Types of Audits

Financial Audits

The primary purpose of a financial audit is to render an opinion on whether the City’s financial statement reports are presented fairly in conformity to applicable generally accepted accounting standards. State law requires the City’s financial statements be audited annually by external auditors who are Certified Public Accountants (CPA) and independent of City functions. The City procures and contracts with CPA firms licensed by the State of California to perform financial audits.

Reports of financial audits focus on reporting the financial condition of the organization. Financial statement reports of government organizations are required to conform to Government Finance Officer’s Association requirements. Audits of governmental financial statements are performed in accordance with Government Audit Standards and include reports on internal controls, and compliance with laws and regulations.

Performance Audits

Performance audits are defined as engagements that provide assurance or conclusions about processes and programs. Assurances and conclusions are based on evidence that compare a program or process performance against stated criteria. Stated criteria include, but are not limited to: specific requirements, established performance measures or best business practices. Often, our audit objectives focus on performance measures, and then use those measures to determine whether a program is achieving its goals and objectives.

Audit reports will make conclusions based on evidence of program effectiveness. When the auditor’s findings identify problems that need corrective action, recommendations are made to improve the program. Reports also include perspectives of officials responsible for the process or program being audited and their corrective action plans. Normally, follow-up audit work is performed to assure corrective action plans are performed within a prescribed time period.

Other Audit Work

Attestations

Attestation engagements cover a broad range of financial or non-financial objectives and provide different levels of assurance or assertion depending upon the needs of the user. Although not technically considered audits, government auditing standards and the American Institute of Certified Public Accountants (AICPA) have established standards and provide guidance as to how attestation engagements should be conducted. External auditors are more likely to conduct attestation engagement; however, internal auditors may also perform attestation engagements.

Non-Audit Services

Professional services offered by the City Auditor to City departments not considered audits or attestation engagements are defined as non-audit services. Government audit standards do not cover non-audit services and auditors cannot cite in reports that non-audit services are conducted in accordance with government auditing standards. Generally, non-audit services involve technical advice given to City departments in non-audit areas.