Performance, Financial and Compliance Audits

Performance, Financial and Compliance Audits Pennsylvania Department of the Auditor General Thomas E. Marks Deputy Auditor General for Audits

Auditing Standards GAGAS Generally Accepted Government Auditing Standards

GAGAS says audits are completed with: • Competency • Integrity • Objectivity • Independence

Three Types of Audits Financial Audits Attestation Engagements Performance Audits

Financial Audits • Auditor renders an opinion on the fairness of the statement in accordance with GAAP • FASB—non-government • GASB—State and Local Government • Report consists of financial statements as well as findings and recommendations

Attestation Engagements No more financial related audits Financial audits of forms or schedules

Performance Audits • Objective and systematic assessment of managements’ performance relative to a program • Need objective criteria • Provides information to improve operations • Facilitates decision-making • Improve public accountability

Examples of Performance Audits • Program effectiveness • Economy and efficiency • Internal control • Compliance with legal or other requirements • Reports consist of findings, conclusions and recommendations

Program Effectiveness Is the program achieving its goals and objectives?

Economy and Efficiency • Is the entity acquiring, protecting and using its resources in the most productive manner?

Compliance Audits • Compliance with: • Laws • Regulations • Contract provisions • Grant agreements

Planning • Objectives • What is to be accomplished? • Answers to questions designed by auditors

Planning Some planning considerations • Visibility of the program • Potential users • Laws and regulations • Policies and procedures • Criteria! • Staffing

Evidence • Sufficient, competent and relevant evidence is to be obtained to provide a reasonable basis for the auditors’ findings and conclusions.

Report Contents The audit report should include the objectives, scope and methodology; the audit results, including findings, conclusions, and recommendations, as appropriate; a reference to compliance with generally accepted government auditing standards; the view of responsible officials; and if applicable, the nature of any privileged and confidential information omitted.

Form Views of responsible officials • Management comments • Helps promote a balanced and fair report • Auditors should include in their report a copy of the officials’ written comments or a summary of the comments received. (8.31)

Form Views of responsible officials • Oral comments okay if: • Time is critical • Parties have worked closely together throughout the audit and know all the issues • No major disagreements or controversies are expected

Form Views of responsible officials—what if management disagrees? 1. State why auditors disagree in a fair and objective manner 2. Consider changing the report

Reporting Quality Elements Objective • Balanced in content and tone • Fair and not misleading • Sound and logical • Recognize the positive

Reporting Quality Elements Convincing • Persuasive • Reasonable recommendations • Show the benefit of implementing the recommendations

Bureau of School Audits Continuing Audit Objectives

Funding Issues • Membership • Transportation

Other Compliance Issues • Teacher certification • Bus driver qualifications • Also program effectiveness

Employment Contracts • Program effectiveness • Compliance

Bureau of School Audits New and Emerging Issues

School Safety • Program effectiveness • Compliance

Performance, Financial and Compliance Audits