Financial Audit:

The Export-Import Bank of the United States' Fiscal Year 2004 Management Representation Letter on Its Financial Statements

GAO-05-607R: Published: Jul 22, 2005. Publicly Released: Jul 22, 2005.

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The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget (OMB), is required to annually prepare and submit audited financial statements of the U.S. government to the President and the Congress. We are required to audit these consolidated financial statements (CFS) and report on the results of our work. In connection with fulfilling our requirement to audit the fiscal year 2004 CFS, we evaluated the Department of the Treasury's (Treasury) financial reporting procedures and related internal control over the process for compiling the CFS, including the management representation letter provided us by Treasury and OMB. Written representation letters from management, required by U.S. generally accepted government auditing standards, ordinarily confirm oral representations given to the auditor, indicate and document the continuing appropriateness of those representations, and reduce the possibility of a misunderstanding between management and the auditor. The purpose of this report is to communicate our observations on the Export-Import Bank of the United States' (Ex-Im Bank) fiscal year 2004 management representation letter. Our objective is to help ensure that future management representation letters submitted by Ex-Im Bank are sufficient to help support Treasury and OMB's preparation of the CFS management representation letter and our ability to rely on the representations in that letter in combination with individual federal agency representation letters. We reviewed five key areas in each management representation letter: (1) signatures, (2) materiality thresholds, (3) representations, (4) summary of unadjusted misstatements, and (5) reliability of representations. In reviewing the management representation letters, we applied the American Institute of Certified Public Accountants' (AICPA) Codification of Auditing Standards, AU Section 333, Management Representations; OMB Bulletin 01-02, Audit Requirements for Federal Financial Statements; and the GAO/President's Council on Integrity and Efficiency (PCIE) Financial Audit Manual (FAM) section 1001, entitled "Management Representations."

Ex-Im Bank's fiscal year 2004 management representation letter, as well as several other federal agencies' management representation letters, did not provide all the information necessary to support Treasury and OMB's preparation of the CFS management representation letter. This in turn impacted our ability to rely on the representations in the CFS management representation letter in combination with individual federal agency representation letters. We identified some needed improvements in one of the five key areas we reviewed. Specifically, the letter included 24 of the 26 representations from the FAM that were applicable to Ex-Im Bank. For the other 2 representations, 1 was not fully included and 1 was not provided at all. We believe that this matter can be easily addressed. We are making a recommendation to Ex-Im Bank's Chief Financial Officer to ensure future management representation letters fully include all representations from the FAM that are applicable to Ex-Im Bank. Also, we are recommending that the Director of Ex-Im Bank's audit committee, with the contracted independent public accountant, work with the agency to help ensure that future management representation letters meet the key condition noted as needing improvements in this report.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: As part of our FY 2005 audit of the consolidated financial statements (CFS) of the U.S government, we evaluated the agencies' management representation letters to determine whether all applicable representations from the FAM were fully provided. Ex-Im Bank's FY 2005 management representation letter fully provided all applicable representations from the FAM.

    Recommendation: Ex-Im Bank's Chief Financial Officer should ensure that in the future the management representation letter fully include all representations from the FAM that are applicable to Ex-Im Bank.

    Agency Affected: Export-Import Bank of the United States

  2. Status: Closed - Implemented

    Comments: As part of our FY 2005 audit of the consolidated financial statements (CFS) of the U.S government, we evaluated the agencies' management representation letters to determine whether they were sufficient to help support Treasury and OMB's preparation of the CFS management representation letter. Ex-Im Bank's FY 2005 management representation letter met the key condition noted as needing improvements. In a discussion with Ex-Im Bank, Ex-IM Bank's CFO stated that the audit committee had not been involved with the improvements to the management representation letter.

    Recommendation: The Director of Ex-Im Bank's audit committee, with the contracted independent public accountant, should work with the agency to help ensure that future management representation letters meet the key condition noted as needing improvements in this report.

    Agency Affected: Export-Import Bank of the United States

 

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