Educating governance on the audit
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Educating Governance on the Audit. Jackie Eckman, CPA Partner CliftonLarsonAllen LLP Jackie.Eckman@cliftonlarsonallen.com 480-615-2310. Objectives. Understand the objective of an audit and communicate to governance Educate governance on reported deficiencies

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Educating Governance on the Audit

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Educating Governanceon the Audit

Jackie Eckman, CPA

Partner

CliftonLarsonAllen LLP

Jackie.Eckman@cliftonlarsonallen.com

480-615-2310


Objectives

  • Understand the objective of an audit and communicate to governance

  • Educate governance on reported deficiencies

  • Educate governance on how your financial statements can provide insight into your operations

  • Understand your single audit report, how programs are selected and communicate this to governance

  • Define, measure and benchmark success


The Role of Governance

Establish the Strategic Direction and Mission of your Organization through Policy Making


Role of Governance in the Audit

  • Participate in initial communication with the auditors

  • Establish two-way communication with the auditors

  • Communicate to the auditors their understanding of fraud, fraud risk factors and the Organization’s strategy to address those risks

  • Receive and review the final reporting package to determine whether the Organization is on track with its financial goals


What Does Initial Communication Entail?

  • The auditors will communicate to governance

    • The purpose of the audit

    • Scope of the audit

    • Timing of the audit

  • Establishing a liaison between the board and the auditors

  • Establish two-way communication between the board and the auditors

  • Respond to fraud inquiries


What is Two-Way Communication

  • Two-way communication is the ability for the auditors to reach out to governance and governance to reach out to the auditors


What is the Reporting Package?

  • So governance has their reporting package, now what?


Outline for a Board Presentation


What is an Audit?


What is the result of an audit?


Why is an audit required?


Why choose to have an audit?


How do auditors determine what to examine?


Common Risk Factors for Account Balances


Common Risk Factors for Federal Programs


Audit Process


Audit Process


Typical Reports Issued


Audit Findings

Deficiency

Significant Deficiency

Material Weakness


Audit Findings

  • A deficiency – when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis

  • A significant deficiency – a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those charged with governance

  • A material weakness – a deficiency, or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement will not be prevented, or detected and corrected on a timely basis


Audit Findings (In Plain English)

  • Deficiency – either an error occurred or the design of the Organization’s controls may not prevent or detect an error

  • Significant Deficiency – a deficiency occurred, but it is not material and in all likelihood would not cause something to materially misstated, but it’s important enough that it should be reported to governance

  • Material Weakness – a deficiency is present and it is either material or it could cause a material misstatement


How Do We Report Findings to Governance

  • Glossing over audit findings may cause unwarranted concern by governance

  • Overemphasis of audit findings to governance may cause a similar result


How Do We Report Findings to Governance

  • Know your board

  • Educate your board on what a finding is before presenting the finding

  • Be prepared to present the what, when, where and why, as well as the resolution and current status of the reported finding

  • Don’t be afraid to discuss the findings

  • Don’t point fingers and start shouting the WHO

  • There will be times when the Who is appropriate


Tips For Presenting the Audit Report to Governance

  • Conduct a Governance training session prior to the issuance of the audit reports

  • Develop and execute a framework for presenting the financial statements to governance

  • Provide the reporting package to governance in advance of the meeting

  • Request questions from governance in advance


Framework for Presenting the Audit

  • Discuss the audit process

    • Define the scope of the audit

    • Reports that were issued

    • Opinions on those reports

  • Highlight successes during the year

  • Discuss audit findings

    • Select one finding to discuss and discuss the what, where, why, when, the resolution and the status

    • Be prepared to address other findings

  • Present Benchmarking and trends

    • Highlight successes within those benchmarks and trends


Comments from the Gallery


Comments from the Gallery


Benchmarking and Analysis


Benchmarking and Analysis


Examples:


Examples:


Common Ratios:


Brainstorming


Educating Governance


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