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FALL 2006 FOCUS November 14-15, 2006 APA UPDATE

FALL 2006 FOCUS November 14-15, 2006 APA UPDATE. Bill Cole, Deputy Auditor Auditor of Public Accounts. Discussion Topics. NCAA Reporting – The Second Year Risk Assessment Standards Auxiliary Enterprise Project SJR 51- Data Security Capital Appropriations Available

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FALL 2006 FOCUS November 14-15, 2006 APA UPDATE

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  1. FALL 2006FOCUSNovember 14-15, 2006APA UPDATE Bill Cole, Deputy Auditor Auditor of Public Accounts

  2. Discussion Topics • NCAA Reporting – The Second Year • Risk Assessment Standards • Auxiliary Enterprise Project • SJR 51- Data Security • Capital Appropriations Available • Audit Timing and Scheduling • Timely Financial Reporting

  3. NCAA Reporting – The 2nd Year • Most control work has been completed • Waiting on completion of the Schedules • Reporting issues • Complimentary tickets • Indirect costs • Advisory services

  4. Risk Assessment Standards

  5. AICPA Standards Assessment Suite Of Standards • Statements on Auditing Standards (SAS) Nos. 104-111 • Most far-reaching changes in standards in 20 years • Amends or revises 8 existing standards

  6. AICPA Standards Assessment Suite Of Standards • Amends SAS 1, Due Professional Care (104) • Amends SAS 95, GAAS (105) • Audit Evidence (106) • Audit Risk and Materiality (107) • Planning and Supervision (108) • Understanding the Entity and Assessing Risks (109) • Performing Audit Procedures and Evaluating Evidence (110) • Amends SAS 39, Audit Sampling (111)

  7. Assessment Suite Of StandardsObjectives • More in-depth understanding of entity and internal control • More rigorous assessment of risks of misstatement • Improved linkage between assessed risks and audit procedures performed

  8. Understanding Entity/Assessing Risks • Gaining understanding about entity, its environment, internal controls • Brainstorming session • Evaluate internal control design and implementation • Identify and assess risks to design additional procedures • Consider risks at financial and assertion levels • Identify significant risks (Required testing of those identified)

  9. Performing Procedures • Do procedures that respond to risks • Overall response • Procedures at assertion level • Always perform: • Tests for assertions for transactions, account balances, and disclosures • F/S tie to the accounting records • Material JEs and F/S adjustments

  10. New Assertions

  11. Assertions Used by Auditors • Occurrence and Existence • Transactions, events that have been recorded have occurred and pertain to the entity • Assets, liabilities, and equity interests exist • Disclosed events and transactions have occurred and pertain to the entity

  12. Assertions Used by Auditors • Rights and Obligations • The entity holds or controls the rights to assets, and liabilities are obligations of the entity

  13. Assertions Used by Auditors • Completeness • All transactions and events that should have been recorded have been recorded • All assets, liabilities, and equity interests that should have been recorded have been recorded • All disclosures that should have been included in the financial statements have been included

  14. Assertions Used by Auditors • Accuracy and Valuation • Amounts and other data relating to the recorded transactions and events have been recorded appropriately • Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded • Financial and other information are disclosed fairly at the appropriate amounts

  15. Assertions Used by Auditors • Cut-Off • Transactions and events have been recorded in the correct accounting period

  16. Assertions Used by Auditors • Classification / Understandability • Transactions and events have been recorded in the proper accounts • Financial information is appropriately presented and described and disclosures are clearly expressed

  17. How Does This Impact You? • Auditors have responsibility for risk assessment • First place to start, what is management’s assessment of risk? • ARMICS – State Comptroller’s Directive

  18. Auxiliary Enterprises Project

  19. Auxiliary Enterprises Project • Still a work-in-progress, but completion is getting closer • Tuition vs. Mandatory Fees • What services are covered? • Guidance is outdated • Similar activities accounted for differently • Accounting principles have changed • Inconsistencies in accounting and monitoring A/E

  20. Auxiliary Enterprises Project • Draft findings • Develop principle-based definition of activities funded by mandatory fees • Update and refine auxiliary enterprise guidance • Identifying activities as auxiliaries • Accounting procedures • Allocation of debt service and indirect costs • Consistent guidance for outsourced auxiliaries • Application of self-supporting activities

  21. Auxiliary Enterprises Project • Draft findings • Best practices for A/E management • Monitoring for self-supporting basis • Documenting and approving transfers • Develop specific, consistent procedures for preparing the Schedule of A/E Revenues and Expenses • Develop specific, consistent procedures for preparing a separate Schedule of A/E Reserves

  22. SJR51 – Information Security

  23. SJR51 – Information Security • 2006 General Assembly passed SJR No. 51, directing the APA to report on the adequacy of the security of state government databases and data communications from unauthorized uses. • Focusing data security efforts on only databases and data communications does not consider the amount and nature of information held by the Commonwealth; nor does it consider the various methods of storing and using potentially sensitive information.

  24. SJR51 – Information Security • As part of this review, we compiled from available sources, the industry concerned best practices for an information security program. • We evaluated the Commonwealth’s information security programs against the best practices of the industry and as a means of completing the review survey checklist.

  25. SJR51 – Information Security • Information Security Program Objectives and Issues • A well-defined, clear and documented information security program will minimize unauthorized uses of information contained within databases and transmitted through data communication lines. A lack of sufficient policies, procedures and standards creates a highly diversified information security environment, which limits an organization’s ability to govern information security at an enterprise level.

  26. SJR51 – Information Security • Roles and Responsibilities for IT Security in the Commonwealth • Role of VITA • Role of Agencies (including roles of information security officers)

  27. SJR51 – Information Security • Review survey checklist (120 questions) administered by APA with each agency and institution • Results evaluated judging key components (30-40 questions) • Rating of policies and procedures • Non-existent • Inadequate • Adequate • Model

  28. Capital Appropriations Available

  29. Capital Appropriations Available • Fund 0811 – General Obligation Bonds • Fund 0817 – 21st Century Bond Program • DOA has issued Accounting Procedures for these programs available on their web site. • Some Colleges had to make significant prior period adjustments due to overstating appropriations.

  30. DOA Instructions • Calculate project to date allotments since 1993 by adding prior year expenditures to current allotments. • Compare to prior year appropriation revenue from previously reported in the financial statements. • Difference is current year appropriation revenue or reversion.

  31. Revenue and Receivables • Appropriations available are generally equal to current year allotments less current year expenditures including payables. • Current year appropriation revenue is generally equal to current year allotments less beginning appropriations available.

  32. Issues • Note that allotments and not appropriations are used to compute revenue and receivables. • When appropriations are used or prior year revenue is not excluded, appropriation revenue can be significantly overstated.

  33. Conclusion • APA and DOA will work together to address accounting issues and clarify instructions.

  34. Audit Timing

  35. AUDIT TIMING • Scheduling and Specialties • NCAA – interim work on controls, final work when Schedule is completed • Research & Development – interim work on controls, final work when SEFA is completed • Student Financial Aid – interim work on controls, final work when FISAP is completed • Payroll and Revenue – interim work on controls, final work when financial statements and notes are completed • Acquisitions and Capital Assets – interim work on controls, final work when financial statements and notes depending on specialists’ schedules

  36. Timely Financial Reporting

  37. Timely Financial Reporting • Financial Management Standard • Timeliness • Accuracy • Deadlines are only going to get tighter • Closing books timely • Start early • Documentation of financial reporting process

  38. QUESTIONS?

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