Audit Process Outline of Presentation Audits Today Why

Audit Process

Outline of Presentation Audits Today: Why are you required to have an audit? 2. What are the deliverables 3. A brief overview of how the auditor conducts an audit using, inquiry, analytical procedures, sampling and testing of transactions. 4. Limitations on using the above methods. 1. 5. Different bases of accounting. Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

Takeaways • Overview of Audit Deliverables • Overview of the Audit Process Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

Why Are Audits Required? • Oregon Minimum Standards • OAR 162 -010 -0020 All municipal corporations are required to have an annual audit in accordance with generally accepted auditing standards, unless they qualify under ORS 297. 435 to be reviewed or file a financial reports in lieu of having an audit. Management has the responsibility for adopting sound accounting policies, for maintaining an adequate and effective system of controls, for safeguarding of assets, and for devising a system of internal control that will help assure the production of proper financial statements. Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

What a Financial Audit is NOT • Fraud Audit • Internal Control Audit • Performance Audit Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

Audit Deliverables 1. 2. 3. 4. 5. 6. Opinion Letter (Governmental, Single Audit) OMS Letter Single Audit - Financial Statements Single Audit - Major Program Compliance Management Letter Governing Body Letter

Overview of the Audit Process Objective is to Determine if Financial Statements Materiality Correct 1. Washington County Materiality 2. Schedule of Adjustments Passed (Example) Audits are Conducted Using Inquiry 1. • Internal Inquiries of Staff • Other Questionnaires of Management and Board • Representation Letter Analytic Procedures 2. • Ratio Analysis • Comparing Prior Year to Current Year Test of Transactions (Based on risk assessment) 3. • Sampling Memo Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

7 - Washington County Materiality Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

7. 1 - Schedule of Adjustments Passed Not actual numbers. Examples only. Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

8 - 004 -Management Questionnaire Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

8 - 004 -Management Questionnaire (cont. ) Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

8 - 004 -Management Questionnaire (cont. ) Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

9 - 043 -Governing Body Questionnaire Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

9 - 043 -Governing Body Questionnaire (cont. ) Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

9 - 043 -Governing Body Questionnaire Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

Limitations of Auditors Methods Inquiry 1. • People may not be honest in their answers Analytic Procedures 2. • Can be consistantly wrong amounts Sampling 3. • Sample didn’t detect underlying or systemic issues Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632

Different Bases of Accounting 1. Entity wide financial statements on accrual bases. 2. Governmental financial statements on modified accrual. 3. Budgetary statements on essentially the cash basis. 4. Leads to different “fund/net position balances” • What is different (pensions, capital assets and depreciation, bonds and payments, inventory, property taxes, other post employment benefits including vacation). • Additional changes coming (leases). Presented by: Roy Rogers, Managing Partner at Pauly, Rogers and Co. , P. C. (503) 620 -2632