Step By Step Audit Contracting Process
Step 1 – Develop a list of audit firms eligible to perform government audits for the current fiscal year.
The State Auditor’s Office will issue an invitation to audit firms interested in performing government audits to complete an application known as the firm profile datasheet. Firms will submit the application along with the required documentation indicated on the profile datasheet to the State Auditor’s Office by a deadline specified by the State Auditor.
Upon reaching the deadline for receiving applications from the firms, the Office will conduct an extensive review of each application. The areas of review include verification that educational requirements have been met, the firm’s documents such as professional liability insurance, New Mexico firm permit, etc. are current and a review that the firms are in compliance with requirements set forth in the Audit Rule relating to due dates, late audit notifications, quality of work, etc.
Upon the conclusion of the review, firms will fall into several categories: 1) approved, 2) approved with limitations (often limiting the number of audits they are eligible to perform), 3) approved to be on the list of firms eligible to perform audits however there is some requirement that must be met before the Office will approve and issue contracts. Some of the most common items that can cause this restriction is a) an expired or upcoming expiring peer review, b) not having an at least one audit manager with a current New Mexico CPA license, c) having outstanding audit reports for prior years, d) having expired documentation, e) not meeting the CPE requirements, etc.
Once the list of approved firms has been finalized the information is posted on our website.
Step 2 – Update and finalize the current year Audit Rule.
For More Information: The Office annually reviews and updates the 2.2.2 New Mexico Administrative Code (NMAC) “Requirements for Contracting and Conducting Audits of Agencies”, know as the State Auditor’s Rule. The updates include administrative updates, changes based on the outcome of legislation and changes resulting from auditing standards.
Step 3 – The State Auditor selects the audits his Office will perform and all other agencies will be sent written notification that they can procure their auditor.
More Information: State Auditor has the option to select any agency and have his office perform the annual financial and compliance audit. Once he has made his selection all other agencies must wait until they receive written notification from the State Auditor that they can contract for audit services. Agencies needing to go out to Request for Proposals (RFP) can use the sample audit contracts in their RFP process. They can also contact General Services, Purchasing Division at 827-0472 or their website for any questions relating to Request for Proposals. Once an agency has received their proposals and evaluation form must be completed for each proposal received. The agency will submit the evaluation for the firm they are recommending. All other evaluations forms need to stay in a procurement file.
Step 4 – The State Auditor’s Office conducts statewide trainings on the Annual Contracting Process.
More Information: The State Auditor’s Office will conduct statewide training sessions at the beginning of the audit contracting cycle. The trainings are usually 3-4 hours in length and cover a variety of issues including 1) highlights from the State Auditor, 2) the contracting department will cover the steps that agencies need to follow to get an auditor in place to perform their audit including providing statistics from previous audit years and 3) the audit department will cover overall changes that will affect the audit and give an overview of upcoming changes in standards that may effect future audits.
Registration is requested and can be completed on are website.
Step 5 – Agencies submit a cover letter and evaluation form on the audit firm they are recommending perform their annual financial and compliance audit.
More Information: An agency will need to submit to the state auditor a completed cover letter and two page evaluation forms. Agencies who will have a one year audit performed or an agency in who has a multi-year proposal and is in the first year of the multi-year proposal must submit the cover letter and two page evaluation form. Agencies who are in a multi-year proposal and are in year #2 or year #3 must submit a cover letter and a copy of the evaluation form part 2 from the
the original evaluation form initially completed. If the information is unavailable the agency can fill out part 2 of the evaluation form.
If the State Auditor denies an agency’s recommendation they will be notified in writing with an explanation and will be asked to make another selection. If the recommendation is approved the State Auditor’s Office will issue the audit contract and mail it to the agency with instructions. There will be several areas within the contract that must be completed by the agency before signing the contract and sending it to the auditor for their signature. The final signature will be the State Auditor. Once he has signed the contract copies will be distributed to all parties. (Only contracts issued by the State Auditor Auditor’s Office will be accepted)
If you are an agency who requires DFA approval, once you receive the audit contract you will need to make 3 additional copies so that when it is returned to the State Auditor’s Office there will be four original copies of the contract all with original signatures. The contract should be signed by the agency, audit firm, Taxation and Revenue and Legal Counsel. The contracts should accompanied by an approved requisition and contract brief. The State Auditor will sign the contract and his office will hand deliver the contracts to the Department of Finance & Administration for approval. When the contract has been approved by Department of Finance and Administration they will return them to the State Auditor’s Office for distribution. The audit firms have 10 days from the entrance conference with an agency to submit the dated and signed engagement letter along with the list of client prepared documents to the State Auditor’s Office.
Step 6 – Audit firms will submit audit reports to the State Auditor for review and release beginning in September through December.
More Information: Section 2.2.2.9 – Report Due Dates will outline the due dates for the audit reports. Once an audit report with the required documentation (completed audit review guide, management representation letter and letter of past adjustments or an indication there were none) is received in the State Auditor’s Office we will post on our website the date the audit was received. Any audits received lacking any of the required documentation including the engagement letter will not be considered received until all the required documents are received.
A completed audit report submission then will go through a review process. Upon completion of the review the Office will fax a letter of comments to the auditor with a copy to the agency awaiting response. The audit firm is given 20 business days to respond. If no response is received a letter will be sent to the firm and the agency reminding them of the required response time.
Once the corrections have been completed the office will issue an “ok to print the final copies of the audit report”. When the final audit reports are received (including a required copy on disc) the Office will briefly review it making sure all the corrections noted in the draft are reflected in the final audit report. The Office will then issue our standard release letter which indicates that the audit report will have 10 days before becoming public record. An agency can request a waiver of the 10 day holding period; however the request must be in writing (sample 10 day waiver) and received PRIOR to the report being released.
