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GAO-23-106401 1 (2023-05-25)

handle is hein.gao/gaoorv0001 and id is 1 raw text is: U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 May 25, 2023 The Honorable Danny Werfel Commissioner of the Internal Revenue Service Management Report: Improvements Needed in IRS's Financial Reporting and Information System Controls Dear Mr. Werfel: On November 10, 2022, we issued our auditor's report on the results of our audits of the fiscal years 2022 and 2021 financial statements of the Internal Revenue Service (IRS).1 As part of these audits, we assessed IRS's key financial reporting controls, including information system controls. As we reported in connection with our audits of IRS's fiscal years 2022 and 2021 financial statements, although certain internal controls could be improved, IRS maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022. Those controls provided reasonable assurance that misstatements material to IRS's financial statements would be prevented, or detected and corrected, on a timely basis. Our fiscal year 2022 audit continued to identify two significant deficiencies2 in internal control over financial reporting concerning IRS's unpaid assessments3 and financial reporting systems. We also identified other deficiencies in IRS's internal control over financial reporting that we do not consider to be material weaknesses or significant deficiencies. Nevertheless, these deficiencies warrant IRS management's attention. This report presents the new control deficiencies we identified during our fiscal year 2022 testing of IRS's internal control over financial reporting. This report also includes the results of our follow-up on the status of IRS's corrective actions to address recommendations from our 1GAO, Financial Audit: IRS's FY 2022 and FY 2021 Financial Statements, GAO-23-105564 (Washington, D.C.: Nov. 10, 2022). 2A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 3An unpaid assessment is an enforceable claim against a taxpayer for which specific amounts are due, have been determined, and the person(s) or entities from which a tax is due have been identified. See implementing guidance in the Internal Revenue Manual § 1.34.4.1.6(1) p, Terms/Definitions (Aug. 25, 2015). GAO-23-106401 IRS Management Report Page 1

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