Army Audit Agency:

Staff Reductions and Audit Quality Issues

AFMD-89-1: Published: Apr 21, 1989. Publicly Released: May 5, 1989.

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Pursuant to a congressional request, GAO assessed the Army Audit Agency's (AAA): (1) allocation of audit resources; (2) audit quality; and (3) independence.

GAO found that: (1) AAA audits resulted in reported monetary benefits of $1.6 billion for fiscal year (FY) 1987 and included significant recommendations for improved Army operations; (2) AAA generally provided extensive audit coverage of Army program and budget areas; (3) AAA could improve its audit coverage by conducting more Army-wide financial management audits, more closely monitoring the Army's $380-million accounting system redesign, and auditing Army financial reports and the accounting systems generating financial management information; (4) AAA did not ensure follow-up of audit recommendations until it conducted a subsequent audit, which could take place 1 to 10 years after the recommendations; (5) the Army's 3-percent reduction of AAA staffing would not seriously affect operations, coverage, or audit quality, although further reductions could adversely affect AAA ability to respond to increasing and expanding responsibilities; (6) a recent Army reorganization increased AAA organizational independence; (7) AAA audit working papers sometimes lacked sufficient evidence to support audit report statements, differed with audit reports on the extent of reported problems, and were not always cross-indexed with audit reports; and (8) AAA audit reports did not always cite the underlying causes of reported problems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Auditor General instituted a revised quality control checklist for all audits. The AAA quality assurance program will help ensure that the checklist is used.

    Recommendation: To ensure the accuracy and validity of AAA audit reports, the Secretary of the Army should direct the Auditor General to institute improved quality control procedures, such as report referencing, to provide verification of information in final audit reports.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: AAA has established a trial procedure for receiving data from the Army Inspector General on the status of significant recommendations. The Auditor General intends to review the benefits of this approach. The Auditor General has now determined that it is of benefit to auditors to receive followup information on significant recommendations. Auditors will receive information on a permanent basis.

    Recommendation: To enhance audit coverage and ensure that audit recommendations are implemented to improve Army operations, the Secretary of the Army should direct the Auditor General to follow up to determine whether appropriate corrective actions have been taken on all significant AAA audit findings and recommendations.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: The Auditor General issued a letter to all staff emphasizing the importance of managers remaining involved in the final stages of audit and report processing. The AAA assurance procedure now includes verification that report processing procedures are followed by all audit managers.

    Recommendation: To ensure the accuracy and validity of AAA audit reports, the Secretary of the Army should direct the Auditor General to require that auditors-in-charge or other appropriate individuals remain involved in audit assignments during the processing of audit reports to fulfill the responsibility for documenting all meetings with Army management and for indexing the final audit report to the working papers.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: The AAA audit plan for FY 1990 shows an increase of 2,000 auditor days devoted to Army-wide financial issues as compared to FY 1989. These auditor days are scheduled for multilocation audits that will also carry over into 1991.

    Recommendation: To enhance audit coverage and ensure that audit recommendations are implemented to improve Army operations, the Secretary of the Army should direct the Auditor General to direct more of AAA financial management coverage toward auditing Army-wide issues, accounting system redesign efforts, and the data included in the Army's financial reports.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Closed - Implemented

    Comments: AAA includes a review of reports in each of its quality assessments. These reviews specifically require that cause be identified in each input. The Auditor General plans to report to the Secretary of the Army after July 1990. The Auditor General issued his written report to the Secretary on July 31, 1990, outlining actions taken to improve reporting the cause of audit findings.

    Recommendation: To ensure the accuracy and validity of AAA audit reports, the Secretary of the Army should direct the Auditor General to schedule a quality assurance review to determine if causes of problems are being appropriately identified, analyzed, and reported following implementation of the recommended report review procedures, and report to the Secretary within 1 year on the progress toward correcting this weakness.

    Agency Affected: Department of Defense: Department of the Army

 

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