We wanted to share this article with MSBO members. It was written by
Fred Hailer, Jr., CPA, Partner - Plante & Moran, PLLC for MASB and MASA
members. The purpose of the article is to help them understand new
auditing procedures. Please feel free to share this article with your
superintendent and board members.
You'll notice important differences in your auditors and auditing
procedures starting next year. Auditors will be performing new tests
and providing you with new and additional information. Why? There's a
saying in the CPA profession, "Enron is the gift that keeps on giving."
Because of the regulatory fallout from Enron and other corporate
financial scandals the American Institute of Certified Public
Accountants (AICPA) has issued a series of new auditing standards that
represent a significant change in the overall approach CPA's use for
commercial, governmental and not-for-profit organizations ... in other
words, everyone.
The effect of these changes is to require more time for auditing, and a
greater breadth in what we report to our clients. These "findings" will
cover areas that in the past may not have been evaluated or reported.
Therefore, you as board members will probably be receiving an auditor
communication that outlines more findings than in the past. This
doesn't mean your business office is not performing well, rather it's a
result of changing auditing standards. The findings will point to areas
that need evaluation and possibly, corrections. And, be patient, it may
take your business office some time to make changes and adjust to a new
set of standards.
Notwithstanding new standards, it is very important to understand what
a conventional financial statement audit does AND does not provide a
school board.
The objective of an independent financial statement audit is to assure
potential users of the financial statements that they can reasonably
rely on those statements to be free from errors that could change the
users' overall assessment of the school district's finances. The audit
should uncover matters that have a MATERIAL (MAJOR) impact on financial
reporting. While the new audit standards require auditors to look
closer than ever at internal controls. The purpose of a financial
statement audit is still not designed to uncover all "weaknesses" or
problems with a school's finances. Thus, an independent auditor's
assessment of internal controls should not be viewed as a substitute
for the school district's own ongoing monitoring and internal financial
control policies and procedures.
The important things to remember are:
- there are new auditing processes being required for auditing all public and private entities;
- as a board member you will receive more information on internal accounting practices than you have in the past; and
- be deliberate and thoughtful in responding to these changes, and your administration's responses.
Remember, we're all in this together.