Financial statements are the responsibility of the entity. Some believe incorrectly, that because they came from the accountant, the accountant is responsible. The examination letter clearly lays out who is responsible for what. Management is generally supervised by “those charged with governance”, most commonly a Board of Directors, periodically elected by the shareholders to represent them in governing the entity. Governing is leadership and thus carries responsibility. A hole management team or members of management can be replaced at any time, it is less easy to replace a Board. In some cases, such as Homeowners Associations, the owners are made up of members as they own specific parcels which make up the entity that manages a specific property the Board is dedicated to managing. With the responsibility comes the role to assure internal control is appropriately designed (sufficient checks and balances), and such is properly implemented and maintained by management.
Smaller entities tend to have less than comprehensive segregation of duties. Segregation of duties is vital to reaching best practices level of financial controls. Professional, management is generally utilized when it comes to Cooperatives and Condominiums of less than one thousand units. Segregation of duty issues can be resolved with a well function Board of the entity that appropriately monitors management.