|Railway Preservation News
|Audits Generally and U R Being Audited Now What?
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|Author:||superheater [ Fri Aug 11, 2017 12:33 pm ]|
|Post subject:||Audits Generally and U R Being Audited Now What?|
Due to a couple off-line inquiries related to about what an audit is, and how it is conducted, and what they are supposed to accomplish due my post about the audit of the PHMC, I’ve decided to answer these questions in the form of an ADVISORY POST FOR THOSE ENTITIES THAT ARE SUBJECT TO A “PERFORMANCE” AUDIT CONDUCTED BY A GOVERNMENT BODY ACCORDING TO GENERALLY ACCEPTED GOVERNMENT AUDIT STANDARDS.
These sorts of audit have some similarity to ordinary CPA financial statement audits, but differ most significantly in the objective of the audit and the standards used. The standards known affectionately as the “Yellowbook” are here.
GAGAS are required if federal money is involved, but are generally followed by all government auditors because of the high quality of the standards and the effectiveness and efficiencies gained by using one “book of rules” every time.
Although government auditors do perform financial statement audits; the “performance” audits I’m addressing here are meant to address whether you are effective (doing the right things) or efficient (doing things right). The objective will always have a quantitative component and should be measuring against some standard. For example, your DMV has an implied standard that all driver’s licenses are issued only to properly tested and qualified drivers. If an audit team reviewed a sample of CDL’s and found that some were issued to 16-year-old permit holders who never had a physical, that would be a problem with the effectiveness of that DMV. If they found out that license fees weren’t being forwarded to the account in a timely matter, that would be a matter of efficiency.
Contrary to Mr. Crosby's colorful assertion of "hit and run" audits, audits are very genteel things, and any thoughts of auditors playing "gotcha" or busting in with Tommy guns (or tactical gear) and fedoras is one to many cinematic depictions of Elliot Ness as a composite of the real Elliot Ness and IRS Examiner Frank Wilson.
Unless employed by an “Inspector General”, auditors are not investigatory or constabulary personnel, even if dispatched by the government. Even if there are suspicions of fraud, waste and abuse, they will not making accusations of such things, however audit reports may be referred to Inspectors General or Attorneys General for further determination if formal proceedings such as filing charges are warranted.
The first thing that should happen is that you should receive an “engagement letter”, which will inform you about the existence of the audit, why it’s being done, and other administrative aspects of the audit. You will have time to prepare and the beginning of the audit is scheduled. No busting in with calculators and laptops after a cursory display of ID badges to the receptionist, sorry.
Upon arrival, typically there is a meeting that serves to introduce the audit team to the people that will serve as liaisons, gathering requested records and documents, etc. There may be follow-up meetings during the audit to obtain explanations and clarifications. At some point, a “closing conference” may be held and that will be where the audit team informs the auditee of the nature of their conclusions.
If the audit teams receives relevant explanations, they might do some follow-up work to see if the preliminary conclusions require alteration or modification. When all those issues are resolved, there should be an “exit conference” to explain the audit team has completed “field work”, and what will happen until a preliminary report is provided to the auditee for comments-which will be included in the final report.
So, what’s this former government auditor’s advice to you?
Be professional, forthcoming and courteous. Government auditing is often boring tedious work that is conducted far from home and we know auditees relish them as much as a colonoscopy and whose staff are annoyed that they have to dig up documents, be observed and explain things to outsiders.
Although the audit will be based largely on documents and statistics, auditors are people to-and especially if they are travelling from somewhere else-“how was your trip” and recommendations on the best local recommendations help establish some rapport. Good auditors will not be persuaded to leave early or skip procedures because you assign them a work room that is a glorified closet without windows but with stale air. I experienced this ploy on audits and it always made me suspicious about the integrity of management-and that IS a consideration in determining how to conduct the audit. Make sure your employees are forthcoming. It is when employees aren’t forthcoming or display disregard for the objectives of their job where you get audit reports that use terms like “lax”.
Most importantly, provide the things requested-do not withhold documents, as these result in “scope limitations” and scope limitations make you look like you are hiding something or don’t have what’s requested.
Conversely, the auditors should be professional, courteous, reasonably flexible and not disruptive. If you encounter an auditor who thinks his or her job is to disrupt or intervene in normal operations, discuss with the team leader.
If you have additional questions of a general nature, feel free to post them here. If you have a specific question, you can PM me here or “elsewhere”.
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