The External Audit Process and UC Davis Coordination
Audits, whether internal or external, follow a standard process based on laws, rules, and regulations. The following describes the general process for an external financial and/or administrative audit and what you need to know.
The initial request for an audit may be informally received by the Principal Investigator via an email, phone call, or other correspondence with the sponsor. Others may receive the initial request including department administrators, Contracts and Grants Accounting, Office of Research, Sponsored Programs, and the External Audit Coordinator.
What is being audited?
The formal audit request is memorialized in the engagement letter and defines the purpose, objectives and scope of the audit. Sometimes this is the initial notifications as well.
The PURPOSE describes why the audit is being performed.
The OBJECTIVES – What will the audit accomplish?
The SCOPE defines the range of activities and the time period subject to this audit.
When and how the audit will take place is also included.
Action: Forward the engagement letter to the External Audit Coordinator as soon as possible. If the engagement letter does not sufficiently define what is being audited, the EAC will follow up with the external auditor.
Audit and Management Advisory Services is responsible for coordination of all financial and administrative campus audits conducted by external auditors. Note: Accounting and Financial Services is responsible for coordinating the annual financial statement and federal single audits.
Our External Audit Coordinator, Amy Holzman, has extensive audit experience and will help you work successfully with the auditors. She acts as the main liaison between the external auditor and campus personnel and coordinates all aspects of the audit including:
Scheduling and space requirements
Information and data requests
Bringing together the right people and resources to effectively and consistently respond to external audit requests.
In addition to navigating the external audit process, the external audit coordinator role is also one of advocacy. The coordinator is uniquely qualified to evaluate the external auditor’s conclusions, articulate disagreements with audit findings, and quickly elevate campus wide concerns. If you are contacted by an external auditor, please immediately notify:
Amy Holzman, External Audit Coordinator
Telephone: (530) 752-9169
Action: Determine who will be the primary contact within your department. Often the most appropriate person for this role is the account manager. Communicate to faculty and staff in your department that if the auditors contact them directly, they should immediately notify you or the External Audit Coordinator.
Fieldwork usually starts with the entrance conference. This kick-off meeting provides an opportunity for the audit team and client to discuss the scope and schedule for the audit. This is a formal meeting that should be attended by those directly knowledgeable of the award(s) under review. The PI may or may not need to attend depending.
You should walk away from the entrance conference with a clear understanding of the following:
- The audit’s purpose, objective and scope.
- Explanation of why your department was selected for an audit.
- Awareness of the auditor’s fieldwork processes including anticipated timelines.
- Specifics of the reporting process including who will receive audit reports and response timelines.
Action: The External Audit Coordinator will work with the department to scheduling this meeting. The entrance conference often sets the tone for the audit so it is important to demonstrate competence and a positive attitude.
Fieldwork is the crux of the audit. It is the process of gathering evidence through supporting documentation, interviews, and observations; then analyzing and evaluating that evidence against predetermined criteria. The audit team will physically be on site performing fieldwork. However, desk audits are quite common where the auditor is remote and information and data are exchanged electronically.
Action: Both the department and the External Audit Coordinator should keep the audit focused, resolve audit issues as soon as they are made known, and keep informed of the auditor’s progress.
Records Request - Supporting Documentation
Throughout the audit expect to receive requests for information and documentation ranging from transaction support to process and controls descriptions. The External Audit Coordinator will obtain the auditor’s requests and then forward them to the most appropriate university personnel to collect.
Action: When you receive the request:
- Gather only the relevant documents and submit copies to the EAC.
- If a request is ambiguous, ask for a description of the document’s purpose. There may be alternate documents that would achieve the auditor's purpose.
- Do not submit original documents.
- Respond to requests timely and communicate the reasons for any significant delays.
Action: External Audit Coordinator will review the documents and submit them to auditor. Any anticipated questions will be discussed with you prior to submission. The Coordinator maintains a list of the records provided to the auditor and we suggest you do the same.
Auditors test expense transactions posted to an award against a variety of criteria including the award document, award budget, sponsor requirements, Federal and State regulations, and UC/UCD policies and procedures to name a few. If not obvious, auditors seek explanations for how a transaction benefited the grant, activity or budget. Remember Allowable, Allocable and Reasonable. Limit conversations to the transaction in question and do not bring in funding issues or departmental politics.
The auditors may want to meet with a variety of personnel to understand various policies and procedures.
Action: External Audit Coordinator will schedule and attend meetings between the auditors and other UC Davis personnel.
The exit conference signifies the end of onsite fieldwork. Its purpose is for the auditors to communicate their questioned costs, findings, and recommendations before the draft audit report is issued. Usually the issues presented at the exit conference have already been discussed with us. The reporting and follow up processes are also discussed.
Action: The External Audit Coordinator will work with the department to schedule this meeting ensuring the appropriate participants are there. If an issue is valid, we should concur and take immediate corrective action to resolve the issues. If we do not agree with the issue we can ask for time to review findings and present additional information as appropriate.
Once all information is shared and evaluated by the auditors, they present their findings and questioned costs in a draft report. We are asked to prepare a formal written response conveying our corrective action plan. Any disagreement with the auditors should be clearly articulated.
Action: The Coordinator will assist the department and University Officials in preparing a thoughtful response. The response letter and any management representation letters requested must be signed by a University official with signature authority.
Final Report and Follow up
Once the final report is received, follow up will begin.
Action: Management is responsible for addressing the findings and completing the corrective actions. Coordinator will follow up with you and report progress to sponsor as needed.