most frequent issues: certified public accountant … to ensure cpa’s work performed in accordance...

Most Frequent Issues: Most Frequent Issues: Certified Public Accountant (CPA) ( )

Workpaper Reviews of Indirect Cost Rate (ICR) AuditsRate (ICR) Audits

forA hit t d E i i (A&E)Architecture and Engineering (A&E)

Consulting Firms

TRAINING PURPOSE & GOALTRAINING PURPOSE & GOALTRAINING PURPOSE & GOALTRAINING PURPOSE & GOAL

PURPOSE: To highlight frequently To highlight frequently identified issues encountered during a identified issues encountered during a ggReview.Review.

GOAL: Ensure A&E and CPA firms are successful in developing and auditingsuccessful in developing and auditing A&E firms’ ICRs, respectively.

APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY

Issues Discussed TodayIssues Discussed Today –– Currently Applicable toCurrently Applicable to Issues Discussed Today Issues Discussed Today –– Currently Applicable to Currently Applicable to Department A&E Contracts.Department A&E Contracts.

High Probability That Similar Issues Will Be Found High Probability That Similar Issues Will Be Found During Reviews of Local Agency A&E Contract CPA During Reviews of Local Agency A&E Contract CPA g g yg g yWorkpapaper Reviews.Workpapaper Reviews.

Reviews performed on Department or Local Agency Reviews performed on Department or Local Agency A&E Contracts of $3.5 Million or more. A&E Contracts of $3.5 Million or more.

COGNIZANCECOGNIZANCECOGNIZANCECOGNIZANCE DETERMINES WHO CONDUCTS REVIEWDETERMINES WHO CONDUCTS REVIEW

Cognizant State determined by where financial records Cognizant State determined by where financial records are maintained.are maintained.C i S h C HQC i S h C HQ Cognizant State not necessary where Corporate HQ Cognizant State not necessary where Corporate HQ residesresides

M ltiM lti St t i b i t f lSt t i b i t f l MultiMulti--State review may be appropriate for large State review may be appropriate for large Consultants.Consultants.

Review may involve transfer of Cognizance.Review may involve transfer of Cognizance.(Refer to 23 CFR 172(Refer to 23 CFR 172----Administration of Engineering and Design Related Administration of Engineering and Design Related

Service Contracts for more information.)Service Contracts for more information.)

CPA WORKPAPER REVIEWS CPA WORKPAPER REVIEWS (REVIEW)(REVIEW)

Performed by Caltrans Audits and Investigation (A&I) Performed by Caltrans Audits and Investigation (A&I) y g ( )y g ( )Auditors.Auditors.

Review Independent CPA’s Audits of ICRs.Review Independent CPA’s Audits of ICRs. Review to ensure CPA’s work performed in accordance Review to ensure CPA’s work performed in accordance

with all applicable standards and the American with all applicable standards and the American Association of State Highway and Transportation Association of State Highway and Transportation Officials (AASHTO) Uniform Audit & Accounting Officials (AASHTO) Uniform Audit & Accounting G id ’ (A dit G id ) d d p dG id ’ (A dit G id ) d d p dGuide’s (Audit Guide) recommended procedures Guide’s (Audit Guide) recommended procedures ((Chapter 10, AASHTO Audit GuideChapter 10, AASHTO Audit Guide), as well as, to verify ), as well as, to verify the accuracy of the audited ICR.the accuracy of the audited ICR.the accuracy of the audited ICR.the accuracy of the audited ICR.

Review Objectives.Review Objectives.

REVIEW OBJECTIVESREVIEW OBJECTIVESREVIEW OBJECTIVESREVIEW OBJECTIVES

Function as a “REGULATOR”.Function as a “REGULATOR”. Provide a cognizant approval of the ICRs.Provide a cognizant approval of the ICRs.

May result in May result in rejectionrejection rather than an approval.rather than an approval. May require additional work by the CPA/A&E firm.May require additional work by the CPA/A&E firm.

ifi i h C i A ( ACifi i h C i A ( AC Notification Letter to the Contracting Agency (DPAC Notification Letter to the Contracting Agency (DPAC or Local Agency) & Contract/Project Manager.or Local Agency) & Contract/Project Manager.M L CPA d/ A&E fiM L CPA d/ A&E fi Management Letter to CPA and/or A&E firm.Management Letter to CPA and/or A&E firm.

May result in CPA being referred to Board of May result in CPA being referred to Board of A nt nA nt nAccountancy.Accountancy.

PARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHT

PARTNERING: Is wIs working cooperativelyorking cooperativelyPARTNERING: Is wIs working cooperatively orking cooperatively in association with others outside of in association with others outside of C lt ffi it Di t i t t tC lt ffi it Di t i t t tCaltrans or your office, unit, District, etc. to Caltrans or your office, unit, District, etc. to reach a common goal.reach a common goal.

OVERSIGHT: Is being vigilant and remaining objective and independent when managingobjective and independent when managing contracts, projects, and the work of others for which you are responsiblewhich you are responsible.

PARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHTPARTNERING AND OVERSIGHT

PARTNERING: Is critical to gain trust and a Is critical to gain trust and a good understanding of the needs of all partiesgood understanding of the needs of all parties..g g pg g p

OVERSIGHT: Is critical to protect state, f d l d l l f di d i dfederal and local funding; and required to perform your job effectively.

The Two are NOT Mutually Exclusive!

A&E Firms’ ResponsibilityA&E Firms’ ResponsibilityA&E Firms ResponsibilityA&E Firms Responsibility

Ensure your Financial ManagementEnsure your Financial Management (Project/Job(Project/JobEnsure your Financial Management Ensure your Financial Management (Project/Job (Project/Job Cost Accounting) System is adequate to segregate Cost Accounting) System is adequate to segregate reasonable, allowable and allocable costs.reasonable, allowable and allocable costs. A labor distribution system that properly segregates A labor distribution system that properly segregates

direct and indirect labor to the appropriate contract/cost direct and indirect labor to the appropriate contract/cost bj ibj iobjectives.objectives.

Proper segregation of other direct costs by contract/cost Proper segregation of other direct costs by contract/cost objectiveobjectiveobjective.objective.

Segregation of indirect costs, and removal of Segregation of indirect costs, and removal of unallowable costs pursuant to 48 CFR Part 31 and unallowable costs pursuant to 48 CFR Part 31 and ppcontract provisions.contract provisions.


Development of a FAR Compliant InDevelopment of a FAR Compliant In--House ICRHouse ICRDevelopment of a FAR Compliant InDevelopment of a FAR Compliant In House ICR House ICR (whether you have your CPA perform an ICR Audit (whether you have your CPA perform an ICR Audit or not): or not):

A Column for Unallowable Amounts Should be A Column for Unallowable Amounts Should be Included on the InIncluded on the In--House ICR ScheduleHouse ICR Schedule

FAR References for all Unallowable Amounts FAR References for all Unallowable Amounts Should be IdentifiedShould be Identified

Notes to the InNotes to the In--House ICR Schedule Should be House ICR Schedule Should be Completed.Completed.

(Refer to Tables 5(Refer to Tables 5--5 & 55 & 5--6 6 -- AASHTO Audit Guide)AASHTO Audit Guide)


Policies (preferably written) for Bonuses,Policies (preferably written) for Bonuses,Policies (preferably written) for Bonuses, Policies (preferably written) for Bonuses, Uncompensated Overtime, Requiring All Employees Uncompensated Overtime, Requiring All Employees (Hourly & Salaried) to Record (Hourly & Salaried) to Record AllAll Hours Worked.Hours Worked.

Document work performed for Executive Document work performed for Executive Compensation (EC) Analysis to substantiate allowableCompensation (EC) Analysis to substantiate allowableCompensation (EC) Analysis to substantiate allowable Compensation (EC) Analysis to substantiate allowable ECEC Simply using the Benchmark Amount or National Simply using the Benchmark Amount or National S p y us g t e e c a ou t o Nat o aS p y us g t e e c a ou t o Nat o a

Compensation Matrix without documenting work is not Compensation Matrix without documenting work is not adequate.adequate.


InIn--House Unit Rates: Should be based onHouse Unit Rates: Should be based on InIn House Unit Rates: Should be based on House Unit Rates: Should be based on general ledger accounts (actual costs).general ledger accounts (actual costs).

Once established, these Unit Rates should be Once established, these Unit Rates should be offset to the Indirect Expense Pool as “credit offset to the Indirect Expense Pool as “credit backs” or cost recoveries as utilized on projects.backs” or cost recoveries as utilized on projects.

U it R t h d di t t b iU it R t h d di t t b i Unit Rates, when used on a direct cost basis, Unit Rates, when used on a direct cost basis, must be supported by accounting records and must be supported by accounting records and

t b “ dit d”t b “ dit d”must be “audited” must be “audited” (5.3 (5.3 –– Cost Centers, p.29, 2012 AASHTO Guide.)Cost Centers, p.29, 2012 AASHTO Guide.)


Hire a Qualified CPA To Perform Their ICR Audit:Hire a Qualified CPA To Perform Their ICR Audit:QQ Preferably, the CPA would have prior experience conducting ICR Audits for Preferably, the CPA would have prior experience conducting ICR Audits for

A&E firms. A&E firms. Ensure CPA follows Generally Accepted Government Auditing Standards Ensure CPA follows Generally Accepted Government Auditing Standards y p gy p g

(GAGAS) and the AASHTO Audit Guide by reference in the engagement letter (GAGAS) and the AASHTO Audit Guide by reference in the engagement letter between A&E firm and CPA.between A&E firm and CPA.

Ensure CPA meets all GAGAS requirements, including the requirement for Ensure CPA meets all GAGAS requirements, including the requirement for d C f l d d hd C f l d d hadequate Continuing Professional Education in government auditing or the adequate Continuing Professional Education in government auditing or the

government environment.government environment. CPA should be knowledgeable of GAGAS, Generally Accepted Auditing CPA should be knowledgeable of GAGAS, Generally Accepted Auditing

Standards (GAAS) Generally Accepted Accounting Principles (GAAP) Code ofStandards (GAAS) Generally Accepted Accounting Principles (GAAP) Code ofStandards (GAAS), Generally Accepted Accounting Principles (GAAP), Code of Standards (GAAS), Generally Accepted Accounting Principles (GAAP), Code of Federal Regulation (CFR) Part 31 (including Subpart 31.2 Cost Principles), Cost Federal Regulation (CFR) Part 31 (including Subpart 31.2 Cost Principles), Cost Accounting Standards (CAS), related laws and regulations, and the guidelines set Accounting Standards (CAS), related laws and regulations, and the guidelines set forth in the AASHTO Audit Guide. (forth in the AASHTO Audit Guide. (See Appendix ASee Appendix A--22).).

CPA should be well versed in project/job cost accounting practices and systems CPA should be well versed in project/job cost accounting practices and systems used by A&E firms, and knowledgeable of the A&E industry.used by A&E firms, and knowledgeable of the A&E industry.

CPA FIRM RESPONSIBILITYCPA FIRM RESPONSIBILITYCPA FIRM RESPONSIBILITYCPA FIRM RESPONSIBILITY

Wh d f d l f d i l d h ’Wh d f d l f d i l d h ’ When state and federal funds are involved, there’s more When state and federal funds are involved, there’s more scrutiny; materiality levels should be much lower; and scrutiny; materiality levels should be much lower; and more testing is requiredmore testing is requiredmore testing is required. more testing is required.

Full access to CPA’s Workpapers by a state/federal Full access to CPA’s Workpapers by a state/federal ffi i l i A&E iffi i l i A&E igovernment official is an A&E contract requirement.government official is an A&E contract requirement.

In other words, the CPA’s client could risk losing a In other words, the CPA’s client could risk losing a //contract when the CPA does not provide state/federal contract when the CPA does not provide state/federal

auditors access to their workpapers. auditors access to their workpapers.


An An ICRICR Audit should not be approached like a Audit should not be approached like a Financial Statement (Financial Statement (F/SF/S) Audit.) Audit.

F/S AUDITSF/S AUDITS Balance Sheet Balance Sheet Statement of IncomeStatement of Income Statement of Cash FlowsStatement of Cash Flows Statement of Shareholder’s EquityStatement of Shareholder’s Equity Report on Internal Control (If GAGAS)Report on Internal Control (If GAGAS) Report on Internal Control (If GAGAS)Report on Internal Control (If GAGAS)

ICR AUDITSICR AUDITS Statement of Direct Labor Fringe Benefits and GeneralStatement of Direct Labor Fringe Benefits and General Statement of Direct Labor, Fringe Benefits, and General Statement of Direct Labor, Fringe Benefits, and General

OverheadOverhead Report on Internal Control (Required by GAGAS)Report on Internal Control (Required by GAGAS)


Important to Understand that ICR AuditsImportant to Understand that ICR Audits Important to Understand that ICR Audits Important to Understand that ICR Audits Have Have AdditionalAdditional Audit Assertions:Audit Assertions:

F/S Audits F/S Audits -- 55 Assertions while,Assertions while,ICR AuditsICR Audits 33 AdditionalAdditional AssertionsAssertionsICR Audits ICR Audits -- 33 AdditionalAdditional Assertions.Assertions.

Important to Understand the Different Audit Important to Understand the Different Audit Objectives.Objectives.

FINANCIAL STATEMENTFINANCIAL STATEMENTAUDIT ASSERTIONSAUDIT ASSERTIONSAUDIT ASSERTIONSAUDIT ASSERTIONS

SAS #106 SAS #106 AU326.15:AU326.15:

Classes of transactions and eventsClasses of transactions and events Occurrence Occurrence ---- Transactions and events that have been recorded Transactions and events that have been recorded

h rr d nd p rt in t th ntith rr d nd p rt in t th ntithave occurred and pertain to the entity.have occurred and pertain to the entity. Completeness Completeness ---- All transactions and events that should have been All transactions and events that should have been

recorded have been recorded.recorded have been recorded. Accuracy Accuracy ---- Amounts and other data relating to recorded Amounts and other data relating to recorded

transactions and events have been recorded appropriately.transactions and events have been recorded appropriately. Cutoff Cutoff ---- Transactions and events have been recorded in the Transactions and events have been recorded in the

correct accounting period.correct accounting period. ClassificationClassification ---- Transactions and events have been recorded in theTransactions and events have been recorded in the Classification Classification Transactions and events have been recorded in the Transactions and events have been recorded in the

proper accounts.proper accounts.

ICR Audit AssertionsICR Audit Assertions FAR 31.201FAR 31.201--2 2 –– ALLOWABILITY:ALLOWABILITY:

A cost is allowable only when the cost complies with all of the following:A cost is allowable only when the cost complies with all of the following:(1) Reasonableness.(1) Reasonableness.(2) Allocability(2) Allocability(3) Standards promulgated by the CAS board, if applicable, otherwise, (3) Standards promulgated by the CAS board, if applicable, otherwise, GAAP and practices appropriate to the circumstancesGAAP and practices appropriate to the circumstancesGAAP and practices appropriate to the circumstances.GAAP and practices appropriate to the circumstances.(4) Terms of the contract.(4) Terms of the contract.(5) Any limitation set forth in FAR Subpart 31(5) Any limitation set forth in FAR Subpart 31--2.2.

FAR 31.201FAR 31.201--3 3 –– REASONABLENESS:REASONABLENESS:A cost is reasonable if, in its nature and amount, it does not exceed that which A cost is reasonable if, in its nature and amount, it does not exceed that which

would be incurred by a prudent person in the conduct of competitive would be incurred by a prudent person in the conduct of competitive b ib ibusiness.business.

FAR 31.201FAR 31.201--4 4 –– ALLOCABILITY:ALLOCABILITY:A cost is allocable if it is assignable or chargeable to one or more cost objective on the A cost is allocable if it is assignable or chargeable to one or more cost objective on the

basis of relative benefits received or other equitable relationship.basis of relative benefits received or other equitable relationship.

AUDIT OBJECTIVESAUDIT OBJECTIVESJJ

FINANCIAL STATEMENT AUDITFINANCIAL STATEMENT AUDIT FINANCIAL STATEMENT AUDITFINANCIAL STATEMENT AUDIT

Statements present fairly, in all material respects, the Statements present fairly, in all material respects, the financial position the results of operations and its cashfinancial position the results of operations and its cashfinancial position, the results of operations and its cash financial position, the results of operations and its cash flows.flows.

In other words the reports are free of materialIn other words the reports are free of materialIn other words, the reports are free of material In other words, the reports are free of material misstatement.misstatement.

INDIRECT COST RATE AUDITINDIRECT COST RATE AUDIT INDIRECT COST RATE AUDITINDIRECT COST RATE AUDIT

Statement presents fairly, in all material respects, the direct Statement presents fairly, in all material respects, the direct labor, fringe benefits, and general overhead.labor, fringe benefits, and general overhead.b , g b s, d g v d.b , g b s, d g v d.

SCOPE OF CPA AUDITSCOPE OF CPA AUDITSCOPE OF CPA AUDITSCOPE OF CPA AUDIT 1) CPA performs both the Financial Statement audit and 1) CPA performs both the Financial Statement audit and

the Indirect Cost Rate audit:the Indirect Cost Rate audit:the Indirect Cost Rate audit:the Indirect Cost Rate audit: Will have addressed relevant assertions in the Financial Statement Will have addressed relevant assertions in the Financial Statement

audit.audit. Should have performed appropriate level of internal control Should have performed appropriate level of internal control

testing in conjunction with the Financial Statement audit. testing in conjunction with the Financial Statement audit. OROROROR

2) CPA performs only the Indirect Cost Rate Audit:2) CPA performs only the Indirect Cost Rate Audit: Reliance on other CPA will require W/P reviewReliance on other CPA will require W/P review Reliance on other CPA will require W/P review.Reliance on other CPA will require W/P review. Will require additional testing as part of the CPA’s ICR audit.Will require additional testing as part of the CPA’s ICR audit.

ISSUES WITH ICR AUDITSISSUES WITH ICR AUDITSISSUES WITH ICR AUDITSISSUES WITH ICR AUDITS

Overall Lack of Documentation in CPA’s Overall Lack of Documentation in CPA’s WorkpapersWorkpapersWorkpapers.Workpapers.

AND/ORAND/ORAND/ORAND/OR

Insufficient Testing Insufficient Testing –– Does Not Meet Minimum Does Not Meet Minimum AASHTO Audit Guide’s Recommended Testing AASHTO Audit Guide’s Recommended Testing Procedures.Procedures.


Lack of Documentation:Lack of Documentation: Lack of Documentation:Lack of Documentation: Why were steps excluded? How were conclusions reached? Often the Why were steps excluded? How were conclusions reached? Often the

analysis is not clear or complete. analysis is not clear or complete. A diA di Audit ProgramAudit Program

Uncompensated Overtime and Premium OvertimeUncompensated Overtime and Premium Overtime CPA Audit of the Project /Job Cost System or Other Direct CostsCPA Audit of the Project /Job Cost System or Other Direct Costs CPA’s evaluation of Internal Controls Relating to the Accounting, CPA’s evaluation of Internal Controls Relating to the Accounting,

Project/Job Costing, and Related Labor Charging SystemProject/Job Costing, and Related Labor Charging System Minimum Audit Report DisclosuresMinimum Audit Report Disclosurespp Materiality LevelsMateriality Levels Executive Compensation AnalysisExecutive Compensation Analysis Were InWere In House Direct Cost Rates Audited?House Direct Cost Rates Audited? Were InWere In--House Direct Cost Rates Audited?House Direct Cost Rates Audited?


Insufficient Testing:Insufficient Testing:

Labor Cost Testing (Direct and Indirect Labor)Labor Cost Testing (Direct and Indirect Labor)

I di E T iI di E T i Indirect Expense TestingIndirect Expense Testing

Other Direct Cost TestingOther Direct Cost Testinggg

AUDITING STANDARDSAUDITING STANDARDSAUDITING STANDARDSAUDITING STANDARDS SAS 105 SAS 105 –– AU 150.02 AU 150.02 Standards of Field WorkStandards of Field Work

The auditor must adequately The auditor must adequately plan the workplan the work and must properly and must properly supervise any assistants.supervise any assistants.

The auditor must obtain a sufficient understanding of the entity The auditor must obtain a sufficient understanding of the entity g yg yand its environment, and its environment, including its internal controlincluding its internal control, to assess , to assess the risk of material misstatement of the financial statements the risk of material misstatement of the financial statements whether due to error or fraud and to design the nature timingwhether due to error or fraud and to design the nature timingwhether due to error or fraud, and to design the nature, timing, whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures.and extent of further audit procedures.

The auditor must The auditor must obtain sufficient appropriate audit obtain sufficient appropriate audit evidence evidence by performing audit procedures to afford a reasonable by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under basis for an opinion regarding the financial statements under audit.audit.

GAGAS ParagraphsGAGAS Paragraphs 4.10 & 4.11 4.10 & 4.11 are similar to AICPA standard.are similar to AICPA standard.

WORKPAPER STANDARDSWORKPAPER STANDARDS QualityQuality

GAASGAAS SAS #103SAS #103 GAAS GAAS -- SAS #103SAS #103 AU339.03AU339.03: : The auditor must The auditor must prepare audit documentationprepare audit documentation in connection in connection

with each engagement in sufficient detail to provide clear understanding of the with each engagement in sufficient detail to provide clear understanding of the work performed (including the nature, timing, extent, and results of audit work performed (including the nature, timing, extent, and results of audit p ( g gp ( g gprocedures performed), the audit evidence obtained and its source, and the procedures performed), the audit evidence obtained and its source, and the conclusions reached.conclusions reached.

AU339.10: AU339.10: The auditor should The auditor should prepare audit documentationprepare audit documentation that enables an that enables an i d dit h i i ti t th dit t d t di d dit h i i ti t th dit t d t dexperienced auditor, having no previous connection to the audit, to understand:experienced auditor, having no previous connection to the audit, to understand:

a. The nature, timing, and extent of auditing procedures performed to comply a. The nature, timing, and extent of auditing procedures performed to comply with SASs and applicable legal and regulatory requirements;with SASs and applicable legal and regulatory requirements;

b The results of the audit procedures performed and the audit evidenceb The results of the audit procedures performed and the audit evidenceb. The results of the audit procedures performed and the audit evidence b. The results of the audit procedures performed and the audit evidence obtained; obtained;

c. The conclusions reached on significant matters; andc. The conclusions reached on significant matters; andd. That the accounting records agree or reconcile with the audited financiald. That the accounting records agree or reconcile with the audited financiald. That the accounting records agree or reconcile with the audited financial d. That the accounting records agree or reconcile with the audited financial

statements or other audited information.statements or other audited information. GAGAS GAGAS –– Paragraph 4.15 has additional requirements.Paragraph 4.15 has additional requirements.

WORKPAPER STANDARDS WORKPAPER STANDARDS Cont’dCont’d

AUDIT EVIDENCE AUDIT EVIDENCE –– SAS 106 SAS 106

AU 326.06:AU 326.06:

SufficiencySufficiency is the measure of the quantity of audit is the measure of the quantity of audit ff yff y q yq yevidence.evidence.

Appropriateness Appropriateness is the measure of the quality of audit is the measure of the quality of audit pp ppp p q yq yevidence, that is, its relevance and its reliability in evidence, that is, its relevance and its reliability in providing support for, or detecting misstatements in, providing support for, or detecting misstatements in, the classes of transactions, account balances, and the classes of transactions, account balances, and di l d l d idi l d l d idisclosures and related assertionsdisclosures and related assertions

The CPA should consider the sufficiency and appropriateness of The CPA should consider the sufficiency and appropriateness of pp ppp paudit evidence to be obtained when assessing risks and designing audit evidence to be obtained when assessing risks and designing further audit procedures. further audit procedures.

WORKPAPER STANDARDS C ’d

AUDIT PLAN SAS #108AUDIT PLAN SAS #108

WORKPAPER STANDARDS Cont’d

AUDIT PLAN SAS #108AUDIT PLAN SAS #108

AU311.19 :AU311.19 : The auditor must develop an audit plan in which the The auditor must develop an audit plan in which the auditor documents the audit procedures to be used that, when auditor documents the audit procedures to be used that, when ppperformed, are expected to reduce audit risk to an acceptably low performed, are expected to reduce audit risk to an acceptably low levellevel

ID OF PREPARER & REVIEWER SAS #103ID OF PREPARER & REVIEWER SAS #103

AU339.18AU339.18: : In documenting the nature, timing, and extent of audit In documenting the nature, timing, and extent of audit pr d r p rf rm d th dit r h ld r rdpr d r p rf rm d th dit r h ld r rdprocedures performed, the auditor should record:procedures performed, the auditor should record:

a. a. Who performed the audit work and the date such work was Who performed the audit work and the date such work was completed; and completed; and

bb h i d ifi di d i d h d f hh i d ifi di d i d h d f hb. b. Who reviewed specific audit documentation and the date of such Who reviewed specific audit documentation and the date of such review.review.


QUALITY CONTROLQUALITY CONTROL


SAS 108 SAS 108 –– AU311.31:AU311.31: The work performed by each assistant, The work performed by each assistant, including the audit documentation, should be reviewed to determine whether including the audit documentation, should be reviewed to determine whether it was adequately performed and documented and to evaluate the results, it was adequately performed and documented and to evaluate the results, relative to the conclusions to be presented in the auditor's report.relative to the conclusions to be presented in the auditor's report.

SAS 103 SAS 103 –– AU339.19: AU339.19: The requirement to document who reviewed The requirement to document who reviewed the audit work performed does not imply a need for each specific working the audit work performed does not imply a need for each specific working paper to include evidence of review. It should be clear from the audit paper to include evidence of review. It should be clear from the audit documentation who reviewed specified elements of the audit work performed documentation who reviewed specified elements of the audit work performed and when.and when.

GAGASGAGAS P h 4 15P h 4 15 GAGAS GAGAS –– Paragraph 4.15a: Paragraph 4.15a: Under GAGAS, supervisory review Under GAGAS, supervisory review should be documented before the report release date, as well as that which should be documented before the report release date, as well as that which supports findings, conclusions, and recommendations contained in the supports findings, conclusions, and recommendations contained in the auditors’ reportauditors’ reportauditors report.auditors report.

Peer Review requirements.Peer Review requirements.

Other Areas of ConcernOther Areas of ConcernOther Areas of ConcernOther Areas of Concern

EXECUTIVE COMPENSATIONEXECUTIVE COMPENSATIONEXECUTIVE COMPENSATIONEXECUTIVE COMPENSATION

A&E fi t f th l i d CPAA&E fi t f th l i d CPA A&E firm must perform the analysis and CPA A&E firm must perform the analysis and CPA must document concurrence.must document concurrence.

A&E firm must document A&E firm must document Superior PerformanceSuperior Performance(basis for using 75(basis for using 75thth percentile), if claimed, andpercentile), if claimed, and(basis for using 75(basis for using 75 percentile), if claimed, and percentile), if claimed, and CPA must document concurrence.CPA must document concurrence.

Other Areas of ConcernOther Areas of ConcernOther Areas of ConcernOther Areas of Concern

STATISTICAL SAMPLING METHODOLGIESSTATISTICAL SAMPLING METHODOLGIESSTATISTICAL SAMPLING METHODOLGIESSTATISTICAL SAMPLING METHODOLGIES

Method must be validated and documented byMethod must be validated and documented by Method must be validated and documented by Method must be validated and documented by the CPA.the CPA.

Consultant should have an appropriate advance Consultant should have an appropriate advance agreement with the cognizant State DOT or agreement with the cognizant State DOT or g gg gFederal official. (FAR 31.201Federal official. (FAR 31.201--6(c) (4))6(c) (4))

OVERALL SUMMARYOVERALL SUMMARYOVERALL SUMMARYOVERALL SUMMARY

To issue a Cognizant Approval Letter, To issue a Cognizant Approval Letter, we use the AASHTO we use the AASHTO Review programReview program ((Appendix A, AASHTO Audit GuideAppendix A, AASHTO Audit Guide), to obtain ), to obtain reasonable assurance that the ICR audit is in accordance with the reasonable assurance that the ICR audit is in accordance with the following: following: gg

GAGAS or “Yellow Book”GAGAS or “Yellow Book” GAAS (for accounting principles)GAAS (for accounting principles) GAAPGAAP 48 CFR Part 3148 CFR Part 31 CAS of 48 CFR subpart 9900 (if applicable)CAS of 48 CFR subpart 9900 (if applicable) CAS of 48 CFR subpart 9900 (if applicable)CAS of 48 CFR subpart 9900 (if applicable)

Minor issues should not be a “Show Stopper”. Our conclusion is Minor issues should not be a “Show Stopper”. Our conclusion is b d mm r f r pb d mm r f r pbased on summary of responses.based on summary of responses.

Most Frequent Issues: Most Frequent Issues: Certified Public Accountant (CPA) ( )

Workpaper Reviews of Indirect Cost Rate (ICR) Audits(ICR) Audits

Questions?Questions?

Caltrans A&E Contracts:Caltrans A&E Contracts:

Linda Laubinger, External Audit ManagerLinda Laubinger, External Audit ManagerCaltrans A&ECaltrans A&ECaltrans A&ECaltrans A&[email protected]@dot.ca.gov

Local Agency A&E Contracts:Local Agency A&E Contracts:Local Agency A&E Contracts:Local Agency A&E Contracts:

Nancy Shaul, External Audit ManagerNancy Shaul, External Audit ManagerLocal Assistance A&E and Single AuditLocal Assistance A&E and Single AuditN Sh l@dN Sh [email protected]@[email protected]

most frequent issues: certified public accountant … to ensure cpa’s work performed in accordance...

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