|
|
From The AICPA Audit Committee Toolkit.
Copyright © 2005 by the American Institute of Certified Public Accountants,
Inc., New York, New York.
| Purpose of This Tool. While not-for-profit organizations (NPOs) are not subject to the requirements of the Sarbanes-Oxley Act, the audit committees of many NPOs may deem it necessary to engage outside advisers in the course of carrying out their duties. This tool is intended to assist audit committee members in understanding the process of engaging independent counsel and other advisers if needed.
|
When selecting independent counsel or other advisers (expert/adviser) for
an engagement within the organization, the audit committee should not only
consider the education, training, and experience of the specialists and staff
assistants actually performing the work, but it should determine that the
service provider (1) maintains integrity and objectivity; (2) is free of conflicts
of interest with respect to the members of the audit committee and the organization,
(3) has the expertise and resources necessary to do the work it is under consideration
to do, and (4) has a reputation for reliability, among other considerations.
The source of funding for payments to the outside advisers should be considered
before initiating the process of engaging external resources. Many NPOs receive
funding support from governmental and other regulated agencies, and funding
agreements with these agencies may require the NPO to follow statutory or
contractual procedures when engaging external resources. Such procedures may
include specific procurement requirements for advertising, securing bids,
and bid acceptance.
Although the nature of every engagement will be different, the initial steps
the audit committee (or its designee) should undertake when engaging external
resources include the following:
- Determine that the expert/adviser has the competence and experience to perform the requested service. Check references with other clients of the service provider.
- Consider and discuss whether the expert/adviser has a conflict of interest
with respect to the NPO. Such a conflict might arise if the expert/adviser
has a relationship with the external auditor, or if they provide service to
organizations with similar missions, programs, donors, or other constituent
groups. Depending on the nature of the service to be offered, a conflict could
arise if the expert/adviser has a relationship with a member of the board
of directors, or a member of the organizations management. Be aware of other
potential conflicts of interest that may distract the expert/adviser or undermine
the work to be done.
- Determine if the expert/adviser has sufficient resources to perform the
work in the time frame specified by the audit committee.
- Evaluate the scope of work to be performed and other issues, including
the proposed plan for payment of fees and expenses.
- Make sure all parties (including management and the expert/adviser) understand that the audit committee is the owner of the service relationship. Make sure that management understands that the expert/adviser is working on behalf of the audit committee and the audit committee expects management to be fully cooperative and forthcoming with respect to any information that may be requested.
- Determine the criteria that will be used to measure the experts/advisers work and document those criteria in an agreement with the service provider. As with any relationship, communication and managing expectations is important.
From The
AICPA Audit Committee Toolkit. Copyright ©
2005 by the American Institute of Certified Public Accountants, Inc., New
York, New York.
|
|
