Why Auditors Aren’t Perfect

June 28, 2013 | By Jerry Ashworth | 2 comments

1035776_money_issuesWith the massive amount of federal dollars issued in grant awards these days, I’m all for ensuring that they are spent appropriately. To that end, having auditors conduct Circular A-133 single audits, as well as other types of audits, is critical in ensuring that accountability. However, auditors are not infallible. This is not new, but it is disturbing.

During a session I attended last week at the American Institute of Certified Public Accountants’ Nonprofit Industry Conference, one speaker ran through a laundry list of auditor deficiencies when conducting Circular A-133 engagements and Government Auditing Standards engagements. Some I’ve heard before — failing to audit major programs, failing to audit programs by Catalog of Federal Domestic Assistance number or cluster per the Circular A-133 Compliance Supplement and failing to ensure auditor independence.

However, there also seems to be a lack of understanding among many auditors about what are internal controls. “People seem to be having a hard time understanding that internal control is not the same as compliance; they are different animals,” said Nancy Miller of the Miller Foley Group. “Controls are elements designed to prevent or detect errors from occurring. The fact that someone did something right is not a control. It’s evidence that perhaps a control is working, but it’s not a control by itself.” We have sections within the Single Audit Information Service that can help subscribers better understand this issue.

Miller also noted that she is seeing a “problematic” increase in continuing professional education noncompliance. She added that many auditors may be taking CPE compliance courses, but they are not the right ones. For example, she has seen cases where auditors at a robust Circular A-133 practice had not taken any A-133 CPEs and were not meeting the competency element. “We’re seeing a disturbing number of issues where they are not meeting the rules, and flagrantly not meeting the rules,” she said.

I’m sure there are many auditing firms that are doing well in peer reviews, complying with industry standards and keeping up with appropriate CPEs. However, in light of the 2005 President’s Council on Integrity and Efficiency report that noted that less than half of all single audits were of limited reliance, all auditors must take it upon themselves to improve the quality of their profession. Hearing words such as “problematic” and “flagrantly” is not a good sign.

What do you think? Am I too hard on auditors, or is there a serious problem here? Let us know.

 

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