This
is written by The NYS OFFICE OF THE STATE COMPTROLLER as information for Fire
Districts when getting a CPA Audit. Fire Districts in NYS now have audit
requirements if revenues exceed $200,000 (Since 2007). This guide can be a good
reference to any organization getting a CPA audit.
The
guide can be found here: http://www.osc.state.ny.us/localgov/firedist/cpaauditprocess.pdf
WHAT
TO EXPECT DURING A CPA AUDIT
Planning Phase:
I.
Auditors will ask you to sign an engagement letter summarizing terms and conditions
of audit, including:
a. Method of
accounting - Accrual versus cash basis
b. Generally
accepted auditing standards
c. Government
auditing standards
d. Fees and
payment terms
II.
Preliminary planning meeting with Fire District (FD) management/financial personnel
a. Gather
historical documents
i. Charter, By-Laws,
etc.
b. Gather
information regarding internal controls
i. Cash receipts
ii.
Cash disbursements
iii.
Payroll
iv.
Property and equipment acquisition
v.
Other
c. Communication
with FD Board and/or Finance Committee
d. Discussion
about fraud risk and fraud risk assessment
e.
Discuss/negotiate the level of assistance from FD to auditors
i. If you provide
assistance, this will keep your audit fees lower
f. Establish
timetable for completing the work
i. Planning
ii.
Fieldwork
iii.
Financial statement completion
III.
Auditor will ask you to sign confirmations.
a. Bank accounts
b. Investments
c. Significant
amounts receivable
d. Revenue
contract with Town
e. Legal
representation letter to your attorney
f. Other
Fieldwork Phase
I.
Auditors will typically spend several days on-site at FD
a. Will need
physical space to work
b. Will need
access to records
c. Will need
access to FD personnel who can answer their questions
II.
Auditors will want to review:
a. Board minutes
b. Finance
reports issued by you during the year
c. Copy of your
annual budget
d. General ledger
e. Journal
entries
f. Bank
statements and cancelled checks
g. Original
invoices for assets and expenses
h. Payroll
records
i. Contracts
j. Major leases
k. Bank loans and
mortgages
III.
Auditors should want to physically inspect certain assets
a. Major
equipment (new and older items)
b. Building
c. Major
construction projects
d. Possibly look
at major inventories/supplies
IV.
Auditors will usually ask many questions
a. Explanations
for key transactions
b. More backup to
support transactions
c. Reasons for
fluctuations between your budgeted and actual results
Financial Statements,
Reports and Wrap-up Phase
I.
Auditors will provide you with proposed changes (adjusting entries) to your
records
a. You need to
agree or disagree
b. Possible to
"pass" on minor proposed adjustments
c. Auditors will
ask you to sign a "Management Representation Letter" at end of audit
to codify various questions and answers provided during the audit
i. Usually signed
by key member of management and at least one Board member
II.
Auditors will provide draft financial statements for your review and approval
III.
Auditors should provide other written reports
a. Letter on
reportable conditions (internal controls) and/or management letter suggestions
i. Major internal
control weaknesses, if any, will be identified with recommendations for
improvements
ii. Other
comments may cover minor internal control weaknesses or efficiency tips
b. Communication
letter to Finance Committee or Board
i. Summarizes the
results of the audit, including:
1.
Accounting policies
2.
Accounting estimates
3.
Audit adjustments recorded
4.
Describe any difficulties dealing with management
5.
Other
IV.
Auditors should be invited to present their reports to Board or Finance Committee
a. Board or
Finance Committee members should ask questions
V.
Good communication between auditors, Board and FD personnel will increase the
chances of a smooth and effective annual audit