audit methodology

Refresh your audit planning and fraud assessment

As we roll into audit season, would be wise to revisit your audit planning and risk assessment. Gary Zeune can help you do that in his superb article, Fraud: The 15 biggest risks for 2013.

He reminds us that we really, really need to understand our clients and their overall environment. We need to look at fraud from different angles all the time.

Try these ideas to refresh your thinking:

#1 – Are there things going on in DC or issues for which nothing is happening that could devastate your client’s industry? If so, you need to pay attention to the action or lethargy in play.

An open letter to the CPAs who audit R&D charities receiving GIK meds

(Cross-post from my other blog, Nonprofit Update.)

Dear colleagues:

If you would like some background on the GIK issues, please read my open letter to your clients.

The accounting is problematic for donated pharmaceuticals that you have been auditing for the last few years.

If you have a budget of 100 or 300 hours, it might be wise to allocate a few hours to read beyond AICPA risk alerts and Accord position papers. You can browse my blog for  discussions, which contain links to other resources that also discuss the accounting and valuation issues.

It is my considered opinion that many of the valuations are not supportable under GAAP.  The timing of SFAS 157 isn’t the issue.

The amount of scrutiny on your client’s valuation methodologies is high and increasing.

Document retention timeline for auditors in California – also document retention policy needs to be in writing

Another reminder for all of us from the California state law that applies to CPAs:  There is a requirement for auditors to retain audit documentation for 7 years from report release date.

Here’s the state code from section 5097:

‘If it isn’t documented, it wasn’t done’ is almost the law in California

While doing the required CPE for regulatory ethics, I reread the California state law on audit documentation. The standard is that if something wasn’t done documented, there is a rebuttable presumption that it was not done.  You can overcome that presumption, but the burden would be on you as the CPA to persuade a jury you really did something for which you prepared no documentation.

That gets back to a comment I’ve made in CPE courses that …

Need to develop an audit methodology? Check out the perfomance audit chapters in the Yellow Book

Do you need to develop an audit methodology and don’t want to rely on the entire body of knowledge that exists in the SASs?

How could you wind up in that situation?

You might need to develop an audit model for your church denomination, or field programs of an international relief and development organization, or local affiliates of a national organization. Obviously you could just tell your local programs to find a CPA and have them comply with GAAS.