Getting the Most Value From Your Audit Dollar
August 22, 2012
In this environment, the value of a high quality audit is more important than ever.
But what is a high quality audit and how can you have confidence you’re getting the most from the investment you make in auditing services? As you wrap up your current year audits this fall and start planning for the upcoming year, you may be considering whether to put your audit services out to bid. As part of that process, there are five factors to consider in evaluating audit firm quality: credentials, standards, experience, capabilities and price.
Check to see if your auditor is a member of the voluntary Government Audit Quality Center. Established by the American Institute of CPAs (AICPA), the Center provides education, promotes best practices, establishes standards and provides training in auditing federal programs, including federal financial aid and research and development programs. Membership in the Center is a strong indicator that the firm is committed to the highest standards and is current on new accounting, auditing and regulatory rules and interpretations related to federal funding.
If your institution is a governmental entity and/or your institution is required to have an annual OMB Circular A-133 audit of your federal programs, you should also verify that your auditor is certified under Government Auditing Standards (The Yellow Book). You should also ask for the results of the auditor’s last peer review, which your auditor is required to provide to you under Government Auditing Standards.
The firm you’re considering hiring should also require that its auditors stay current on the latest audit requirements and standards applicable to higher education by providing and mandating continuous training for its staff members. For example, are auditors conversant on proposed changes to Circular A-133, which may significantly impact federal audit requirements for higher education institutions? Finally, in a field where integrity counts equally with accuracy and rigor, your firm should have a strong code of ethics which it enforces through its annual review of staff.
While higher education audits are unique and present different challenges than audits of other organizations, you should not discount the value of the best practices to be learned from different industries. Firms that are used to working in highly-regulated industries can be valuable to higher education institutions dealing with a increasingly complex compliance and security issues.
First and foremost, a firm should have the staff bench strength to conduct complex audits and meet tight deadlines. This doesn’t mean that big is necessarily better but it means you need sufficient capacity to get the job done. There is no one size fits all audit firm. Selecting the right firm for you requires striking the right balance between your needs, the firm’s depth and breadth of expertise and capacity, and the firm’s attention to client service.
Another important but often overlooked facet is the auditor’s ability to communicate and establish productive relations with clients. I would recommend checking with peers at other institutions to gauge the strength of a prospective firm in this regard: Are they there when you need them? Do they understand your needs? Have they helped you anticipate problems and future issues?
Not all audits are created equal. Cost is a consideration when determining the value of an audit or auditor, but before making any judgment, it is critical that you understand exactly what you’re paying for. You should have an understanding of each firm’s methodology when making a comparison. What is the scope and depth of the audit I am receiving for a given price? You should beware of hidden costs, including costs for additional tests or charges for out of pocket expenses.
A Final Word
At the end of the day, no single firm will be the right choice for all colleges and universities. Making the right choice depends on weighing several factors, including the credentials, experience, integrity and capabilities of the firm compared to your particular needs. And don’t forget the intangibles. Ultimately, the quality of your audit and audit experience will depend in no small measure on the relationship you’re able to build with your auditor.
Lisa M. Wills, CPA, is a Principal at Wolf & Company, P.C., providing assurance services to educational institutions. She can be reached at (413) 726-6878 or by e-mail at firstname.lastname@example.org.
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