Here at Slabbed we’re the proverbial Johnny Come Lately to cover the long anticipated release of the 2013 Fiscal Year Single Audit Report for the City of Bay St Louis. That’s OK though because the report was very late being released, less than two months before the subsequent fiscal year end. How can an entity improve if it waits until late in the next year to correct the Significant Deficiencies that were reported in a late submitted Single Audit? The answer is simple junior, you can’t but then again many of the Significant Deficiencies noted in the report have been reported for multiple consecutive years without correction and that too is meaningful.
That said there are two things I need to address straight away as this topic, by its very nature, requires a few posts to fully paint the picture. The first thing is that somewhere in my earlier coverage of the City’s audit process, based upon what were at times inside conversations between the City Council and the Audit Firm in a public meeting, I wrote that the audit firm was within the bounds of professional discretion with their, at that point unreleased, opinion on the financial statements. Reading the report caused me to change my opinion in a nuanced way and here is why straight from Auditing Standards (Codified), Section 570:
.16 The auditor’s conclusion about the entity’s ability to continue as a going concern should be expressed through the use of the phrase “substantial doubt about its (the entity’s) ability to continue as a going concern” or similar wording that includes the terms substantial doubt and going concern. In a going-concern emphasis-of-matter paragraph, the auditor should not use conditional language in expressing a conclusion concerning the existence of substantial doubt about the entity’s ability to continue as a going concern.
So there you go, there is no middle ground in the use of the words “substantial doubt” and “going concern” but there is a trap door for the CPAs to use just in case management, for whatever reason, chooses not to share their plan to salvage the enterprise as was the case with the City of Bay St Louis:
.18 Nothing in this section precludes an auditor from disclaiming an opinion in cases involving uncertainties. When the auditor disclaims an opinion, the report should not include the going-concern emphasis-of-matter paragraph described in paragraph .15 of this section but, rather, describe the substantive reasons for the auditor’s disclaimer of opinion in the auditor’s report as required by section 705.4 The auditor should consider the adequacy of disclosure of the uncertainties and their possible effects on the financial statements as described in paragraph .12 of this section even when disclaiming an opinion.
The disclaimer based on these circumstances is just as bad as getting the going concern qualified opinion, thus the interest shown by the Office of the State Auditor in the City’s finances after the report was released last month and this brings us to the second thing that needs to be addressed in Mayor Fillingame’s assertion the 2013 Audit Report was sensationalized by the media. I think I found what he was talking about. Continue reading “2013 Bay St Louis Municipal Audit reveals poor financial management Part 1”
