Week 4, Part 5: CFO Interview on Financial Audits

Initially, the district selects criteria on which auditors will be ranked. The external auditor is selected based on a qualification process, and not on the amount that would be charged for services. Then the district advertises the need for an external auditor and takes in bid packets from auditors. A Request for Qualification (RFQ) would be completed, as opposed to a Request for Proposal (RFP). The RFQ is criterion based, in which criteria are rated on a point system. A few examples of criteria for qualification are reputation, length of experience/service in governmental auditing, number of employees serving on the audit team, references, and number of schools being served by the auditing company. Once bid packets are received, the qualifications are tallied, and the district contacts the top ranked auditor according to the qualification criteria. At this point, the district negotiates cost with the external auditor. If the district is unable to come to an agreement with the top ranked external auditor, it can then go to the second ranked auditor. Technically, cost is not supposed to be a consideration in selecting the auditor.

The audit takes place on-site, in which they review district transactions, entries, bank statements, conduct interviews, review ledgers, expenditures, payroll reports, and assets of the district among other things. The audit evaluates internal controls to review for checks and balances to guard against any possible abuse or misuse of funds.

The results are communicated in a formal report, including flow charts, along with a presentation to the school board. Summaries for each indicator are included, and may or may not be accompanied with findings. Findings are not desirable as they are areas of concern, but recommendations are given to address the issue. Corrective actions should take place in regards to findings as it can hinder the following year’s audit.

Interviewing my district’s Chief Financial Officer on how an external auditor is selected, how the audit is conducted, what is concluded in the audit, and how the results are communicated has increased my knowledge and understanding of district financial audits. Prior to this interview I have had very little experience or knowledge with this process, and I feel this interview was very beneficial to me.