Monday, October 18, 2010

Communications with Auditors - What to Expect

Generally Accepted Government Auditing Standards (GAGAS) require auditors to communicate with the entity under audit. If your company is about to undergo an audit by a Governmental audit organization, you can expect communication at the entrance conference, during the audit, and the exit conference. We will discuss communications during the entrance conference and during the audit today, while reserving exit conference communications for tomorrow.

Entrance Conference

The auditor should explain the purpose and overall plan for performance of the audit at the entrance conference while also discussing the types of books, records, and other data the auditor will need. The auditor should also ascertain the nature and location of supporting data. It is also appropriate to discuss other matters during the entrance conference. For example, the auditor may need to follow-up on items discussed at a separate walk-through meeting or arrange for temporary space at the contractor’s facility in close proximity to the contractor’s representatives with whom he/she will be working so that those representatives are readily available.
Communication with the Contractor During the Audit

Through-out the audit, the auditor should discuss matters with the contractor as needed to obtain a full understanding of the contractor’s basis for each item in the submission, or each aspect of the area subject to audit. The auditor should discuss preliminary audit findings (e.g., potential system deficiencies, potential FAR/CAS noncompliances, etc.) with the contractor to ensure conclusions are based on a complete understanding of all pertinent facts. These types of discussions do not impair auditor independence and are generally necessary to obtain sufficient evidence to support audit conclusions. Discussions of the preliminary audit issues should be limited to factual matters when the audit is of forecasted costs that will be subject to negotiations.

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