There have been many changes that have come with the update to the Guide for Audits of Proprietary Schools and for Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs (Guide) that was released in September 2016. Many Institutions have become very familiar with these changes as they will impact their upcoming or ongoing Compliance Audits. There is one change in particular that many institutions may not be aware of or may not be aware of the potential impact that it could have on them.
What change should you be aware of? Under the old Guide, the auditor was required to perform the compliance attestation engagement as an examination level engagement in accordance with the Statement on Standards for Attestation Engagements (SSAEs) and Government Auditing Standards (GAS). Now under the updated Guide, the auditor must perform their audit in accordance with GAS and the Statements on Auditing Standards. What does this mean? In simple terms, the auditor went from performing a compliance attestation to performing a compliance audit.
How are these different? Under a compliance audit, the auditor is required to document their assessed level of audit risk and control risk. Auditors will have to have a better understanding of the Institution’s internal controls and operations to be able to adequately assess and document these risks. This could cause a significant increase in the time it takes to complete the audit.
How does this impact my Institution? Potentially fees. As with many things, an increase in time to perform the work can lead to an increase in the fees for it to be completed. Not only that, but your auditors may need more of your time upfront during the planning stages of the audit to gather all of the information they need to perform the audit. M&A strives to identify ways we can continuously improve our efficiencies to minimize impact to our clients.
What can you do to help your Institution? A significant amount of the information needed to assess audit and control risk is observed during an institution’s financial statement audit. Utilizing the same audit firm to complete both audits is highly suggested as the firm can share the applicable information among the two engagements. Utilizing one firm can help reduce the potential impact the change from an attestation examination to a compliance audit can have on your institution.
What steps should you avoid taking? Institutions will want to err on the side of caution when deciding to utilize one firm for both audits to simply cut costs. With the changes that came with the update to the Guide, it is critical that Institutions engage auditors who are well versed in all of the compliance requirements that your institution faces. There is a lot more value in being proactive and averting issues that can be costly in the long term than being reactive to issues caused by a decision to cut costs. We are available at any time to discuss this impact on your institution.