Who Are MIT’s Auditors and the Audit Committee and What Are Their Roles and Responsibilities?
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Transcript of Who Are MIT’s Auditors and the Audit Committee and What Are Their Roles and Responsibilities?
Who Are MIT’s Auditors and the Audit Committee and What Are Their Roles and Responsibilities?
Accounting Group
April 2, 2009
Bush Room
What is the definition of “audit”? Noun – professional, independent inspection /
examination / review / verification to evaluate one or more of the following: Financial statement representation Compliance Soundness and integrity of financial and operational internal
control environment System controls Efficiency and effectiveness
Verb – to conduct an audit (see above) Alternative – to attend a class / lecture as a participant to review
material; does not receive credit
Audit work is conducted against an appropriate set of standards
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Auditors Recently in National Headlines
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What groups perform audits at MIT? External auditors – independent of Institute
Independent Public Accountant – PricewaterhouseCoopers (PwC) Institute financial statements (annually in accordance with GAAP) Basic pension plan Supplemental retirement - 401K plan Retiree health and welfare benefits plan A-133: Student financial aid A-133: Federally funded fellowships Investment Fund of Funds SMART
Cognizant Audit Agency - Defense Contract Audit Agency (DCAA) A-133: Research and development
Other auditors and inspectors (e.g., OSHA)
MIT Internal Audit – independent in practice
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PwC Audit Calendar @ MITJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Overall Institute
Basic Pension Plan
401k Pension Plan
Retiree Health and Welfare Plan
A-133/Student Financial Aid
Investment Fund of Funds
SMART
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PwC Areas of Audit Emphasis Observations and Recommendations – Review status of
prior year comments and report current year findings Office of the VPF – Reassess and test key general
controls over balance sheet accounts Investment Management – Review and test operations
and control structure surrounding investment management and treasury functions, as appropriate
Development and Major Gifts – Test to ensure gifts and pledges are reported and recorded in proper period
Federally Sponsored Research – Ensure federally sponsored research activity is appropriately reflected in financial statements
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PwC Areas of Audit Emphasis Tax Matters – Review compensation policies, related
party transactions, and related disclosures Pending or Threatened Claims / Litigation – Assess
accruals, and/or disclosures, and related exposure Information Technology – Update assessment of
monitoring controls over financial systems Compliance – Review programs that monitor
compliance with federal regulations SAS 99 – Consideration of Fraud – Identify risks of
material misstatement
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Who is the DCAA?
Defense Contract Audit Agency Under the Dept of Defense (DOD) Mission: audit military grants and
contracts Full-time DCAA team assigned to MIT to
perform various types of audits of DOD awards (approx. 6 auditors) Resident on campus and at Lincoln Lab
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Role of the DCAA at MIT Performs financial audits of the Institute’s books
and records Primarily in relation to federally sponsored research
Much of their effort is in reviewing the Institute’s “cost study” – the F&A rate
DCAA also performs part of the A-133 Audit Other areas of focus (audits) are:
Property Cost Allowability Effort Reporting Other
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Office of Management and Budget (OMB) Circular A-133 Audit Established under Single Audit Act of 1984 Annual audit requirement Applicable to non-profit entities receiving in
excess of $500,000 in federal awards annually
Typically A-133 audit is performed by the entity’s financial statement auditors
MIT is unique: A-133 is split between DCAA (R&D) and PwC (student fin aid and federally funded fellowships)
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MIT Internal Audit Mission, Scope, and Guidance
Independent and objective assurance and consulting activity Scope of services equal to full extent of Institute’s auditable activities
(includes Lincoln Lab) Responsible for ensuring adequacy of controls over financial
operations, safeguarding of assets, and compliance with laws and regulations
Guided by philosophy of ensuring achievement of the Institute’s business objectives and adding value to improve the Institute’s operations
Strive to conduct audit work in accordance with the International Standards for the Professional Practice of Internal Auditing
Systematic and disciplined approach to evaluate and improve effectiveness of risk management, control and governance processes
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MIT Internal Audit Services Assurance engagements
Business process reviews Assess functionality of processes and determine whether business objectives are
being achieved Test adequacy and effectiveness of internal controls across traditional Institute
boundaries Frequently encompass IT focus
Targeted reviews Limited scope Focus on distinct controls within an area or sub-process
Advisory services Non-attestation Provide advice and guidance on strong controls; assist management in
decision making Largely research admin. compliance & construction contract reviews
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MIT Internal Audit Stakeholders and Customers
Audit Committee Senior management Line management in departments,
labs, and centers External auditors
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MIT Internal Audit Org Chart
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MIT Internal Audit – Examples of Key Findings / Output Need for improved data governance Need for strengthened controls over revenue recording Weakness in operational processes RACP completion of site visits to “Top 40” federally
funded DLCs Reviews of alleged malfeasance when requested by
management Assessment of contracted third party capacity and
viability Construction recovery and cost avoidance
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Who / What is the Audit Committee of the MIT Corporation? Oversight body Governed by Bylaws of the Corporation Audit Committee is comprised of 5 members
3 members on 5 yr. terms; 2 members on 3 yr. terms Chosen from members of the Corporation Chaired by A. Neil Pappalardo (elected annually)
Appoints external auditors (PwC) for financial statement audit annually
Meets three times per year
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The MIT Audit Committee - bylaws“Subject to the approval of the members of the
Corporation, the Audit Committee shall employ public accountants to examine the books of MIT for the next fiscal year, and such other financial and investment records as the Audit Committee deems appropriate from time to time. The public accountants shall report thereon to the Audit Committee, which shall in turn present the report of audit, including the scope of the examination, to the members of the Corporation at their next annual meeting with such recommendations as the Audit Committee shall deem appropriate.”
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What should customers expect? Requests for supporting documentation, often prior to
commencement of fieldwork Financial statement auditors, in particular, need full
cooperation Tight turnaround time Filing deadlines
For attestation engagements conducted, a report containing an opinion and any related findings will be issued to the appropriate member of senior management or business process owner
For advisory engagements (Internal Audit), a report may be issued, containing a statement of audit scope and results of audit work performed
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