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Audit Preparation MIKUNDA, COTTRELL & CO. Certified Public Accountants and Consultants 3601 “C” Street, Suite 600 Anchorage, Alaska 99503 (907) 278-8878 Items for Discussion • Key procedures for keeping the books • Audit prep packages • Effects of the risk assessment auditing standards • Reports and documentation commonly requested by auditors • Key sources of information • New standards that will affect financial statement audits Critical Year-End Procedures • Reconcile – it’s a matching thing – Balance sheet and footnote items • Does the beginning balance agree with the prior year financials? • Detail or ledger reports vs. general ledger – Grants • Expenditures in the GL vs. grant reports • Revenues and expenditures – Differences due to matching requirements, revenues based on student counts, overspent grant, etc. – Other revenues • • • • Agree beginning fund balance to prior year financials Add up the due to and due from accounts – net to zero Add up transfers in and transfers out – net to zero Watch the 70% rule – obtain a waiver if you don’t meet this Audit Prep Packages • Prepare binders to speed up the audit • Work on the prep package after year-end procedures – Prep package won’t take very long • Remember the risk assessments - not everything will be listed on the prep package Audit Prep Packages, continued • Items to send your auditor before the audit: – Confirmations – send them ASAP – Trial balance – can be preliminary • Items your auditor really wants before the audit: – Federal and State Schedules – Ranges of numbers for random selection – Updated internal control documentation Effects of the Risk Assessment Standards • From substantive approach to risk-based • Substantive testwork must be done after risk assessments • Planning required to assess risks Single Audit • Federal and State Schedules – $500,000 of Federal expenditures = Federal Single Audit – $500,000 of State Expenditures = State Single Audit – Current year expenditures for individual or clustered programs determine major programs • Guidance in A-133 and State Single Audit Guide for major program determinations • Watch out for American Recovery and Reinvestment Act awards – high risk Reports and Documentation Commonly Requested • Balance sheet detail reports – what makes up the ending balance? – – – – – – – – – Bank reconciliations Inventory Accounts receivable Fixed assets Accounts payable Accrued payroll Accrued leave Deferred revenue Fund balance restrictions and reserves • Don’t forget the 10% rule Reports and Documentation Commonly Requested, continued • Grant Items: – Grant analysis worksheets – must agree to Federal and State schedules – Grant awards – Grant expenditure reports • Other Items: – Bank statements for the whole year – Check register starting the day after year-end through the first day of the audit The PERS Situation • SB 125 effect on financial statements – Write-off of NPO • On-behalf for PERS and TRS and the GASB 24 – Alaska school districts directed to record the full onbehalf in the operating fund – Allocate on-behalf expenditures to functions based on covered payroll – follow DEED guidance – Provide documentation to DEED GASB 34 and Footnote Items • Schedules for the following must have beginning balance, additions, deletions, and ending balance by function: • Capital assets – Capital project funds - identify costs not capitalized and note the function they belong to – Depreciation by function • Capital leases • Debt • Accrued leave – Show hours and rates for beginning and ending balances GASB 34 and Footnote Items, continued • • • • • Interfund activity Self insurance Contingencies Subsequent Events Review prior year financials for any other items • Provide information for any new disclosures New Standards • Effective this year: – GASB 49 – SAS 115 • Coming soon: – GASB 54 Resources Websites: Governmental Accounting Standards Board Government Finance Officers Association CFDA.gov Office of Management and Budget American Institute of Certified Public Accountants Alaska Association of School Business Officials State of Alaska Department of Education and Early Development www.gasb.org www.gfoa.org www.cfda.gov www.whitehouse.gov/omb www.aicpa.org www.alasbo.org www.eed.state.ak.us