01-20-04 Regular Meeting - Laserfiche WebLink

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What other services may auditors be requested to perform in conjunction with an audit of the financial statements? In practice, auditors often provide a range of ser- vices to their clients in conjunction with financial statement audits. For example, they may take responsibility for special-purpose reports fur- nished to state agencies and grantors. Similarly, auditors may agree to help a government to achieve the GFOA's Certificate of Achievement for Excellence in Financial Reporting. These services, while important, are not part of the basic audit engagement. Accordingly, govern- ments desiring such services should be sure to request them in their RFP for auditing services. As noted earlier, the independence standard of Government Auditing Standards (Yellow Book) places limitations on the types of nonaudit ser- vices that independent auditors may provide to their clients. 44 AN ELECTED OFFICIAL'S GUIDE What is auditor independence? Auditors must maintain their independence if their work is to be credible. External auditors selected from private-sector CPA firms must be free from both personal and external impairments that could lead reasonable third parties to question their independence. For example, a potential auditor would be "person- ally impaired" from performing the audit of a government in which a spouse served as the fi- nance director. Similarly, a potential auditor would be "externally impaired" from performing an audit if that auditor could not obtain free ac- cess to all relevant records of the government. Government auditors serving as external audi- tors are subject to the same rules governing per- sonal and external impairments as are private- sector CPAs serving in the same capacity. In ad- dition, government auditors must demonstrate organizational independence. For example, a government auditor appointed by the chief exec- utive officer of the government and reporting to that officer would not be considered to be organi- zationally independent when conducting audits of the executive branch. On the other hand, a government auditor appointed by the legislative body and reporting to that body would be consid- ered organizationally independent when con- ducting audits of the executive branch of the same government. Similarly, a government audi- tor selected in a general election would by virtue of the election be considered organizationally in- dependent. Internal auditors also are required to maintain a high degree of independence, though not so great as that required for external auditors. Like their external counterparts, internal auditors must be free of both personal and external impairments TO AUDITING 5