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Audit Buzz Newsletter
December 2022
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In this issue of Audit Buzz, we summarize the status of current engagements and explain what is auditor independence in the Knowledge Hive. Stay up to date with Office of Auditor General's (OAG) current and future work by subscribing to Audit Buzz.
Prior editions of Audit Buzz are archived here on OAG's website.
OAG wishes a safe and happy holidays to all!
As always, we appreciate the cooperation and courtesies extended to our staff by FCPS management and staff during all past, current, and future audit engagements.
Engagement and Office Updates
Current Engagement Update
- At the December 14 Audit Committee meeting, OAG presented the following agenda items (full agenda and reports can be found on BoardDocs):
- In addition to the ongoing FY23 Continuous Monitoring, the FY23 Succession Planning and Leadership Development Audit and the FY23 IT Cybersecurity Audit are currently in process.
Knowledge Hive
What is Auditor Independence?
Have you ever wondered: “Why should we rely on audit reports?” One important reason has to do with auditor independence. It assures the reader that the auditor is not compromised by a prior or existing relationship with the audit subject. An auditor’s independence is a prerequisite of every audit.
The Office of Auditor General (OAG) carries out its audits in accordance with something called GAGAS (generally accepted government auditing standards). GAGAS, also referred to as the Yellow Book, (yes, it is really yellow!) provides a roadmap for government auditors to follow in the areas of independence, transparency, accountability, and quality throughout the audit process. According to GAGAS, auditors and audit organizations must be independent from an audited entity… no exceptions.
You may ask “How independent must an auditor be?” After all, internal auditors are employees of the organizations they audit. According to GAGAS, auditors should avoid situations that could lead reasonable and informed third parties to conclude that the auditors and audit organizations are not independent and thus are not capable of exercising objective and impartial judgment on all issues associated with conducting the engagement and reporting on the work.
OAG maintains auditor independence in several ways. This is through: (A) OAG’s place in the organization (particularly its reporting relationships); (B) performing procedures to assess any threats to independence prior to each audit engagement; and (C) being objective and exercising professional judgement throughout the engagements.
A. Maintaining Organizational Independence
FCPS goes to great lengths to protect the independence of OAG auditors. FCPS Policy 1105, Auditor General Authority, indicates that the office shall be independent of the administration in the performance of its functions. Independence, in fact and appearance, permits an internal auditor to render the impartial and unbiased judgments essential to the proper conduct of any audit.
To assure independence, the office reports to the School Board through its Audit Committee.
The Audit Committee is comprised of four school board members and two citizen members that meet on a monthly basis. Its role is to promote, maintain, and enhance the independence and objectivity of the internal audit function of the school division by ensuring broad audit coverage, adequate consideration of audit or review reports, and appropriate action taken regarding audit recommendations. The Audit Committee serves as the Board’s liaison with OAG by:
- reviewing the annual audit plan prepared by OAG and submitting its recommendation to the School Board for approval;
- mediating the auditors’ relationship with management;
- reviewing audit reports and management responses, and reporting to the Board monthly;
- following up on the implementation of internal audit recommendations;
- monitoring progress against the approved annual audit plan;
- acting as a representative for School Board member requests for ad hoc reviews;
- periodically reviewing audit-related policies for approval by the Board; and
- assisting the Board with the evaluation of the auditor general in accordance with Human Resources guidelines, policies, and regulations.
B. Assessing Threats to Independence Prior to Engagements
Prior to beginning an audit, the audit team must assess the following threats to independence:
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Self-interest threat: The threat that a financial or other interest will inappropriately influence an auditor’s judgment or behavior.
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Self-review threat: The threat that an auditor or audit organization that has provided non-audit services will not appropriately evaluate the results of previous judgments made or services provided as part of the non-audit services when forming a judgment significant to a GAGAS engagement.
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Bias threat: The threat that an auditor will, as a result of political, ideological, social, or other convictions, take a position that is not objective.
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Familiarity threat: The threat that aspects of a relationship with management or personnel of an audited entity, such as a close or long relationship, or that of an immediate or close family member, will lead an auditor to take a position that is not objective.
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Undue influence threat: The threat that influences or pressures from sources external to the audit organization will affect an auditor’s ability to make objective judgments.
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Management participation threat: The threat that results from an auditor’s taking on the role of management or otherwise performing management functions on behalf of the audited entity, which will lead an auditor to take a position that is not objective.
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Structural threat: The threat that an audit organization’s placement within a government entity, in combination with the structure of the government entity being audited, will affect the audit organization’s ability to perform work and report results objectively.
At the commencement of each engagement, auditors are required to certify there are no known impediments to independence using the OAG Auditor Assignment & Independence Statement. If one or more of these threats is present for any audit engagement, the auditor should document and report the potential conflict to the assigning supervisor or the Auditor General. For all identified threats, OAG will evaluate the significance of the threat, both individually and in the aggregate, and apply safeguards to eliminate or reduce the threat to an acceptable level. OAG will not accept any engagement where threats to independence cannot be eliminated or reduced to an acceptable level.
C. Being Objective and Exercising Professional Judgement During Engagements (Trust But Verify!)
Auditors must be objective, free from bias and use professional judgment in planning and conducting the engagement and in reporting the results. Professional judgment includes exercising reasonable care and professional skepticism.
- Reasonable care includes acting diligently in accordance with applicable professional standards and ethical principles.
- Professional skepticism includes being alert to, for example, evidence that contradicts other evidence obtained or information that brings into question the reliability of documents or responses to inquiries to be used as evidence.
Have a question for OAG? Contact OAG at internalaudit@fcps.edu. Questions submitted will be consolidated and answers will be provided periodically through the “Knowledge Hive”.
Did you Know?
Next Audit Committee Meeting
The next Audit Committee meeting is scheduled for January 11, 2023 at 4:30 PM. Please refer to BoardDocs for meeting information once it becomes available.
Fraud, Waste, and Abuse Hotline:
(571) 423-1333 (anonymous voicemail)
InternalAudit@fcps.edu (email is not anonymous)
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