Short answer: An entity is auditable when it can support the numbers in its financial statements with complete, accurate, accessible evidence, and show the controls that produced them. An auditability assessment tests that before the auditors arrive, so problems are found and fixed while there’s still time.
Why it matters
The Chief Financial Officers Act of 1990, as expanded by the Government Management Reform Act of 1994, requires the largest federal agencies to prepare audited financial statements every year. OMB Circular A-136 sets the form and content of those statements, and OMB’s audit requirements bulletin sets the rules for the audits themselves. Auditors follow Government Auditing Standards and, for federal entities, the GAO’s Financial Audit Manual.
The checklist
Records and reconciliations
- Fund Balance with Treasury is reconciled to Treasury records, with differences explained and cleared.
- Subsidiary ledgers reconcile to the general ledger for major accounts.
- Property, plant and equipment can be traced to supporting records for existence, completeness and valuation.
- Accruals and estimates have a documented, repeatable method.
Controls
- Key controls over each significant process are documented and performed consistently.
- IT general controls over financial systems (access, change management, operations) are documented and tested.
- Prior-year findings have corrective action plans with owners and dates.
Readiness for fieldwork
- Someone owns the auditor request list (often called the PBC, or “provided by client”, list) and tracks every item.
- Supporting documentation can be retrieved quickly for a sample.
- Legal, management representation and other confirmations have a timeline.
- The statements and notes follow the current A-136 format.
How an auditability assessment helps
An independent assessment works through these areas the way an auditor would, then gives management a prioritized list of gaps and a realistic plan to close them. Audit preparation support can follow, helping teams build schedules, reconciliations and documentation before fieldwork starts.
This article is a general overview for information only. It isn't legal, tax or accounting advice for your situation — talk to us about yours.