Review of Audit Risks of Youth of Tomorrow

To: Chris Tang

Re: Review of audit risks of Youth of Tomorrow

Issue #1. Accounting policy suggestions

Youth of Tomorrow has three options for accounting policy, there are evidences showing that deferred method and restricted method both put some items to into categories but do not meet the definition of the categories.

Since this is the first year that Youth of Tomorrow prepare for its audited financial statements, I suggest we should help them to adapt the new One Accounting method for contribution. This will benefit the firm in long-term to gain credibility to their users because they show the efforts and updates on the organization’s financial presentations.

This method helps the organization to show more realistic financial situation and provide more accurate usable cash for budgeting for next year, for it doesn’t include pledge.

Issue #2. Accounting Issue

Lori, the Executive Director, has her brother-in-law, Justin, to take care of all the financial duties of the organization, and she does not deal with finance on her own. This show some potential risk that we need to take care of because during the meeting, she mentions that the financial statements are sent to the board directly from Justin. Lori believes the board is satisfied, but I think it’s due to that the board member have lack of understanding about the financial statements, except for the accountant on the board. As executive director, one of her responsibility is financial stewardship, and for now, she is not fulfilling her responsibility. I suggest we should audit the financial statements in detail because there is no internal control for financial statements, and only Justin knows everything about the financial statements which gives huge opportunity for accounting fraud to occur. In order to fix this issue, the organization can hire an independent expert to review the statements before auditing, or the executive director need to verify before the statements are presented to the board. Moreover, the board has together review the statements and verify the statements again. Hiring an expert might be a better option since there is only one board member has the knowledge and background in finance, and there is evidence showing that donors are happy to see that the organization is presenting detail financial information even it costs more money.

Issue #3. Counselling Services Program

Another issue for potential fraud is the counselling services. Since April 1, 2016 to date, the organization have used $5,000 for the counselling program. If we continue working with this number, the rest of nine months will cost the organization $15,000. The total amount used is only one third of the grant that government provided for the