A key internal control is linked to management’s and auditors’ access to various details for reconciling summary dollar amounts and balances. In a recent presentation, an external auditor shared with the audience how much the external auditor community was frustrated by school districts’ inability to provide sufficiently detailed records relating to the new governmental accounting principles involving pension liability amounts reported in fiscal year 2015 financial statements. It was assumed that records and information captured in school districts’ financial management systems combined with information available from external sources would be sufficient for applicable generally accepted auditing standards. The external auditor further explained how much more efficient and less costly the external audit processes would have been, if school districts had captured select screen shots or saved certain reports in pdf format, as certain transactions were being processed.
The lesson of this story is that school district officials need to have conversations with internal and external auditors about supplemental information archival practices that need to be followed at the time certain transactions are being processed in financial accounting, payroll and/or human resource systems.