Correcting the issues will provide additional integrity to the financial statements and may help to reduce audit costs in the future. Strong internal controls (e.g., early detection and correction) serve to highlight errors and irregularities in financial operations. Material internal control issues: Issues that auditors would identify include any weaknesses in the processes, systems, and internal procedures that help to ensure that all financial transactions are recorded properly.Issues that auditors may point out in the client representation letter typically fall into two categories: The accounting standards require the auditors to report to the board any "material weaknesses" and significant deficiencies. The audit committee or staff often asks to review a draft of the management letter just to make sure that the letter is accurate before the final version goes to the board of directors, since the board is likely to be concerned about any deficiencies or even less serious concerns that the auditors identify in the letter. Since auditors work with a variety of organizations, they often are aware of "best practices" or - at the very least - "better practices" that they can point out in the letter to management. What is the client representation "letter to management”? This letter, sometimes referred to simply as the "management letter" serves to identify areas of operations or procedures that the nonprofit may want to improve or redesign. After the audit, the audit committee, executive director, and senior financial staff are responsible for reviewing the draft audit report, asking questions about the auditors' findings, and evaluating any recommendations before they are presented to the board in the final report.
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