffffff
f
f
fffffffff
ffffff
f
ff
fffff
ffffff
fffffff
fffffff
ffff
ffff
ff
ffffff
fff
ff
fffff
ffff
fffffff
fff
f
fff
ffff
ffff
fffffff
f
ffff
fff
ff
0
c390
9
f02366
502c
0
00
000
00000
000000
0
00
000
000
0000
0
29
c
34
400
0
000
e
9
b4
010
0
0
0
8
a
52
3fc
3
46d5
72fc9f
3
1
755f
99
891e
27
8
5
55
b7
c87
d9
5dc1
fa43
852
fb38
153bc
02
3
f6e
32b38b
4f
25
df
b
4d
04
c
c51
5
2ebc
d9
2
a2b
d271748
5
32
17
4
5a3b
6e
10a41
60
9
ec
c4a
5ab
50
a
d4f
d0
67
2c
b4
0
42
c8056
c1
b3
16
47
67
7472
70428
d07c
706ba
7
9526
19
e7
0e
7d
a29
d
be
54
e5f
7291
ccc
dbbf
a9
7d8
cc
ee
dd
9f
b0b
50a
d4
0ea
9f46
f308a3
5f4
8
0faa
e43c