JUNE 13, 2008 

QUALITY CONTROL REVIEW REPORT

REPORT NO. IG-08-020 (ASSIGNMENT NO. A-08-008-00) 

OFFICE OF AUDITS

QUALITY CONTROL REVIEW OF THE

HOUSE & ALBRIGHT P.C. AUDIT OF THE 

MARSHALL SPACE FLIGHT CENTER EXCHANGE 

FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED 

SEPTEMBER 30, 2007 

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration 

 
Acronyms 

AICPA American Institute of Certified Public Accountants 

CPA Certified Public Accountant 

CPE Continuing Professional Education 

FY Fiscal Year 

GAGAS Generally Accepted Government Auditing Standards 

MSFC Marshall Space Flight Center 

REPORT NO. IG-08-020 
RESULTS

REPORT NO. IG-08-020 1 

National Aeronautics and 

Space Administration 

Office of Inspector General 

Washington, DC 20546-0001 

 June 13, 2008 

William C. House, CPA 

House & Albright P.C. 

SUBJECT: Quality Control Review of the House & Albright P.C. Audit of the Marshall 

Space Flight Center Exchange Financial Statements for Fiscal Year Ended 

September 30, 2007 (Report No. IG-08-020; Assignment No. A-08-008-00) 

The audit firm of House & Albright P.C. performed an audit of the Marshall Space Flight 

Center (MSFC) Exchange financial statements for the fiscal year ended September 30, 

2007 (FY 2007). The Inspector General Act of 1978, as amended, section 4, paragraph 

(b)(1)(C), directs each Inspector General, with respect to the organization within which 

the office is established, to take appropriate steps to ensure that any work performed by 

non-Federal auditors complies with the standards established by the Comptroller General. 

Our quality control review was to determine whether House & Albright P.C. performed 

its audit in accordance with the Government Accountability Office’s “Government 

Auditing Standards, 2003 Revision” (often referred to as generally accepted government 

auditing standards, or GAGAS), issued by the Comptroller General of the United States. 

GAGAS applies to audits of Government organizations, programs, activities, and 

functions and prescribes general standards (including independence, professional 

judgment, competence, quality control, and assurance requirements), fieldwork standards, 

and reporting standards. Additionally, GAGAS incorporates the generally accepted 

auditing standards of the American Institute of Certified Public Accountants (AICPA) for 

fieldwork and reporting.1

 See Enclosure 1 for details on the scope and methodology of 

our review, requirements for reviews of exchanges and morale support activities, and our 

summary of the latest peer review of House & Albright P.C. See Enclosure 2 for the 

results of the House & Albright P.C. audit of the MSFC Exchange for FY 2007. 

Background. The MSFC Exchange is located at MSFC in Huntsville, Alabama. The 

MSFC Exchange contributes to the welfare, efficiency, and morale of NASA MSFC 

employees; other Government personnel stationed at MSFC; retired NASA employees; 

 

1

 The AICPA is the national professional organization for all certified public accountants (CPAs). 

According to the AICPA, its mission is to provide members with the resources, information, and 

leadership that enable the members to provide valuable services in the highest professional manner to 

benefit the public as well as employers and clients. In fulfilling its mission, the AICPA works with State 

CPA organizations and gives priority to those areas where public reliance on CPA skills is most 

significant. 
RESULTS

2 REPORT NO. IG-08-020 

families and guests of the preceding; and MSFC on-site contractor personnel. Services 

provided by the MSFC Exchange include vending and retail stores, convenience services, 

health and recreation activities, and a physical exercise program. In FY 2007, MSFC 

Exchange revenues totaled approximately $850,000 and assets totaled approximately 

$909,000. House & Albright P.C. maintains an office in Huntsville, Alabama. 

Review Results. House & Albright P.C.’s audit work on the FY 2007 audit of the MSFC 

Exchange’s financial statements substantially met GAGAS. We found no exceptions 

regarding the firm’s audit fieldwork or audit reporting. However, we noted two 

exceptions regarding the firm’s compliance with the general standards2 of GAGAS. The 

firm did not require two audit team members to adequately address personal or external 

impairments that could have affected their independence when auditing the MSFC 

Exchange financial statements (Finding A). We also found that one audit team member 

had not met her continuing professional education (CPE) requirements (Finding B). In a 

draft of this report, issued April 11, 2008, we made two recommendations to address our 

findings. 

Management Comments. Mr. William House concurred with our findings and 

recommendations and described actions to be taken in response to the draft report (see 

Enclosure 3 for the full text of management comments). We consider the comments 

responsive and have closed the recommendations. 

Finding A 

Auditor Independence Inquiries Not Adequate. Prior to starting the MSFC Exchange 

audit, House & Albright P.C. did not determine whether the auditors had any personal or 

external impairments that could affect their independence on the audit. 

GAGAS, paragraph 3.03 requires that, in all matters relating to the audit work, the audit 

organization and the individual auditor, whether Government or public, should be free 

both in fact and appearance from personal, external, and organizational impairments to 

independence. GAGAS also requires audit organizations to establish policies and 

procedures that will enable the identification of personal impairments to independence. 

Personal impairments include, for example, an immediate or close family member who is 

a director or officer of the audited entity; a responsibility for managing or making 

decisions that could affect the audited entity; or preconceived ideas toward individuals, 

groups, organizations, or objectives that could bias the audit. External impairments 

would deter the auditors from acting objectively and exercising professional skepticism 

 

2

 General standards concern the fundamental requirements for ensuring the credibility of auditors’ results. 

General standards encompass the independence of the audit organization and its individual auditors; the 

exercise of professional judgment in performing and reporting on the audit; the competence of audit staff; 

and the existence of quality control systems and external peer reviews. 
RESULTS

REPORT NO. IG-08-020 3 

by pressures, actual or perceived, from management and employees of the audited entity 

or oversight organizations. 

House & Albright P.C. audit staff members did not adequately address various potential 

impairments to their independence due to the firm’s use of a list of “commandments” 

applicable to all areas of accounting at the firm, which is signed by the staff members 

acknowledging receipt and agreeing to comply with the “commandments.” Only one 

commandment related to independence and read, “Never fail to notify, in writing, the 

partner if you or your family have a financial interest (directly or indirectly) in one of the 

firm’s clients.” The form did not address the other types of personal or external 

impairments to independence delineated in GAGAS. Even though no independence 

issues came to our attention during the review, there was the potential that House & 

Albright P.C. audit staff with independence issues may inappropriately participated in an 

audit. 

Recommendation 1. House & Albright P.C. should require all audit team 

members to complete and sign an independence questionnaire that covers the 

independence requirements in GAGAS before team members initiate work on 

audits subject to GAGAS. 

Management’s Response. Mr. House stated that House & Albright P.C.

will use the independence questionnaire illustrated in the firm’s Yellow 

Book (GAGAS) guidelines for all future engagements (whether or not the 

engagement is subject to GAGAS). Additionally, each member of the 

engagement’s participating staff will complete a new questionnaire and 

the questionnaire will be maintained with the engagement documentation. 

Evaluation of Management’s Response. Management’s planned 

corrective action is responsive to the intent of our recommendation. 

Subsequent to House & Albright P.C.’s written response, we received a 

copy of the firm’s memorandum to all staff dated May 27, 2008, which, in 

part, requires each staff member to complete, for each audit, a 

comprehensive questionnaire regarding possible personal and external 

impairments to their independence. We consider the recommendation 

closed. 

Finding B 

Audit Staff Not Required to Obtain Continuing Professional Education. One of two 

auditors on the MSFC Exchange financial statements audit had earned no CPE credits 

over the past 2 years. According to GAGAS paragraph 3.45, “Auditors performing work 

under GAGAS, including planning, directing, performing field work, or reporting on an 

audit or attestation engagement under GAGAS, need to maintain their professional 

competence through CPE. Therefore, each auditor performing work under GAGAS 
RESULTS

4 REPORT NO. IG-08-020 

should complete, every 2 years, at least 80 hours of CPE that directly enhance the 

auditor’s professional proficiency to perform audits and/or attestation engagements.” 

The founding partner of House & Albright P.C. advised the NASA Office of Inspector 

General that he thought only certified audit staff members (i.e., staff members who were 

Certified Public Accountants) required CPE and, therefore, did not require non-certified 

auditors to obtain CPE. As a result of this misunderstanding, an audit staff member did 

not have the required GAGAS CPE credits. 

Recommendation 2. We recommended that House & Albright P.C. require 

that all auditors who perform audit work subject to GAGAS meet the CPE 

requirements specified by GAGAS. 

Management’s Response. Mr. House stated that House & Albright P.C. 

has implemented procedures to ensure that all audit staff members 

performing audit work subject to GAGAS have met their respective CPE 

requirements. 

Evaluation of Management’s Response. Management’s action is 

responsive to the intent of our recommendation. Subsequent to House & 

Albright P.C.’s written response, we received a copy of the firm’s 

memorandum to all staff dated May 27, 2008, which, in part, assigns an 

audit partner the responsibility for completing a CPE Documentation 

Form and requires staff members to acknowledge by their initials the 

accuracy of their respective CPE hours shown on the form. According to 

the form’s instructions, the form reflects the GAGAS CPE requirements 

and is to be completed during the planning stages of the engagement and 

filed with the audit documentation. We consider the recommendation 

closed. 

We appreciate the courtesies extended to the staff during our review. For additional 

information on this report, please contact Mr. David L. Gandrud, the Project Manager, at 

650-604-2672. See Enclosure 4 for the report distribution. The review team members 

are listed inside the back cover of this report. 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

4 Enclosures 
ENCLOSURE 1 

REPORT NO. IG-08-020 5 

QUALITY CONTROL 

REVIEW PROCESS

Scope and Methodology 

We conducted a quality control review of the House & Albright P.C. audit of the MSFC 

Exchange financial statements for FY 2007. We performed our review February 20 

through March 4, 2008, at the office of House & Albright P.C. in Huntsville, Alabama. 

Our review covered areas related to House & Albright P.C.’s compliance with GAGAS. 

We focused the review on auditor qualifications, audit planning, audit supervision, 

conduct of the audit fieldwork, and audit reporting. 

In conducting our review, we assessed the documentation gathered and prepared by 

House & Albright P.C., including documentation used to support the audit report, and 

discussed our review with House & Albright P.C. personnel. We confirmed the permit 

status of the company and the partner who worked on the MSFC Exchange audit by 

querying the Web site of the Alabama State Board of Public Accountancy. We 

determined that House & Albright P.C. and its CPA partner who supervised the audit of 

the MSFC Exchange held active permits with the Alabama State Board of Public 

Accountancy. We did not use computer-processed data in performing our review. 

Exchange and Morale Support Activities 

Inspector General Act. The Inspector General Act of 1978, as amended, requires an 

agency’s Inspector General to take appropriate steps to ensure that any work performed 

by non-Federal auditors complies with the standards established by the Comptroller 

General. 

NASA Requirement. NASA Policy Directive 9050.6I, “NASA Exchange and Morale 

Support Activities,” November 10, 2004, authorizes Center Directors to operate activities 

to contribute to the efficiency, welfare, and morale of NASA personnel. The Directive 

requires that financial records be maintained and that an annual audit be conducted. The 

Directive also requires the Center Chief Financial Officer to monitor compliance with the 

Directive and to review financial statements and audit reports to ensure that the Center’s 

exchange and morale support activities are operated in a financially sound and 

responsible manner. 
ENCLOSURE 1 

6 REPORT NO. IG-08-020 

External Peer Review 

We reviewed the most recent peer review report on House & Albright P.C., which was 

prepared by Mann, Poarch, Miller, Key & Morrison, P.C., for the year ended July 31, 

2006. The report, issued on April 20, 2007, stated that the system of quality control for 

the accounting and auditing practice of House & Albright P.C. was designed to meet the 

requirements of the quality control standards for an accounting and auditing practice 

established by the AICPA and was complied with during the year then ended, providing 

the firm with reasonable assurance of conforming with professional standards. The peer 

review report identified no deficiencies in House & Albright P.C.’s system of quality 

control. 
ENCLOSURE 2 

REPORT NO. IG-08-020 7 

RESULTS OF THE HOUSE &

ALBRIGHT P.C. AUDIT OF THE 

MSFC EXCHANGE FOR

FYS 2007 AND 2006 

House & Albright P.C. Audit Report 

House & Albright P.C. issued its February 5, 2008, report on the audit of the MSFC 

Exchange’s statement of financial position as of September 30, 2007 and 2006, and the 

related statements of activities and cash flows for the years then ended, to the MSFC 

Chief Financial Officer. House & Albright P.C. reported that it had performed the audit 

in accordance with auditing standards generally accepted in the United States and the 

standards applicable to financial audits contained in “Government Auditing Standards,” 

issued by the Comptroller General of the United States. It further stated that the financial 

statements presented fairly, in all material respects, the financial position of the MSFC 

Exchange as of September 30, 2007 and 2006, and the changes in the MSFC Exchange’s 

net assets and cash flows for the years then ended. 

House & Albright P.C. Report on Internal Control and Compliance 

and Other Matters 

House & Albright P.C.’s “Report on Internal Control Over Financial Reporting and on 

Compliance and Other Matters Based on an Audit of Financial Statements Performed in 

Accordance with Government Auditing Standards,” February 5, 2008, stated that 

House & Albright P.C. “did not identify any deficiencies in internal control over 

financial reporting that we consider to be material weaknesses [and] no instances of 

noncompliance or other matters that are required to be reported under Government 

Auditing Standards.” The report noted a finding that the MSFC Exchange maintained a 

checking account balance that exceeded the Federal Deposit Insurance Corporation 

(FDIC) limit of $100,000. 
ENCLOSURE 3 

8 REPORT NO. IG-08-020 

MANAGEMENT COMMENTS
ENCLOSURE 4 

REPORT NO. IG-08-020 9 

REPORT DISTRIBUTION

Independent Audit Firm 

William C. House, CPA 

House & Albright P.C. 

400 Meridian Street, Suite 102 

Huntsville, Alabama 35804-2648 

National Aeronautics and Space Administration 

Deputy Administrator 

Chief of Staff 

Chief Financial Officer 

Assistant Administrator for Infrastructure and Administration 

Director, Marshall Space Flight Center 

Chief Financial Officer, Marshall Space Flight Center 

NASA Exchange – MSFC Council Chairperson 

NASA Exchange – MSFC Council Operations Manager 

NASA Exchange – MSFC Council Treasurer 

NASA Exchange – MSFC Council Secretary 

NASA Exchange – MSFC Council Legal Advisor 

Major Contributors to the Report: 

Mark Jenson, Director, Financial Statement Audits Directorate 

David Gandrud, Project Manager 

REPORT NO. IG-08-020 11 
JUNE 13, 2008 

REPORT No. IG-08-020 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

ADDITIONAL COPIES

Visit www.hq.nasa.gov/office/oig/hq/audits/reports/FY08/index.html to obtain additional copies of this 

report, or contact the Assistant Inspector General for Auditing at 202-358-1232. 

COMMENTS ON THIS REPORT

In order to help us improve the quality of our products, if you wish to comment on the quality or 

usefulness of this report, please send your comments to Ms. Jacqueline White, Director of Quality 

Assurance, at Jacqueline.White@nasa.gov or call 202-358-0203. 

SUGGESTIONS FOR FUTURE AUDITS

To suggest ideas for or to request future audits, contact the Assistant Inspector General for Auditing. 

Ideas and requests can also be mailed to: 

Assistant Inspector General for Auditing 

NASA Headquarters 

Washington, DC 20546-0001 

NASA HOTLINE

To report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at 800-424-9183 or 

800-535-8134 (TDD). You may also write to the NASA Inspector General, P.O. Box 23089, L’Enfant 

Plaza Station, Washington, DC 20026, or use http://www.hq.nasa.gov/office/oig/hq/hotline.html#form. 

The identity of each writer and caller can be kept confidential, upon request, to the extent permitted 

by law.