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By Oliver Arthur, CPA

When people consider CPA specialties, the vital role the profession plays in governmental internal auditing isn’t always top of mind. But just because it isn’t a first thought does not mean it is not important. Internal auditors are the fiscal watchdog of the funds processed in the government departments that we audit. We are responsible for the proper conduct our audits to reveal errors, omissions, and to identify strengths and weaknesses in the internal controls of the auditees. The day-to-day responsibilities of government internal auditors are to safeguard resources against fraud, waste, and abuse; promote accuracy and reliability in accounting; and evaluate compliance with laws and regulations. In addition, we provide transparency to taxpayers that the government’s duties related to the handling of money are being performed properly and legally. Newly elected Pennsylvania Auditor General Timothy DeFoor recently underscored the importance of auditing in government agencies: “Accountability, integrity, and transparency are what Pennsylvania taxpayers expect and deserve.”

When we think of assurance on government financials, many first consider the external auditor who is doing the financial audit on the organization. External auditors play a vital role in providing attestation services on the government’s financial statements, but governments cannot rely solely on accounting firms to be the only auditors. Why? One word: materiality. External audits provide an attestation service on the financials of the government organization, but this service may exclude departments and accounting transactions considered unimportant with regard to the objective of the external audit. That is when internal auditing kicks in to help fill those gaps in the audit process.

For firms auditing government financials, the volume of financial information can be tremendous. Internal auditors, though, can break financials down to certain accounts or departments. This allows us to focus on areas where internal risk assessments guide us to investigate. By analyzing this information, we can determine internal controls weaknesses or other issues that can then be addressed in a timely manner.

Internal auditors look at compliance with government policies and sound internal controls. Local government policies, for example, are designed to help ensure that we all comply with applicable laws and regulations and operate efficiently. By following these policies, we help protect the local government from unnecessary risks and help ensure sound business practices are consistently applied throughout the local government. However, not all internal controls can be codified in policy. If we find control weaknesses, we regularly make recommendations to implement a control even though it may not be specifically required by policy.

Internal auditors, however, are similar to auditing firms when it comes to following auditing standards, independence, competency, and objectivity. We hold ourselves and the work we perform to high standards. A key component for internal auditing departments is to remain independent. A government cannot have an auditing department in name only; it is imperative to have a department that meets the standards applicable to their work. Some local governments may have an audit charter, elected auditor, or operate under the leadership of an elected controller.

Auditors, internal or external, have historically generated dread in the minds of the audited: “Oh no, the auditors are here!” But internal auditors who work for the government can build professional relationships with different departments, can understand how the departments operate, and are in the best place to change the view people have on the auditing profession. In running the Berks County audit department, I have focused on how individuals view our department. We are no longer the department that comes in to find problems, but rather a partner with the departments to prevent problems. Over the past five years, people call us for guidance, recommendations, or even request that we come to their department and perform a new audit.

CPAs working in government internal auditing departments can help provide assurance to the governing board, key department professionals, and, most importantly, the citizens that the government’s financial matters are being handled properly. Internal auditing holds the government to accountability and transparency through the audits performed. Internal auditors play a vital role and make a difference every day at the organizations they work for and are an important career pathway for CPAs to consider.

Oliver Arthur, CPA, is manager of auditing for Berks County, Pa. He can be reached at oarthur@countyofberks.com.

For more depth on government accounting topics, don’t miss PICPA’s Not-for-Profit and Government Accounting Conference webcast on July 12-13.

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