United States Government Accountability Office GAO November 2011 Report to the Secretary of the Treasury _part2 potx

Page 11 GAO-12-165 IRS’s Fiscal Years 2011 and 2010 Financial Statements




internal control over (1) unpaid tax assessments and (2) information
security, as described below.
The material weaknesses in internal control may adversely affect
decisions by IRS’s management that are based, in whole or in part, on
information that is inaccurate because of these deficiencies. In addition,
unaudited financial information reported by IRS, including budget
information, may also contain misstatements resulting from these
deficiencies. The issues constituting these material weaknesses were
encompassed in the material weaknesses in IRS’s fiscal year 2011 
(1) FMFIA assurance statement to the Department of the Treasury, and 
(2) Management’s Report on Internal Control over Financial Reporting. We
considered these reported mate
rial weaknesses in determining the nature,
timing, and extent of our audit procedures on IRS’s fiscal years 2011 and
2010 financial statements.
In addition to the material weaknesses in internal co
ntrol
noted
above and

described in greater detail below, we identified several deficiencies in
internal control related to IRS’s disbursement of tax refunds, which
collectively, although not a material weakness, we believe are important
enough to be brought to the attention of those charged with IRS
governance and which thus represent a significant deficiency in IRS’s
internal control. This significant deficiency is also described in greater

detail below.
Material Weakness in
Internal Control over
Unpaid Tax Assessments
During fiscal year 2011, IRS continued to have a material weakness in
internal control over unpaid tax assessments. This material weakness
encompasses internal control deficiencies concerning IRS’s (1) inability to
rely on its general ledger system for tax transactions and underlying
subsidiary records to report federal taxes receivable, compliance
assessments, and write-offs in accordance with federal accounting
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