| Analyzing
Audit Oversight
FEBRUARY
2005 - Concerning the November 2004 Publisher’s Column,
“Reconciling Image with Reality,” I think Lou
Grumet’s proposed changes would be somewhat ineffective.
His suggestion that the CPA play the role of the trusted professional
is circular reasoning unless one accepts that the CPAs in
the school districts with financial irregularities had absolutely
no responsibility to discover the problem.
Below
are my concerns:
-
Presenting audit results to the board in a public meeting
will probably not be effective if board members are neither
financially savvy nor capable of asking the right questions.
-
Audit committees can be effective only if they are adequately
compensated, trained, and insured. I cannot imagine there
will be an overwhelming response for this responsibility.
-
The request for proposal (RFP) is a good idea if implemented
effectively and not just window dressing. Mandatory rotation
of audit firms every five years would be a better idea.
-
An internal audit function is very expensive and can work
only if the internal auditor reports to an independent
audit committee.
-
The oversight training is not a practical solution, unless
considered with my comment below.
What
is missing is oversight over the quality of the audit. I
believe that most school districts are too small to effectively
implement the mentioned reforms. Thus, the only protection
standing between the fiscal management of the school district
and upholding the public trust is the trusted independent
auditor.
Some
knowledge about overseeing the sufficiency and extent of
the examination and a more active role by the independent
auditors resulting in a comprehensive evaluation of internal
controls and search for fraud would seem to be required.
Dennis
B. Kremer, CPA, CVA, CFE, CBM
Partner, William Greene & Company
Katonah, N.Y.
Long-Term
Effects of Outsourcing
The
December 2004 article “Outsourcing Income Tax Returns
to India: Legal, Ethical, and Professional Issues”
(by Richard G. Brody, Mary J. Miller, and Michael J. Rolleri)
is interesting, but the authors do not discuss a key facet
of the issues: If more outsourcing occurs, how will the
profession be able to train and develop young people to
learn and advance their tax skills? It sounds great to mention
the alleged cost savings from returns being prepared in
other countries, but where we will get the future leaders
of the profession who will come after the older CPAs retire?
Outsourcing
may seem good from a short-term view, but let’s think
about the future of the profession. This could be a matter
for the NYSSCPA to study.
Joe
Marchbein
Jack P. Fitter, CPA APC
Chesterfield, Mo.
The
author responds
We
agree with Marchbein’s comment and wish we had emphasized
this issue in the body of the article, because it is important.
His comment was addressed in the article’s sidebar,
under the downsides of outsourcing: “Junior staff
no longer get the experience of preparing individual returns.”
[See Editor’s Note, below.]
I
should also mention that we were in no way endorsing outsourcing;
in fact, we were very critical of the current state of affairs,
and we suggested that the profession has not done enough
in this area. The AICPA has taken some positive steps to
address the outsourcing issue, but I think it can take on
a greater leadership role.
In
addition, I am now doing a survey on outsourcing, looking
at two issues:
-
Do taxpayers care if their returns are outsourced?
-
Does their opinion change if their tax returns are outsourced
to India?
My
hypothesis is that outsourcers have no support for their
view that taxpayers do not care about their returns being
outsourced, and I hope my study will address this issue
directly.
Richard
G. Brody, PhD, CPA, CFE
Editor’s
Note: For online readers of www.cpajournal.com,
the initial link to the referenced sidebar was possibly
difficult to find, and was relocated in late December. |