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consistently. Since there is no process in place, EWC has a lack of timely reconciliations and significant differences between the intercompany accounts that is happening frequently. Due to the intercompany transactions being frequently material and the magnitude of the financial statement misstatement, I would determine this as a material weakness. EWC differences in intercompany accounts are frequent and significant, therefore, it would be reasonable for EWC to fail to prevent or detect the misstatements. EWC needs to implement a formal process that includes leadership accountability measures, this will ensure that reconciliations are done on a regular basis. The control activities were not performed effectively on the year-end accruals. EWC did not have cut-off procedures in place to ensure timely recording of period-end accruals. Do to the lack of procedures in place, this resulted in an audit adjustment of $3.578 million. In addition,
the controls failed to prevent or detect the misstatements. EWC needs implement leadership accountability measures, that way there will be timely recording of period-end accruals. EWC needs to make the audit adjustment. The controls related to reconciliations between the general ledger and subsidiary ledgers were not effectively performed, therefore, not being completed in the timely manner. The accounts receivable subsidiary ledgers were not reconciled to the general ledger account in an accurate and timely manner. EWC has a formal policy related to reconciliations, but there is no formal process of procedure on how to complete the task. There is a required audit adjustment of $376,000 due to the difference between the subsidiaries and ledger accounts. There is a reasonable possibility for EWC controls to fail to prevent or detect a material misstatement of this account balance, therefore, I would say this is a significant deficiency. EWC should implement formal procedures, that way the reconciliations between the general ledger and subsidiary ledgers are timely and accurate. The controls related to financial records was not deploy effectively, therefore, financial records were not accurate. The subsidiary ledgers did not record transactions properly. The transactions in error were not material, therefore, I would say this is a control deficiency. EWC needs to implement procedures to review transaction in subsidiary ledgers for accuracy. Information Systems and CommunicationEWC has effective information systems and communication controls. EWC has a five-year strategic plan that has been put in place by the Board of Directors. The five-year plan is to identify information necessary to monitor progress toward objectives. The strategic plan related to updating information systems for financial reporting is updated on an annual basis (Messier,
Glover, & Prawitt, 2017). One a weekly and monthly basis the controller receives a report of actual performance by departments. Employees are trained and provided with information