Financial Reporting Audit Preparation for Cash Basis Ports
1. At the beginning of the financial statement audit your aud...
but may include the Manager/Director of the port.
5. Having completed the assessment of internal controls the auditor wil...
unusual balance is reported. Testing would include examination of records used
to record the transaction...
These schedules need to tie to the general ledger. The auditor will verify them directly
to the general ledger...
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Port Audit

Published on: Mar 4, 2016
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Transcripts - Port Audit

  • 1. Financial Reporting Audit Preparation for Cash Basis Ports 1. At the beginning of the financial statement audit your auditor must have: a. Electronic copy of the final financial report – drafts, working copies, etc will not be accepted. i. Statement of Activities Arising from Cash Transactions (C-1) ii. Notes to the Financial Statements (F-1) iii. Schedule 04 Detail of Revenues and Other Resources iv. Schedule 05 Detail of Expenses and Other Uses v. Schedule of Long Term Debt (Schedule 09)* vi. Schedule of Expenditures of Federal Awards (Schedule 16)* vii. Notes to the Schedule of Expenditures of Federal Awards* viii. Schedule 19 Labor Relations Consultants b. All statements and schedules must be prepared and submitted to SAO within 150 days after year end. The SAO audit report prepared by the auditor will only present items i, ii, v, vi, & vii. Although not presented in the SAO report they are required to be prepared. c. Access to the General Ledger is required in order to verify the accuracy of the Schedules 04 and 05. This may be accomplished in many different ways but most of the time the reports would have to be straight from the accounting system without intermediate manipulation. d. A listing of Journal Entries (direct entries into the general ledger) will also be necessary do determine whether the port has made any significant adjustments to the ledger. Note*: These will be included in the audit report only if applicable. 2. The auditor will then perform preliminary procedures to answer the following questions: a. Are all the required statements, schedules and notes presented? b. Are the correct titles and dates shown on the statements, schedules, and notes? c. Are the statements and schedules presented in prescribed format (i.e. match the format prescribed by BARS)? d. Are statements/schedules/tables mathematically correct (i.e. foot/cross-foot)? e. Do the statements/schedules/tables in notes all tie to each other? f. Do Beginning Cash and Investments tie to prior year audited Ending Cash and Investments? g. Do the balances on C-1 tie to the Schedules 04 and 05? 3. At some point the auditor may also perform additional procedures designed to identify high risk balances reported on the statements or schedules. This may include trend analysis of financial balances resulting in the need to obtain information/documentation from management. 4. After performing analytical procedures the auditor will need access to individual(s) responsible for internal control over the financial statement balances. In most cases it will be the Accountant
  • 2. but may include the Manager/Director of the port. 5. Having completed the assessment of internal controls the auditor will perform audit procedures to determine whether the financial statements represent the transactions that took place during each fiscal year in the audit period. These will include: a. Operating Revenues: i. Total reported revenues should tie to cash receipts recorded in the general ledger. 1. The auditor may examine actual receipts to ensure they were accurately recorded to the appropriate account (i.e. airport revenue was not recorded to marina or property operations revenues, etc). 2. The auditor may limit testing to analytical procedures. In this case the auditor would obtain various information from management in order to determine whether revenues are fairly reported in the financials. b. Operating Expenses: i. Total reported expenses should tie to cash disbursements recorded in the general ledger. 1. The auditor may examine actual payments to ensure they were accurately recorded to the appropriate account (i.e. general operations, maintenance, etc). 2. The auditor may perform “cut-off” testing which is designed to ensure that expenses/expenditures are recorded in the appropriate period (year). c. Non-operating Balances: i. Interest income should tie to the total of monthly interest distributions by the bank/investment firm/LGIP. ii. Taxes should tie to year end County Treasurer reports. iii. Disposal of capital assets should tie to receipts from sale of capital assets (i.e. sale of real capital assets such as real and personal property). iv. Purchase of capital assets should tie to cash payments made for the purchase of capital assets. d. Frequently the auditor will already know about any significant property transactions from reading of the Commission meeting minutes. i. Long-term debt proceeds should tie to receipts from any long term debt issuance. This balance is tested if the port issued new debt. In many cases the auditor will also perform testing of how the debt proceeds were used as many times these revenues are restricted for specific purpose(s). ii. Principal paid on long-term debt should tie to the Schedule 09 and is often compared to the pre-established debt repayment schedules. If the amounts agree no further testing is often performed. However, if any discrepancies are noted or final debt repayment schedules are not available, the auditor will ensure that payments were made and that principal portion is reported accurately by examining the supporting documentation for each debt payment made by the port during the audit period. iii. Interest paid on long-term debt is audited similarly to principal described above except that it is not reported on Schedule 09. iv. Gain/Loss on investment is rarely audited. Auditors would select it for testing if
  • 3. unusual balance is reported. Testing would include examination of records used to record the transaction (underlying original documentation). v. Capital contributions should tie to receipts from related sources such as state/federal/other grants or contributions made by tenants/users of airport property. vi. Extraordinary/Special items are rarely selected for testing based on auditor’s assessment of risk. The reported balance should tie to underlying documentation (insurance settlements, forgiveness of debt, natural disaster recovery money, etc). vii. Other revenues/expenses should tie to underlying supporting documentation. e. Very rarely do auditors select all of the balances reported on the C-1. In most cases the auditors will focus their attention on the largest balances. f. Total receipts/disbursements: i. In most cases the auditors will use the port’s monthly bank statements to determine whether the reported revenues, expenses, and cash balances are consistent with deposits, disbursements, and year end balances on the bank statements. If multiple bank accounts are used, the auditor will examine the transactions between accounts so not to double count deposits/disbursements. 6. Notes to financial statements: a. All note disclosures should tie to the statements/schedules. b. Note 1 should accurately describe the entity, its activities, basis of accounting, etc. Information presented should be updated for each period and be relevant to the port. i. If the port is a member of an Insurance/Risk pool, or if it self-insures for anything (i.e. property, liability, health and welfare, workers comp, unemployment), a full disclosure should be made. The BARS for cash-basis ports does not provide sample language, but GAAP BARS manual has some examples that may be applicable. The focus of these disclosures should be a full explanation of the risk that the port is retaining and all related liabilities. c. Note 2: Cash and investments should tie to amounts reported on C-1 and to reconciled year end bank statements. d. Note 3: property taxes should tie to county treasurer reports. e. Note 4: long-term debt should tie to Schedule 09 and to debt repayment schedules. f. Note 5: construction in progress should include all approved projects, whether they are fully funded on not. g. Note 6, Pension plans – the most current language should be shown for all pension plans including number of participating members and all related liabilities. h. Note 7: all law suits, contract disputes, labor disputes, and other contingent liabilities should be fully disclosed, if material. The auditor will obtain a listing of all claims against the port directly from the port’s attorney(s) and will evaluate whether all required disclosures are made. 7. Schedule 04 Detail of Revenues and Other Resources & Schedule 05 Detail of Expenses and Other Uses
  • 4. These schedules need to tie to the general ledger. The auditor will verify them directly to the general ledger or to unmodified reports generated from the general ledger system. The revenues and expenses on these schedules need to reconcile to the C-1 statement. Note: SAO does not issue an opinion on these schedules and do not include it in the audit report; however they are required for LGCS/ LGFRS. 8. Schedule 09, Long-term debt: a. Separate schedules for general and revenue debt must be presented. b. Schedules should reflect all loans, notes, bonds, lease agreements, compensated absences, and liabilities related to contingencies disclosed in Note 7. c. Beginning balances should tie to prior year ending balances (unless newly issued debt is reported). d. Amount issued in current year should tie to Long Term Debt Proceeds reported on the C-1 (for loans, notes, bonds and not lease agreements, installment sales, etc). e. Amount redeemed in current year should tie to Principal Paid on long-term debt reported on C-1. f. Ending balances should tie to repayment schedules, lease schedules/contracts, etc. 9. Schedule 16, Schedule of Expenditures of Federal Awards: a. The auditor will examine port records related to expenditures of federal awards. Often we look at requests for reimbursements (for reimbursement based grants) and supporting expenditure reports. Auditors will need to verify that the Schedule 16 accurately reports expenditures of federal funds in order to verify the port’s assertion whether a single audit is required. 10. Schedule 19, Labor Relations Consultant(s) a. This schedule required by RCW 43.09.230 must be completed and signed by the executive officer of the port; most of the time this is the port manager/director. Note: SAO does not issue an opinion on this schedule and do not include it in the audit report; however it is required even if no labor consultants were used.

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