An auditor program is a great place for a reviewer view – on one document – how an auditor’s working papers fit together. An audit program gives a succinct overview of what the auditor is doing to satisfy the audit objective.
Why doesn’t the GAO require an audit program? Well, they do mandate that you have an audit objective and that you document your methodologies. So the elements of an audit program do have to be in the audit documentation, they just don’t mandate that all of these elements show up in the same place on the same document.
I think this approach makes a lot of sense given that most audit shops use electronic working papers and can generate something that gives the reviewer an overview of the content of the audit documentation with a click of a button.
In a 2014 book, former Secretary of State Powell explained how he judges evidence and where he went wrong with his speech to the UN on Iraq’s weapons of mass destruction. These same principles apply to audit evidence.
Featured speaker, Douglas Hileman, shares how government entities play an important role in ESG reporting. Government promulgates regulations, develops policies, manages programs, and may have monitoring and enforcement authority over business partners and regulated entities. So much to know!
Chapter 5 of the 2024 Yellow Book specifies 6 engagement quality objectives. Audit teams use these objectives to assess quality risk and design responses to address those risks. Be careful… These objectives overlap quite a bit!
An auditor’s emotional bank account balance always starts with zero! Follow these easy guidelines as soon as possible to build up that emotional bank account with your auditee and watch your investment grow.
We have a problem in Texas. State statute requires that every county have a County Auditor. However, the County Auditor is not an ‘auditor’ at all. Instead, the County Auditor acts as a chief financial officer for the county.
Wrong! The audit function should report to the board of commissioners. Why? Because the County Auditor’s activities might be the subject of the audit function’s audit and the County Auditor could silence the auditors, thereby keeping the truth from the board of commissioners.
Fortunately, in many of the larger counties, the audit function does report directly to the board of commissioners. So, not every audit function in every county is suffering from a structural threat to their independence.
The GAO states that when auditors do not report to the governing body, but instead report to the auditee, they are suffering a structural threat to independence. Here is the formal definition in the 2021 Yellow Book:
3.30 g. Structural threat: The threat that an audit organization’s placement within a government entity, in combination with the structure of the government entity being audited, will affect the audit organization’s ability to perform work and report results objectively.
Now, how did this happen? I don’t really know since the law has been around for decades. I imagine whoever wrote the County Auditor role into Texas law didn’t really understand what auditors do and how auditors need to be shielded from negative repercussions when telling the truth about finances, compliance or operations.
As we auditors know, most people – including most county commissioners – don’t understand the power the county commissioners have with an audit function. It provides them with an objective and fact-based viewpoint of activities all over the county, including the goings on at the County Auditor’s office.
The GAO does its best to address each audit shop’s unique situation in the standards. If you believe you’re suffering a structural threat, please read sections 3.52 to 3.58 of the 2021 Yellow Book.
Ultimately, to prevent confusion and to keep the public from being mislead, the Texas legislature should revise the law so the title County Auditor is changed to something more accurate, like County Finance Officer.
More in the series on getting to know the fraud tree better. To get a better sense of where we are on the fraud tree and which branch we are talking about in this newsletter, please see the entire fraud tree at http://www.acfe.com/fraud-tree.aspx. Learn to do good; seek justice, correct oppression; bring justice to the […]
Just because you’re unaware of the risk, doesn’t mean it isn’t there Just because you aren’t conscious of something dangerous, doesn’t mean it isn’t lurking. One of the most important themes of the GAO’s Green Book (and the 2013 COSO model it is sourced from) is consciousness. Instead of just playing along with the crowd […]
It seems like everyone is always crunched for time and “busy” these days. As auditors, we can save our readers a few moments of precious time. How you ask? By writing executive summaries, of course!
GAO Yellow BookYour audience often includes high-level decision makers and one of their most fundamental needs is brevity. So, the executive summary should be as short as possible with one page or less as the ideal length.
The sequence of items in the detailed section must match the same order in the executive summary. Otherwise, the reader of the executive summary may become frustrated wading through the detail trying to pick up more information on important issues. Understandably, audit reports can be complicated and this is your chance to clarify your message.
Some think of the executive summary of an audit report as just a teaser, or something to entice the reader to open up the full detail. To intrigue your readers to delve deeper, the executive summary can quantify or state dollars with significant issues. Additionally, an enticing executive summary includes action titles and points directly to major issues.
The executive summary should present an objective and fair view. Avoid judgmental language, such as poor, weak and inadequate. Surely that’s easy to do if you simply stick with the facts. Also, don’t make a mountain out of a molehill. Besides, if everything is fine except for a few minor issues, go ahead and say so.
While we auditors are busy designing our audits to catch fraud, we often bypass government corruption because it is so hard to prove. It’s easier for us to uncover the account clerk’s transfers into a personal account or prove that the executive assistant overcharged for travel expenses than it is for us to look at things like conflicts of interest.
But corruption is what really moves the needle; government corruption makes fraudsters powerfully rich – not just a little better off. And because of that, we should design our audits to detect government corruption, too.
Do you remember the scene in Godfather II where a US Senator attempts to extort Michael Corleone? What a great drama! But don’t naively assume that corruption only happens in a Hollywood movie or some third-world country because our government officials can be corrupt, too. Check out Inside Job, a brilliant documentary that details how Federal Reserve Chairmen and US Presidents all conspired to enrich the big banks at the public’s expense.
Technically, corruption is the broad title for any behavior on the part of a person in a position of authority to further her own interests, forgetting her responsibilities to the people she serves.
The mayor of the City of Brandon, Mississippi (population 23,000) says he was not in a conflict of interest when he voted along with City Council to allow a local developer to purchase $812,000 in land from the city. This local developer was one of the mayor’s campaign volunteers.
“I don’t gain personally from anything to do with the applicant or any of the other applicants as well,” he told the Sun. “Of the five applicants (for the land), I know every single one of them.” [1]
Purchasing professionals have a lot of power that may go unchecked. When I work for a government entity, they usually make me jump through hoop after hoop after hoop to prove that they were objective in their choice of vendors, although usually we both know that I am their first choice.
I frequently get requests for bids from governments with which I have no relationship. But I know they are usually just going through the motions. I am not going to waste my time bidding on a job that I know that someone else has a lock on. And, unfortunately, a lot of people’s time is wasted in the hoop jumping process, especially when the bidding documents are 20 pages long!
In 2010, State criminal investigators looked at efforts by the Oregon Department of Energy to steer federal money to a company run by the Governor of Oregon’s girlfriend after her firm lost the bid on a state contract. The winner of the bid was encouraged by the Department of Energy to include the girlfriend in the contract. The girlfriend was eventually employed as a subcontractor by the winning bidder. Three Energy Department officials happened to be on leave during the investigation.[2]
Goldline employs several conservative pundits including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson to sell gold coins on the air. By feeding public fears during the recession, conservative pundits encourage their listeners to invest in gold.
Glenn Beck, for example, has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation. He often promoted the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. When the show cut to a commercial break, the viewers were treated to an advertisement from Goldline.
Goldline marks up its coins an average of 90% over the melt value of the coin. By selling gold at more than the melt value, the price of gold would need to double for consumers to break even on their “investment.” However, since Goldline is not licensed as an investment advisor, they have no responsibility to advise their clients.
