audit – overview, issues, and status
TRANSCRIPT
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Office of Inspector General and KPMG LLP
Presentation at The CFO Financial Statement
/Superusers Workshop
FY 2007 Financial Statement Audit – Overview, Issues, and Status
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Overview
OIG’s Role in the Financial Statement Audit Results of FY 2006 Financial Statement
Audit FY 2007 Financial Statement Audit Status Questions and Answers
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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OIG’s Role in the Financial Statement Audit
Coordinate with Audit Liaisons Announce Audit – HQ and Field Entrance and Exit Conference Audit Coordination Meetings, SAS 99
Interviews, EM Planning Meetings IPA and OIG Field Audit Activities
Monitor Progress Review Planning Documents Review Key Work Papers Review Status Reports and Billings
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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OIG Role in Financial Statement Audit (cont.)
Coordinate Audit Activities with External Agencies (GAO, OMB, Treasury)
Review and Distribute Audit Findings Review and Transmit Audit Opinion and
Management Letters Directly participate in certain audit procedures
(both IT and non-IT) at certain sites (new for 2007)
Audit Coordination Committee Meetings
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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OIG Role in Financial Statement Audit (cont.)
Perform Quality Assurance Procedures Consolidated Audit Work Papers Separate Fund Audits Power Management Administrations
Assist GAO in Oversight Efforts EM Site Visits Interviews with HQ-EM Officials
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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OIG Points of Contact
IG is Primary Point of Contact for Problems, Accounting or Auditing Issues
Scott Ward [email protected]; 301-903-8967 David Lamantia [email protected]; 301-903-5376 Brad Milliron [email protected]; 301-903-
6614
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Results of FY 2006 Financial Statement Audit
Qualified opinion relating to undelivered orders
Material weakness in accounting for obligations and undelivered orders
Reportable conditions in the following areas:
Unclassified network and information systems security
Performance measurement reporting
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Scope of the FY 2007 Audit
Opinion on the Department’s consolidated financial statements and footnotes
Review of Management’s Discussion and Analysis, required supplementary stewardship information (RSSI), and other required supplementary information (RSI)
Opinion on the Closing Package AUP on intragovernmental
transactions/balances Additional testing – undelivered orders –
10/1/06 opening balances at 8 sites
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Changes in Auditor’s Report for FY 2007:Communicating Internal Control Related
Matters
The definitions for material weaknesses and reportable conditions are different in 2007
This terminology is consistent with AICPA and PCAOB standards
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Material Weakness Change
Material Weakness – Old Reportable conditions in which the design or operation
of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud, in amounts that would be material in relation to the financial statements being audited, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.
Material Weakness – New A significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Reportable Condition vs.
Significant Deficiencies
Reportable Condition – Old Matters relating to significant deficiencies in the
design or operation of internal controls that could adversely affect the entity’s ability to record, process, summarize, and report financial data consistent with the assertions by management.
Significant Deficiencies – New Deficiencies in internal control that adversely
affect the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with GAAP, such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected.
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Additional New Definitions
Remote – same as SFAS No. 5 – less than probable or possible (more than remote but less than likely)
Inconsequential – a misstatement is inconsequential if a reasonable person would conclude that the misstatement, either individually or when aggregated with other misstatements, would clearly be immaterial to the financial statements
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Comparison 2006 to 2007
Old Definitions New Definitions
Material weakness (GAGAS paragraph 5.14 and AU 325.15) Material weakness
Reportable condition (GAGAS paragraph 5.13 and AU 325.02) Significant deficiency
Management letter comment (GAGAS paragraph 5.16)
Other matters related to internal control
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Summary of 2006 Findings
Obligations, Budget Execution and Funds Control IT Performance Measures Environmental liabilities (including EM and Active
Facilities) Property, Plant and Equipment Procurement Inventory Grants Closing Package Financial Reporting
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Areas of Focus for FY 2007
Undelivered orders remediation IT controls and network security Property, plant and equipment (including CWIP) Environmental liabilities (including EM, LM, active
facilities, and other environmental liabilities) Nuclear materials (valuation, production costing,
and disposition) Implementation of FAS 158, Employers’
Accounting for Defined Pension and Other Postretirement Plans
Non-GAAP accounting policies
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Other Audit Areas and Topics
Status of Yucca Mountain Project Liability for SNF litigation Continued phase-in of OMB Circular
A-123 Use of statistical sampling Surprise sites
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Other Matters for FY 2007
Timing of field work and completion Monitoring by CFO management of
requests for audit supporting documentation
Findings process: Transmittal of prior year findings New findings
Weekly meetings with ACC (KPMG, OIG, and OCFO) to discuss audit status as fieldwork progresses
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Status of Audit - FY 2007 Consolidated Financial Statements
Planning work is completed Overall entrance conference was held
2/23/07 UDO remediation audit work is in process –
test work started in late February 2007 field work is in process at some
locations Mostly IT work, so far Controls sampling will begin in late April Most EM/LM work is planned for July-
September
© 2007 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S.A.
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Questions?