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Choosing the Right Auditor for Your Government Entity

CPAs & Advisors

Christina LaVielle
Christina LaVielle Manager CPAs & Advisors

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The words “external audit” are often met with dread. However, it doesn’t have to be that way! Selecting the right auditor for your government entity can seem like a long road; however, the benefits of researching and selecting the external auditor that meets your needs while being cost-effective heavily outweigh the time it takes to review the options thoroughly.

Typically, government entities rely on their external auditors for much more than just the actual audit at year-end. Non-attest services performed by external auditors, such as maintaining capital asset depreciation schedules, often require communication and interaction throughout the year. This interaction puts a lot of pressure on a government to select the right external auditor that will not only deliver a quality audit that complies with all laws and regulations but also one that works well with the government’s finance and treasury departments.

Consider several key areas when selecting an external auditor that will help to ensure a smooth and stress-free audit: industry knowledge, use of technology, and the reputation of the audit firm while balancing fees.

Industry knowledge
Industry-specific knowledge is critical, especially in accounting and finance. Governments have many external compliance requirements that are unique and therefore require special procedures. Examples include the submission of several reports, including the annual audit, to the State by the deadlines, and various policies that must be approved by the government’s governing board. All of these are items that external auditors who are well-versed in the governmental accounting field will specifically verify. Non-compliance with laws and regulations can result in findings that must be reported to the Department of Treasury with the annual audit. Avoiding non-compliance is imperative as the Department of Treasury, depending on the degree of the non-compliance, can withhold funding, which has the potential to be detrimental to the government’s operations as cash flows are often tight.

Use of technology
The use of technology by a prospective external auditor is another critical item to think about. The ability to work efficiently and effectively remotely has become a necessity as the COVID-19 pandemic continues. Governments need to consider an external audit firm’s use and extent of technology to ensure that information is shared and communicated securely and efficiently. The use of internet-based portals and the safety measures a prospective audit firm has in place to protect the government’s information should be a priority during the selection process.

Reputation and price
Finally, a government should research external audit firms thoroughly before signing a contract to ensure they are reputable and within the government entity’s financial means. Just like governments, external audit firms vary significantly in size, which can affect the cost of services. Balancing quality and price are important considerations; however, more expensive does not necessarily mean better in the realm of auditing. Reviewing current client testimonials on an audit firm’s website is an excellent way to gauge a firm’s reputation. For example, if a firm has no client testimonials, this could potentially be a red flag that they are not reputable.

While external audits are a necessity at year-end, a good business relationship with your external auditor can offer a variety of additional guidance and support on various accounting issues as they arise throughout the year. External auditors have resources that they share with clients that may otherwise be out of reach, especially for small governments, such as guidance on new accounting standards. Consistent communication with your external auditor on pain points as they arise will help to set up your government for a worry-free, smooth annual audit.

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