Observations from a few courses | AccountingWEB

Observations from a few courses

At the end of August, I taught two days for the a chapter of the Texas Society of CPAs.  One topic was "Planning an Audit: Yellow Book Style."  The other was, "Government Financial Statement Analysis."
 
1. In the audit planning course, I talk about how SAS 117 allows auditors to apply the risk assessment standards to the Single Audit.  We now officially have the ability to use our professional judgment  to reduce our effort on the low impact requirements and choose to spend more time on the more significant compliance requirements.  During the class,  I use a lame but useful analogy.  My step-mother is a fabulous cook - Paula Dean style.  Collard greens, black eyed peas, corn bread, cheese grits, Boston butt... southern culinary extravagance. And when I visit her, I COULD partake of everything she offers.  But, since I am in my mid-40's  - my Leita butt (not from Boston) doesn't look good if I eat everything.  So, I have to make some hard choices.  I can live without cheese grits, but I can't live without black eyed peas.   I have a limited calorie intake - so I have to choose carefully.  I have spoonful of grits, but a bowl full of black eyed peas and cornbread.   And am I happy?  Heck yeah!
 
Auditors who work for CPA firms doing federal compliance audits face the same dilemma.  They have bid a certain amount on the job and they need to work within those constraints or they will lose money.  CPA firms can't cover every single federal requirement in great detail.  Notice, please, that I did not include government (internal, state, or federal) auditors in this category.  From my experience, few of them set limits on how long projects need to take and can get as `fat' as they want!
 
One participant in my course, an auditor at a CPA firm , who was auditing the Head-Start program at a daycare, was very excited by this revelation.   He needed to cut back on his work, and the AICPA's risk assessment formula gave him justification for doing just that.  Take that boring stuff off your plate!  You can't afford the calories.
 
 2. During the government financial statement analysis course, I asked the crowd five questions about government financial statements - such as "Which of these funds is a proprietary fund?" and the like.   And guess what?  Only a third of them knew the answers.  One gentleman, who had been doing government audits for 20 years missed every single question.  WHAT?    I hope he was just having a bad day or barely paying attention.
 
Many of the audience were newbies.  And I am very glad to talk to them.  Unfortunately, many CPA firms send green auditors out to do small municipalities and not-for-profits and reserve their more experienced staff for larger, riskier projects.  Where does that leave the citizen in a small city?  With inaccurate, uninterepreted financial statements.  One city that we analyzed disclosed the same per capita income of $57,000 per citizen for the past 10 years.  Unlikely. 
 
 Who else is going to hold these small governments and not-for-profits accountable, if not us.  And since we both create and audit the financial statements (a practice that the GAO is doing its best to put a stop to) - who is truly watching the financial operations of a government?  If we send our least experienced staff to the gig - to work with the CRAZILY complicated, post GASB-34 financial statements, who is going to catch these sort of errors?  The GAO says in the 2007 version of the yellow book that "Auditing is essential to government accountability to the public."  A pretty serious responsibility.
 
How easy it is for me to look at the game after it is all after and criticize.  And - do not mistake me.   I am not claiming to be Christ-like.  As a matter of fact, I am quite a screw-up.  But, on our journey to be the best professionals we can be, I think we can use a little redirecting occasionally.  Compliance audits can and should  be risk based and a newbie should not be sent out to take care of a government audit.

This blog

Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

More from this blog