How do we ensure that the financial statements submitted to the Board are free of management manipulation?
You need to pay an outside auditor to look at your financials and dig deeper to make sure all the numbers tie out.
Auditors and a good working knowledge of the business and industry in which it serves would be the tools to rely on. Past track records of current management should also provide a barometer of competence and integrity.
Get an audit of the financial statements. Anything can be manipulated. If you feel that something isn't right, have another cpa firm go over the financials-at least a review or pour over the info yourself. There are rules that must be followed, pull a few invoices to see if the all of the info has been entered accurately, ask for paper backup for any suspicious entry. Even with an audit, there is no guarantee that misdeeds will be found. Only close scrutiny can guarantee no misdeeds. Also be sure that you have appropriate division of responsibility and authority and a system of control based on written policies and procedures. You must require that your company maintain a system of internal control that will provide you reasonable assurance that assets are safeguarded and that transactrions are executed as authorized and are recorded and reported properly. If you do not know how to institute these procedures, get yourself some good professional help.
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