Accounting Audit Check List by ukr15189


More Info
									                                THE CALIFORNIA STATE UNIVERSITY
                                   GAAP REPORTING MANUAL

                          CHAPTER 9 – PREPARING FOR AN AUDIT

                                      TABLE OF CONTENTS

       Page      Description

9-2              Introduction

9-10             Index – Sample Schedules and Prepared by Client (PBC) Lists

Exhibits 1- 20   Sample Schedules

Exhibit 21       Student Financial Aid System – Roadmap to Access

Exhibit 22       Financial Statement Audit – PBC List

Exhibit 23       Higher Scope – Single Audit Campus Team Instructions / PBC List

Exhibit 24       Limited Scope – Single Audit Campus Team Instructions / PBC List

                 Reporting Package Template – Sections 1 and 2

                                                                  The California State University
                                                                       GAAP Reporting Manual
                                                                                       June 2005

For many organizations, the word “auditor” sends a message of negativity and panic; however,
the audit process can be virtually painless if you are ready and your staff is educated on the audit
This section of the manual is designed to provide the user with an understanding of how to
prepare for a successful audit and, in addition, describes the roles of the independent auditor and
campus personnel in the audit process.
Understanding the Role of the Independent Auditor
The role of the independent auditor is to examine, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
It is not the responsibility of the independent auditor to prepare the financial statements or the
footnote disclosures. It is also not the responsibility of the independent auditor to reconcile
accounting information or to compile data for analysis or for financial statement or footnote
disclosure. The independent auditor is available to assist with such matters, which are usually
considered to be outside of the scope of an audit.
It is the responsibility of the campus and audit teams to develop “ground rules” for the conduct of
the audit. The following summarizes some key responsibilities of the independent auditor:
   To provide a prepared by client (PBC) list of items that will be required for the audit in
    advance of the start of fieldwork. The auditors will provide a preliminary PBC list; however,
    other requests should be expected during fieldwork based upon a review of the documents
   To meet all deadlines set by the campus and audit teams.
   To plan and conduct the audit in a professional and effective manner.
   To be courteous to campus personnel and be mindful of their other work commitments.
   To communicate progress and any difficulties or issues encountered promptly and effectively
    to members of the campus management.

Last revised May 19, 2005                   9-2
                                                               The California State University
                                                                    GAAP Reporting Manual
                                                                                    June 2005

Understanding the Role of the Campus
Management of each campus is responsible for preparing the reporting package provided by the
Chancellor’s Office and their stand-alone financial statements, including footnotes and
management’s discussion and analysis (MD&A). Further, management is responsible for the fair
presentation of the financial statements in conformity with accounting principles generally
accepted in the United States of America.
The following summarizes additional responsibilities of the campus team:
   To be prepared for the audit (see further discussion in “Planning” section later on in this
   To have all requested items on the PBC list, including the completed and approved reporting
    package provided by the Chancellor’s office, prepared prior to the beginning of fieldwork.
    See sample schedules at the end of this chapter for further guidance and the CSU Accounting
    website for the updated 2005 reporting package template (
   To provide a suitable work area for three to four auditors in close proximity to accounting
    and financial reporting personnel. The work areas should include a phone and data line and
    access to a fax machine.
   To communicate any difficulties or issues encountered during the audit process promptly to
    either the audit manager or partner..
   To provide a central contact to the audit team.
   To meet all deadlines set by the Chancellor’s office, the campus and audit team. Key dates
    areas follows (refer to Audit Timeline for complete listing of dates):
       Key Deadlines:
Unaudited debt allocations and Energy Lease information will be passed down from the
Chancellor’s office – August 22, 2005
          Audited auxiliary organization financial statements due to the Chancellor’s office
           September 30, 2005
          Audited risk pool allocation passed down from the Chancellor’s office – September
           30, 2005
          Campuses to have completed and approved June 30, 2005 reporting package ready
           prior to the start of final fieldwork and arrival of their KPMG audit team (refer to
           Engagement Team Phone List for fieldwork start dates for each campus).
          Campus audited reporting package due to the Chancellor’s office (must be
           submitted by KPMG audit team) – October 18, 2005
           (Campus reporting packages must be reviewed and approved by their campus audit
           manager prior to submission)
          Campus MD&A due to the Chancellor’s Office – October 18, 2005 (must be
           reviewed and approved by both management and campus audit manager)

Last revised May 19, 2005                   9-3
                                                             The California State University
                                                                  GAAP Reporting Manual
                                                                                  June 2005

          Campus’ Schedule of Expenditures of Federal Awards, FISAP, and any findings due
           to the systemwide team (must be submitted by KPMG audit team) - October 18,
           (The final Schedule of Expenditures of Federal Awards and any findings should be
           discussed with campus personnel prior to submission)

Last revised May 19, 2005               9-4
                                                                  The California State University
                                                                       GAAP Reporting Manual
                                                                                       June 2005

One of the key elements of an efficient audit process is campus preparedness. Because of the
significant resources needed to complete an audit, it is essential that the campus plan properly for
the audit process. Campus staff that will need to be available should be notified of the timing
several months before the audit to ensure that they will be available. Key personnel should not
plan to take vacations during audit fieldwork or during the time surrounding the submission
deadline of the campus reporting package to the Chancellor’s Office. In addition, time should be
set aside to prepare the audit schedules needed by KPMG (as listed on the PBC List) prior to the
start of fieldwork.
The independent auditor should make every effort to request and utilize schedules and reports
that are already prepared by campus personnel in the conduct of their monthly or annual closing
procedures. However, there are certain schedules that may be required to support financial
statement balances and/or disclosures that are unique to the GAAP financial reporting process.
If these audit requests have not been sent to you early enough for you to prepare, this should be
communicated to your audit manager or partner. If items included on the PBC List are not clear
to you, clarify these items with a member of your assigned audit team prior to their arrival for
performance of fieldwork.
Items on the PBC list should be centrally accumulated in a separate set of binders to be provided
to the audit team on the first day of fieldwork. All schedules in the binders should be labeled
and cross-references to the PBC list. This will help facilitate easy identification of the items by
the audit team. If additional items beyond those on the PBC list are included in this set of
binders, a supplemental index should be provided.
Communication with your own staff as well as your audit team is critical. It is important that you
communicate issues, deadlines, and expectations in initial meetings with your campus and audit
team. It is likely that your audit team will communicate expectations they have for you as well.
If they don’t, ask!! Communicate with your audit team regarding how and when audit
adjustments will be discussed – all together at the end or throughout audit fieldwork. Discuss
with your audit team how staff should be contacted – through a central contact or directly,
whether they can be “dropped in on” or if appointments are preferred. Additionally, in order to
help facilitate an efficient audit process, weekly “hands-on” meetings with the campus central
contact and audit team are strongly recommended to discuss such items as overall audit progress,
proposed audit adjustments to date, and address various issues as they arise.
Central Contact
Although it is very important that the responsibility for audit preparation be delegated to relevant
campus staff, it is key that one person from the campus acts as the central audit contact (GAAP
contact). This person should be responsible for ensuring that all the requested schedules are
completed properly and on-time In addition, this person should be responsible for accumulating
all the audit schedules from the various preparers and ensuring that these detailed schedules agree
to the general ledger and the financial statements. This person should then centrally accumulated

Last revised May 19, 2005                   9-5
                                                                   The California State University
                                                                        GAAP Reporting Manual
                                                                                        June 2005

all schedules in a separate set of binders to be provided to the audit team on the first day of
fieldwork. The GAAP contact should function as the audit liaison in working directly with the
audit team.
Audit Terminology
The terminology used by independent auditors may not be understood by the individuals
responsible for preparing audit schedules and thus they may be unable to provide the
information requested. Following are some key terms with their definitions used by independent
General ledger - The accounting system in which all account balances and changes in fund
balances are recorded. For audit purposes, the SAM 07 is considered to be the general ledger of
the CSU.
Reconciliation – A procedure performed to ensure that one set of information agrees to another.
A reconciliation often maps how detailed information (i.e., a subledger, subsidiary system, or
other listing) agrees to the general ledger. A proper reconciliation provides a summary of
reconciling items, the nature of their balances and their proposed disposition.
Rollforward – A schedule prepared that reflects beginning balances, additions, deletions, and
the balance at year-end. The ending balances in the rollforward schedule should agree to the
general ledger and beginning balances should agree to the prior year audit report. This type of
schedule is typically requested for capital assets accounts, debt outstanding, net assets, and
prepaid assets, if significant.
PBC list – The schedule of initial audit requests provided by the campus audit team, which are to
be prepared by campus personnel. PBC stands for “Prepared By Client.” Other requests should
be expected throughout final fieldwork.
Subledger – A detailed listing of individual account balances (e.g., capital assets, student and
other receivables, and inventory). These listings should not be rollforwards of the accounts, but
rather a summary of the components of the ending balance or composition of each account. For
example, a listing that shows additions and deletions to an inventory account is not a useful
listing because it cannot be used to determine the composition of the ending balance.
Aging report – A type of subledger that groups account balances by the amount of time that has
passed since the balance originated (e.g., a receivable report that lists all accounts that are
current, 30-60 days past due, etc.). The total balance on this report should agree to the total
balance of the account on the general ledger.
Leadsheet – A summary of accounts and their outstanding balances that are included in one line
item on the financial statements (e.g., a listing of all cash accounts and their balances that agrees
in total to the cash balance presented in the financial statements).
Check register – A listing of all checks processed and disbursed in a certain period. At the
CSU, a check register is the equivalent of a warrant register or claims listing.

Last revised May 19, 2005                   9-6
                                                               The California State University
                                                                    GAAP Reporting Manual
                                                                                    June 2005

Methodology – Thought process or reasoning behind the development of certain financial
statement accounts, the recording of which requires management judgment or a selection from
alternative methods of accounting.
Trial balance – A summary schedule of the general ledger, which includes the ending balances
of each type of account at year-end. For CSU audit purposes, the GAAP conversion template
prepared for each fund will be considered a trial balance. The legal basis account balances per
the GAAP conversion template must agree to the general ledger. Additionally, for PeopleSoft
8.4 campuses, the GAAP basis net transactions during the year must agree to the general ledger.

Last revised May 19, 2005                 9-7
                                                                The California State University
                                                                     GAAP Reporting Manual
                                                                                     June 2005

List of CSU Reports Commonly Used During the Audit and GAAP Conversion Process

SAM 99* - Provides State Controller’s Office (SCO) balances available for General, Lottery, and
Capital Outlay funds. This report is utilized to verify that the GAAP receivable for State
Appropriations has been recorded accurately.

SAM 18A* - Utilized to prepare journal entry to eliminate expenses (general and capital outlay
funds) accrued on the legal basis books for goods and services not received. (i.e., encumbrances)
(applicable to non-PeopleSoft 8.4 campuses only)

SAM 07 - Pre-closing trial balance used to prepare the Excel spreadsheets (or other equivalents)
in legal basis books for balance sheet accounts that support the GAAP template. Commonly
referred to as the general ledger for the audit process.

SAM 18B* - Used to eliminate due to/due from other funds from within a fund group.
(applicable to non-PeopleSoft 8.4 campuses only)

SAM 6C - Used to breakdown expenses by program for the GAAP template. (Unrestricted and
Invested in capital assets, net of related debt only) (applicable to non-PeopleSoft 8.4 campuses

SAM 6B - Provides budget amounts that are used for the schedule of State Appropriations
revenue in General Fund and to record adjustments for State Appropriations receivable.

* Only available to campuses that use Financial Reporting System (FRS).

For PeopleSoft 8.4 campuses, please refer to GAAP Workshop Chapter 4 presentation for list of
standard reports currently available in PeopleSoft 8.4.

Last revised May 19, 2005                  9-8
                                                              The California State University
                                                                   GAAP Reporting Manual
                                                                                   June 2005

Other reports that proved valuable for preparation of the GAAP template and audit process are
the following:

   A locally-developed report that analyzes the reimbursed activities in the general fund
    accounts to make sure that revenues equaled expenses for purposes of elimination or
    reclassification as necessary. (AMO61 could be used for this also)

   A locally-developed report for payments made and received from “related parties” for
    footnote disclosure purposes.

   A locally-developed Focus report run against the Customer Information Retrieval System
    (CIRS) database to analyze vacation accruals for GAAP purposes.

   The June 30th report from AMS (formally EFG Technologies), third party loan service
    provider, regarding Perkins Loan accounts receivable balances. This report can be used to
    determine entries needed for accrued interest income and allowances for doubtful accounts.

Last revised May 19, 2005                 9-9

To top