Association of Government Accountants
The Central Kentucky Chapter
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Association of Government Accountants
The Central Kentucky Chapter
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December 2003 - Volume XXIV, Issue 16 |
President’s Message
By Roy Hunter, Chapter President
I can’t believe another year is nearly passed and Christmas
is upon us. But before you fill your
schedule with shopping and other fun Christmas activities I would like to
encourage everyone to allow one day to attend AGA’s second free CPE of the
year. It is scheduled to be held on
December 12, 2003 at the Salato Wildlife Center in Frankfort and will provide 8
full hours of tax related CPE and a catered lunch to AGA members at absolutely
no cost. Since this is the season of
giving the Central Kentucky Chapter will be presenting donations to several
worthy charities during the lunch break.
You’ll just have to show up to see who gets the dough.
Speaking of giving, we are once again offering a
scholarship to some worthy Kentucky accounting student. So if you think that student may be you or
someone you know, please contact any Chapter Executive Committee member for
more information.
William J. Anderson Jr., immediate past AGA national president, has
recently stirred up quite a debate and I would like to get the view of the
members of our chapter. Mr. Anderson
feels that the Association of Government Accountants should change its name to
the Association for Government Accountability.
He is quick to note that our initials would still be AGA. I for one would tend to agree with Mr.
Anderson in that the new name would better reflect AGA’s mission, but I would
like to know what you think. So if you
have any thoughts on this issue please e-mail me and let me know.
In closing I would like to wish you all a Merry Christmas and a
Happy New Year!
Chapter Meeting Notes For November
By Phil Nally, Chapter Secretary
The Central Kentucky Chapter met at the Office Pub and Deli on November 20, 2003. There were 21 members and guests in attendance.
The guest speaker was David Coyle, Director of the Division of Financial Institutions in the Department of Financial Institutions. The Division regulates state-chartered and licensed depository and non-depository financial institutions and registers and regulates securities activities in Kentucky. There are 1,900 banks, credit unions, mortgage companies, and consumer loan companies in the state.
A large part of their job is dealing with consumer complaints. The number of investigations due to complaints, fraud, and scams is increasing. The Division works with the FBI and law enforcement officials in the investigation process. Problems are also increasing with external auditors.
The Division examines internal and external controls and audits. Most fraud occurs in the mortgage lending business. New laws require all mortgage brokers and their employees to be registered with the state. Predatory lending laws also are helping to curb abuse.
Despite its reputation, payday lenders have few consumer complaints and violations. The fees charged by these lenders can sometimes be cheaper for consumers than bank and non-sufficient funds fees.
The Patriot Act enacted at the federal level has added steps for
consumers establishing bank accounts.
Mr. Coyle stated that the Act is necessary even in places such as
Kentucky because of illegal money transfers in and out of the country.
A question and answer session followed his remarks. There being no
other business, the meeting was adjourned.
Chapter Executive Committee Meeting Notes For November
By Phil Nally, Chapter Secretary
The Central Kentucky Chapter of the Association of
Government Accountants held its monthly Chapter Executive Committee meeting at
Fiesta Grande on November 19, 2003, with nine members in attendance: Don
Fields, Dan Flaherty, Mary Hudson, Roy Hunter, Phil Nally, Sharon Parrish,
Linda Sagraves, Amy Small, and Rick Waddle.
Rick Waddle reported that the October training was a success. Even though some bills are outstanding, Rick
was confident that the chapter will make a profit.
Rick Waddle also reported that training will be offered on December
12 for AGA members only. The training
will be combined with the annual Community Service Banquet. Rick is working to have eight hours of CPE
on tax-related subjects. The training
will take place at the Salato Wildlife Center.
Family Affair Restaurant will cater lunch.
Sharon Parrish distributed a draft of the scholarship mailing to be
sent to the state universities. The CEC
agreed that Georgetown College, Midway College, and Transylvania University
should also be included, due to their proximity to Frankfort. The scholarship will remain at $500. The letters will be mailed in early January,
with applications needing to be postmarked by March 5, 2004. The winner will be notified by April 5. Applications should be mailed to Lee Ann
Watters.
The CEC will not meet in December, but correspond by e-mail should
any issues arise.
Meeting For
December
The meeting for December will be an all day seminar on
federal and state taxes.
THIS
TRAINING IS FREE TO AGA MEMBERS.
Training will begin at 8:30 am for eight
(8) hours of CPE credit. A catered lunch will be provided at 11:30 am.
Albert Becker, Manager of Personal Property Branch, Division of
State Valuation, Kentucky Revenue Cabinet, will speak on Property Tax Issues.
Michael Kalinyak, J.D., Director, Division of Protest Resolution,
will speak on Kentucky Tax Cases of Interest.
Alan Olsen, Alan Olsen & Associates, will speak on
Reverse-Split Dollar Agreements.
Please send your registration form to
Linda Sagraves at sagraves@bellsouth.net, or by mail to AGA c/o
December Training, P.O. Box 576, Frankfort, KY 40601. The deadline for
registration is Thursday,
December 11.
Other Notes
By Sharon Parrish, Early
Careers Director
KSU School of Business will be offering ACC
410-Governmental/Nonprofit Accounting in the Spring 2004 semester. This course is particularly beneficial for
individuals currently or planning to work in state or local government. This course is also highly recommended for
any student planning to sit for the CPA examination.
The prerequisites are ACC 301 or consent of the
instructor. Students with experience
working in state or local government will be considered by the instructor in
evaluating prerequisites.
For further information, individuals can contact
Sharon Parrish at (502) 597-6910 or e-mail sparrish@gwmail.kysu.edu
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Happy Holidays!
External auditors and other auditors are frequently assigned audits
with a very focused audit scope. The
auditors usually do a good job of conducting these audits and communicating the
results related to the audit scope. However, if the auditors notice an issue not within the audit
scope, they often times fail to communicate these observations. The auditors and accountants may not be
maximizing audit value when these other matters are not discussed.
One problem is that too many people believe the audit fee is just a
necessary expense instead of an expenditure that adds value. If an audit adds no value to the
organization, then the audit probably should not be performed. This means the organization needs to
identify the real reasons for the audit and who the audit benefits. The beneficiaries could include
shareholders, bondholders, banks, customers, suppliers, regulators, insurance
companies, auditee management, auditee accountants, and others.
Performing at least the minimum required to meet the audit scope is
a key obligation of an auditor. Many
auditors believe that an auditor’s obligations extend no further than the
original audit scope. Other auditors
feel that communicating incidental observations or discoveries learned while
performing the audit is covered under the audit scope.
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Audit Scope
Range |
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Minimum --- Audit Scope
Only |
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Maximum --- Minimum Audit
Scope Plus All Incidental Observations |
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Consulting-Beyond audit
scope and in violation of Independence Standard for external auditors. |
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Some auditors believe an auditor’s primary job is to meet their
fiduciary responsibility to the stakeholders, and this means performing the
audit to provide good value to the stakeholders. Furthermore, the auditors should not close their eyes or refuse
to perform incidental work that clearly adds value to the end product. However, when incidental or extra work
clearly impairs the audit product’s primary value, it does not add value to the
end product. Thus, the fiduciary duty
view does have a logical boundary.
Under the fiduciary duty view, if an exploration team, such as
Lewis and Clark, was hired to explore new territory, they should not just
report the characteristics of the land, which would be their minimum duty. The
exploration team should also report any gold or diamond deposits they encounter
while performing their originally assigned duty. Anything less might be viewed as a breach of their fiduciary
duty. In essence, any incidental
observations or discoveries should be communicated to auditee management and
possibly other stakeholders.
The internal audit function’s location within an
organization could have a great deal to do with how much they look into
things. When an internal audit group
has a high degree of independence, they can do more critical thinking and
address issues in a way that outsiders could not. Thus, more independence should enable internal auditors to
deliver more value added services.
External auditors might be so concerned with retaining the audit
engagement that they only want to please management through a fast audit. A
fast audit is less likely to be critical of senior management or offer
constructive comments. If the auditors
are focused on pleasing management, it is difficult to know which issues to
suggest and which matters to ignore. If
the auditors are striving to please management, they might not be striving to
meet the needs of other stakeholders.
Many auditors believe mandatory seven-year auditor rotation should
be imposed for publicly traded companies.
If this is implemented, the requirement should include seven-year
contracts for the annual audits. Such requirements should enhance the
independence of the external auditors.
These requirements should enable the external auditors to provide more
constructive comments. Better auditor
feedback would provide stakeholders a higher rate of return on the audit fees.
Some auditors do not view customer service as part of the
audit. The auditors may be fixated on
completing the audit in the least time and for the least money. This approach is like XYZ hotel, which is
just selling rooms for the night while ABC hotel, their thriving competitor, is
focused on delivering high customer satisfaction. The XYZ hotel may even cut its nightly price and still not
attract as many paying customers as ABC hotel.
Other auditors are like car sales people who only want to make the
sale today. If they ignore customer satisfaction, they are far less likely to
have repeat customers. Auditors should
view the audit as part of a long-term business relationship instead of a
one-time transaction.
The internal auditors often have much more flexibility about the
audit scope. These auditors can usually
go beyond the audit scope without others believing they have exceeded their
authority.
The audit being performed could be a traditional financial audit,
an IT (Information Technology) audit, an operational audit, or some other
variation. The financial auditors may
be ignoring IT audit issues and operational audit issues. The IT auditors may be ignoring financial
audit and operational audit issues. The
operational auditors may not be looking at financial audit and IT audit
issues. When auditors close their eyes
to potential audit issues beyond the audit scope, the auditee is not receiving
the full value of the audit.
The external auditors, who perform the financial statement type
audit, are usually the most restricted by the audit scope. This is unfortunate because the shareholders
or other stakeholders are not getting the best return for the money spent. If these external auditors were permitted to
exceed the audit scope by perhaps 5% to 10% of their audit hours, the rate of
return might be greatly increased. If the auditors are not just seeking
consulting work, but covering matters closely related to their audit
activities, the work should be permissible.
The external auditors can cover the incidental issues with no
appreciable extra time.
Many external auditors want to perform the minimum work called for
by the audit scope. This position also
tends to be consistent with their understanding of the audit standards. However, this narrow approach might be very
contrary to the fiduciary duty viewpoint and good customer service. In essence, external auditors could be so
caught up in audit scope and audit standards that they lose sight of their
fiduciary duty to the stakeholders. It
is like the person who is supposed to drain the swamp but they are only focused
on those alligators. The reality is that external auditors probably should
regard their fiduciary duty to the stakeholders as being equal to or greater
than their obligation to meet the minimum audit scope requirements.
When the auditors have a high degree of independence, they can do
more critical thinking and provide more constructive comments for the
stakeholders’ benefit. Incidental
observations or discoveries should be communicated to the appropriate
stakeholders. The fiduciary duty to
stakeholders should be equal to or greater than the minimum audit scope. Auditors should look at each audit as part
of a long-term business relationship and seek to provide those constructive
comments that add long-term value for the stakeholders. The scope of audits should be flexible
enough to enable auditors to communicate opportunities, weaknesses, and areas
of improvement.
Copyright (C) 2003 by Tom Crouch
This text may be forwarded via fax or e-mail so long as the copyright is
shown. This text may be re-printed
anywhere in a constructive manner so long as the copyright is shown. All other rights are reserved.
Of
the Central Kentucky Chapter
For
the month ended October 31, 2003
By
Rick Waddle, Treasurer
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Central Account |
Education
Account |
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Beginning Bank Balance
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$3,014.63 |
Beginning Bank
Balance |
$1,631.23 |
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Revenue: |
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Revenue: |
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Interest |
2.09 |
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Annual Acct
& Aud Update |
8,075.00 |
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Dues |
97.50 |
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Total Revenue |
99.59 |
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Total Revenue |
8,075.00 |
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Expenses: |
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Expenses: |
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Conference Admin– A. Stueber |
560.40 |
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Total Expenses |
0.00 |
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Total Expenses |
560.40 |
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Ending Bank Balance |
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$3,114.22 |
Ending Bank
Balance |
$9,145.83 |
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Office CEC Officers Email Address Phone President Roy Hunter (502) 695-1040 President-Elect Lee Ann Watters (502) 695-1040 Past President Cindy Upton (502) 564-8100 Secretary Phil Nally (502) 564-7750 Treasurer Rick Waddle (502) 564-7750 Program Coordinators Margaret Hurst, Rick Waddle, and Phil Nally (502) 564-8100 (502) 564-7750 (502) 564-7750 Early Careers Director Sharon Parrish (502) 564-6910 Education & Training Coordinator Cindy Upton (502) 564-8100 Newsletter Editor Linda Sagraves (502) 573-0050 Historian Don Fields (502) 564-7334 Community Service Rex Gregory (502) 564-7334 Attendance Coordinator Linda Sagraves (502) 573-0050 Membership Coordinator Amy Small (502) 573-0050 CGFM Coordinator/Public Relations Coordinator Mary Hudson (502) 573-0050 Website Development Coordinator Dan Flaherty (502) 573-0282 Central Kentucky AGA Website
Chapter Executive
Committee
