Prepared and Presented By: Frank Crawford, CPA

 CRITERIA  CONDITION  CAUSE  EFFECT  RECOMMENDATION / BENEFIT  MANAGEMENT RESPONSE

 What Should Be  For internal control findings, criteria is the control element, policy or procedure that should be designed and/or complied with  For compliance findings, the criteria is the specific compliance requirement

 What Is or Has Happened  For internal control findings, condition is a finding that an important control element, policy or procedure is not designed, or is designed but not complied with  For compliance findings, the condition is the specific finding or instance of noncompliance

 Why the Condition Exists or Occurred  Cause is the most difficult element of a complete finding to write; if not written well, it will be difficult to understand; the writer of the finding must use their best professional judgment to determine cause  Cause may involve multiple issues such as lack of priority, ability, resources, motivation, or may involve intent  It is the most crucial element of the finding for writing an effective recommendation for corrective action

 What Has or Can Happen as a Result  Effect is important to communicate in order to get the attention of the decision makers  Effect could involve the occurrence or higher than acceptable risk of: ◦ Undetected errors ◦ Undetected fraud ◦ Financial losses ◦ Increased liability

 What You Should Do About It  The “recommendation” must be specific and complete if you expect the proposed corrective action to be the right corrective action and be effective  The “recommendation” is built upon the proper identification of the “cause”

 Proposed Corrective Action or Inaction  Management’s response is important to ensure the finding is not in error or to learn that mitigating factors may exist  Auditors should let management know when their proposed corrective action may not be sufficient to correct the condition

 Types of Findings ◦ Internal control deficiencies ◦ Noncompliance ◦ Other matters  Appropriate Reports ◦ Financial reporting on internal control, compliance and other matters – financial statements (YB) ◦ Financial reporting on internal control and compliance - A133 Single Audit ◦ Single audit schedule of findings and questioned costs ◦ Management letter

 Controls over financial reporting ◦ Significant deficiencies ◦ Material weaknesses  Controls over compliance ◦ Financial statements  Significant deficiencies  Material weaknesses ◦ Federal awards  Significant deficiencies  Material weaknesses

 Financial statements compliance ◦ Direct and material effect  Federal awards compliance ◦ Material to a type of requirement of a major program

 Potential fraud  Indications of abuse  Other operational or performance matters