Financial Management: Providing a Foundation for Transition - AGA

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26IG office, as it is when the audit team is madeup of IG staff. Executives say do not be afraid topush back on some auditor views, especially if aCFO disagrees with an auditor’s solution.CFOs should recognize when auditors identify areal issue and not go into denial, says an executive.It is not such a bad thing for an auditor to discovera material weakness, because then the CFO can fixit. Indeed, says another, use auditors as a tool anda resource to provide independent interim reportsand counseling throughout the year.During the fixing, though, it is not enoughsimply to take care of problems auditors identify.“We need to find ways to show auditorsand oversight groups we are fixing adverse auditfindings they bring up,” says an executive. Todo that, and to get along, CFOs have to talk toauditors in their own language and understandtheir job, says another.“We need to find ways to show auditors and oversight groupswe are fixing adverse audit findings they bring up.”— An executiveNo one says that there should be not auditorsor auditing. Most would agree with an executivewho is also an auditor who says, “Havingan auditor look over their shoulder motivatesprogram managers.”A message to auditorsAuditors need to consider the feedback thissurvey gives them from financial executives, suchas the following.• “Auditors have become so risk averse that theyhave abandoned their training and professionaljudgment and instead are always looking in thebook for a solution. 3 ”• “They will second-guess you, but never offerany suggestions at the start of an audit, claimingthat they can’t jeopardize their independence.”• “Auditors often come in with a developedmethodology of how to fix issues found duringfinancial statement audits, but sometimes itneither fits the entity nor gets to root of theproblems. ‘One size fits all’ may not work.”• “Why do auditors wait until near the end ofthe audit to convey good or bad news?”In addition, executives question some auditordefinitions of materiality. Even though someproblems may be real, they may not affect theintegrity of financial statements at a material level.Clearly, both auditors and auditees can benefitfrom hearing and acting on each other’s feedback.So will the American public.Changing accounting andauditing standardsWe asked survey executives if the FederalGovernment needs to revisit the accounting andauditing standards for which it holds entitiesaccountable. As shown in Figure 4, less than athird said no, keep the status quo. Half said tochange accounting standards, and 60 percentwanted to see new audit standards.Changing accounting and audit standards is adifficult thing to do: there are too many organizationsinvolved and regulatory entities inparticular tend to be jealous of their authority.However, the Executive Branch can change thefinancial statements without altering standards,which could improve how the government preparesand reports its finances.3This criticism has more generally been leveled at current practices of accountants, contracting officers and other professionals, both in andout of government.
27Figure 4:Opinions of executives on changes needed for accounting and audit standardsNo changeChangeaccountingstandardsChange auditstandards0% 10% 20% 30% 40% 50% 60% 70%Percentage of executive respondentsIn general, executives want standards to berelevant to the business, goals and purpose ofgovernment. Says a CFO, “Accounting standardsneed to focus more on program accounting todetermine the performance of every dollar spentby the government. It is unclear that the five statementscurrently used give meaningful numbers, asthey do for the private sector. Government financialreporting standards are needed to indicateperformance levels that matter, and then we needto audit to these standards.”making management decisions. Congress doesnot consider the reports for budgeting, and few ingovernment can use them for business decisions.Says an oversight executive, “The central thing weshould be asking is what informationis important for entities to have sothey can run properly?”Another executive says, “Financial reports needto be headlights for managers, not tail lights.Our fixation with historical costs should go. Weneed to know, what is it, what does it cost, doesit lead to the outcome I want. It is given thatthere will be a government, so focus standards onhow you measure and report on it.”Standards should also contribute to managementdecision making. Many respondents say that thecurrent federal approach to financial reportingdoes not produce any information useful for
Page 1: Association of Government Accountan
Page 4 and 5: 2Table of contentsAbout the Associa
Page 6 and 7: 4Road to transformationReviewing th
Page 8 and 9: 6government decision making. From t
Page 10 and 11: 8Positive opinions on A-123When the
Page 12 and 13: 10more likely to add value to opera
Page 14 and 15: 12• Better guidance and clearer r
Page 16 and 17: 14Cost/benefit analysis and targete
Page 18 and 19: 16• Many executives say their peo
Page 20 and 21: 18Some CFOs report success in reduc
Page 22 and 23: 20SystemsSurvey respondents listed
Page 24 and 25: 22the top of those that they want c
Page 26 and 27: 24Financial statements and audits:
Page 30 and 31: 28ConclusionDesign by www.sparkdesi
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Financial Management: Providing a Foundation for Transition - AGA

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