Enhancing Audit Efficiency and Effectiveness. Dan Purvine A/E Clarity Consulting and Training, LLC

Transcription

1 Enhancing Audit Efficiency and Effectiveness Dan Purvine A/E Clarity Consulting and

2 Overview of this Session Applying a risk-based approach Indirect cost rate audit best practices: A/E firm preparation CPA firm performance State DOT oversight Interpreting report opinions and audit findings

3 Applying a Risk-Based Approach Key aspects of a risk-based approach Identifying risk areas and performing the risk assessment Audit planning and communication Typical high-risk areas

4 Typical High Risk Areas Labor charging Compensation Classification of direct and indirect costs Travel costs Selling (marketing) expenses

5 A/E Firm Responsibilities Develop policies and procedures Establish monitoring activities to support consistent application Examine transactions for allocability and allowability Throughout the year Near / after year-end in preparation for audit Draft the indirect cost rate schedule

6 Key Policies and Procedures Timekeeping policy Daily timekeeping Labor Charging Record all hours worked Timesheet review and approval Reconciliations between job costing (project) system and payroll system

7 Key Policies and Procedures Compensation Policies for establishing, reviewing, and adjusting compensation Written bonus policy Include eligibility criteria, period covered, measurable and verifiable performance criteria, form of payment and distribution timeline Segregate profit distributions from bonuses

8 Key Policies and Procedures Classification of Costs Policies for properly classifying and segregating direct and indirect costs Costs incurred for the same purpose must be recorded in the same manner

9 Key Policies and Procedures Segregation of Unallowable Costs Policies for identifying FAR-unallowable costs Separate G/L accounts are recommended Don t forget proper segregation of direct vs. indirect costs

10 Monitoring Activities Establish regular, periodic monitoring / testing activities Assign monitoring responsibility to someone not responsible for performing the control activity Document results and involve management in corrective actions

11 Additional A/E Firm Responsibilities Examine indirect cost accounts for unallowable costs or costs that are misallocated Perform other year-end testing activities Draft indirect cost rate schedule

12 CPA Firm Responsibilities Proper audit planning Adequate testing: Internal controls Labor costs Non-labor costs Support for opinion expressed in audit report

13 State DOT Responsibilities Perform risk analysis Apply limited resources to address key risks Properly communicate expectations Provide guidance to firms to enhance audit quality

14 Interpreting Report Opinions and Audit Findings Types of report opinions: Unqualified Qualified Adverse Disclaimer of opinion

15 Interpreting Report Opinions and Audit Findings Internal control findings: Significant deficiency Material weakness Examples Effect on audit work and acceptance of audit report

16 Training and Education NHI training ACEC training under ACEC-NHI partnership Future training courses available at

17 Questions? Visit our website at for more information, and sign up for our newsletter! Dan Purvine Cell (919)