NOVEMBER 7, 2008 

QUALITY CONTROL REVIEW REPORT

REPORT NO. IG-09-005 (ASSIGNMENT NO. A-08-017-00) 

OFFICE OF AUDITS

QUALITY CONTROL REVIEW OF THE

HOWARD, WERSHBALE & COMPANY AUDIT OF THE 

GLENN RESEARCH CENTER EXCHANGE FINANCIAL 

STATEMENTS FOR THE 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 

GAO Government Accountability Office 

GRC Glenn Research Center 

REPORT NO. IG-09-005 
RESULTS

REPORT NO. IG-09-005 1 

National Aeronautics and 

Space Administration 

Office of Inspector General 

Washington, DC 20546-0001 

 November 7, 2008 

Stanley J. Olejarski, CPA 

Howard, Wershbale & Company 

SUBJECT: Quality Control Review of the Howard, Wershbale & Company Audit of 

the Glenn Research Center Exchange Financial Statements for the Fiscal 

Year Ended September 30, 2007 (Report No. IG-09-005; Assignment 

No. A-08-017-00) 

The audit firm of Howard, Wershbale & Company performed an audit of the Glenn 

Research Center (GRC) 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 Howard, Wershbale & Company 

performed its audit in accordance with the Government Accountability Office’s (GAO) 

“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. The standards are for use by auditors of Government entities and 

entities that receive Government awards and by audit organizations performing GAGAS 

audit and attestation engagements. GAGAS prescribes general standards (including 

independence, professional judgment, competence, and 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 

exchange and morale support activities, and our summary of the latest peer review of 

Howard, Wershbale & Company. See Enclosure 2 for the results of the Howard, 

Wershbale & Company audit of the GRC Exchange for FY 2007. 

 

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-09-005 

Background. The GRC Exchange exists to contribute to the welfare, efficiency, and 

effectiveness of the people who work at GRC. The Exchange maintains two stores on the 

GRC campus and subcontracts the operation of one cafeteria. Profits realized from those 

operations are used to support a variety of activities benefiting the GRC community. As 

of September 30, 2007, GRC Exchange net sales totaled approximately $198,000 and 

assets totaled approximately $72,000. Howard, Wershbale & Company maintains an 

office in Cleveland, Ohio. 

Review Results. Howard, Wershbale & Company’s audit work on the FY 2007 audit of 

the GRC Exchange financial statements substantially met GAGAS. We found no 

exception with audit planning, audit supervision, or audit reporting. However, we noted 

one exception related to an auditor’s qualifications (continuing professional education 

[CPE] credits were not adequately supported) and one exception related to audit 

fieldwork that was not adequately documented. This report makes recommendations 

relating to each exception. 

Management Comments. In response to a draft of this report, Howard, Wershbale & 

Company concurred with our recommendations and described actions to be taken (see 

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

responsive and have closed the recommendations. 

Finding A 

CPE Credits Not Adequately Supported. Howard, Wershbale & Company did not 

maintain adequate documentation supporting the CPEs reported for one of the firm’s 

three auditors who audited the GRC Exchange financial statements for FY 2007. 

GAO issued “Guidance on GAGAS Requirements for Continuing Professional 

Education,” dated April 2005, to provide guidance to auditors and audit organizations in 

implementing the CPE requirements found in GAGAS (2003 Revision). Paragraphs 35 

and 36 state, in part, that the audit organization is responsible for maintaining 

documentation for the CPE hours completed by each auditor subject to the CPE 

requirements and that the audit organization should maintain a certificate or other 

evidence of completion from the CPE provider. 

Howard, Wershbale & Company documented the names of CPE courses taken by its 

employees, the titles of the courses, number of CPE hours earned, and dates of course 

attendance. However, the firm did not maintain copies of the certificates of course 

completion for an auditor who performed the audit of the GRC Exchange financial 

statements for FY 2007. The Howard, Wershbale & Company audit manager for the 

GRC Exchange financial statements audit advised us that the auditor removed his course 

completion certificates when he left the firm and later destroyed the certificates. Since 

Howard, Wershbale & Company did not maintain copies of the auditor’s certificates of 
RESULTS

REPORT NO. IG-09-005 3 

course completion, the firm did not fully comply with GAO’s guidance on maintaining 

CPE documentation. 

Recommendation 1. Howard, Wershbale & Company should maintain copies of 

CPE certificates of completion for all audit staff members who work on GAGAS 

audits. 

Management’s Response. Howard, Wershbale & Company stated that it 

has complied with CPE regulations, stating that the firm monitors CPEs 

through its time and billing system and an annual review by the Principal 

in charge of CPE. However, for personnel involved in audits performed in 

accordance with GAGAS, the firm will maintain certificates of completion 

provided by the CPE provider. 

Evaluation of Management’s Response. Management’s planned 

corrective action is responsive, and we have closed the recommendation. 

Finding B 

Fieldwork Not Adequately Documented. In April 2005, the GRC Exchange awarded a 

contract to outsource its cafeteria and catering operations. Total revenues from those 

operations in FYs 2000 through 2004 averaged about $776,000 per year. However, the 

Exchange operated with net losses that averaged $97,000 during that same period. Under 

the terms of the contract, the Exchange is to share, through commissions, in the 

contractor’s gross receipts or profits from cafeteria and catering sales. We found that 

Howard, Wershbale & Company did not prepare audit workpapers that adequately 

evidenced its work in assessing the reasonableness of cafeteria and catering sales 

reported by the Exchange’s contractor during the FY 2007 audit. 

GAGAS (2003 Revision), paragraph 4.03c, states, “Sufficient competent evidential 

matter is to be obtained through inspection, observation, inquiries, and confirmations to 

afford a reasonable basis for an opinion regarding the financial statements under audit.” 

Additionally, paragraph 4.22 states, “The standard related to audit documentation for 

financial audits performed in accordance with GAGAS is: Audit documentation related to 

planning, conducting, and reporting on the audit should contain sufficient information to 

enable an experienced auditor who has had no previous connection with the audit to 

ascertain from the audit documentation the evidence that supports the auditors’ 

significant judgments and conclusions. Audit documentation should contain support for 

findings, conclusions, and recommendations before auditors issue their report.” 

The firm completed an audit procedure to determine whether cafeteria and catering 

commissions were reasonable. According to a Principal at Howard, Wershbale & 

Company, the firm reviewed the contractor’s financial statements; however, it did not 

verify the accuracy of the contractor’s reported cafeteria and catering sales because the 
RESULTS

4 REPORT NO. IG-09-005 

amount of commissions due to the GRC Exchange would not be material. (The GRC 

Exchange financial statements for FY 2007 reported commissions from cafeteria and 

catering sales totaling $1,324.) The Principal acknowledged that the audit workpapers 

did not fully describe the firm’s work relative to the contractor’s sales. As a result of 

inadequate documentation, an experienced auditor who had no previous connection with 

the audit could not ascertain the evidence that supported the firm’s conclusion regarding 

the amount of commissions reported in the GRC Exchange financial statements. 

Recommendation 2. For any future audits of the GRC Exchange, Howard, 

Wershbale & Company should document in the audit workpapers the work that 

it performed to determine the reasonableness of the contractor’s cafeteria and 

catering gross receipts and profits and, in turn, the Exchange’s reported 

commissions. 

Management’s Response. Howard, Wershbale & Company stated its 

belief that the audit procedures were adequate given the materiality of the 

commissions income and that procedures related to the verification of the 

contractor’s income would not be cost-effective or possible to perform. 

Additionally, the firm expressed the opinion that GRC management is 

responsible for verifying whether the commissions income is reasonable 

and in accordance with contract provisions. Notwithstanding its position 

on this matter, Howard, Wershbale & Company stated that it will expand 

its procedures to include confirmation of the commissions income with the 

contractor and will review any documentation received by the GRC 

Exchange to verify the commissions received. Also, the firm will 

compare the income to the contractual terms, prior year amounts, and any 

budgeted amounts. 

Evaluation of Management’s Response. Management’s planned 

corrective action is responsive to the intent of our recommendation. 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 on the inside back cover of this report. 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

4 Enclosures 
ENCLOSURE 1 

REPORT NO. IG-09-005 5 

QUALITY CONTROL 

REVIEW PROCESS

Scope and Methodology 

We performed a quality control review of the Howard, Wershbale & Company audit of 

the GRC Exchange financial statements for FY 2007. We performed our review from 

July 30 through August 19, 2008, at the office of Howard, Wershbale & Company in 

Cleveland, Ohio. Our review covered areas related to Howard, Wershbale & Company’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 

Howard, Wershbale & Company, including documentation used to support the audit 

report, and discussed our review with Howard, Wershbale & Company personnel. We 

confirmed the license status of the company and its personnel who worked on the GRC 

Exchange audit by querying the Web site of the Ohio License Center. We determined 

that Howard, Wershbale & Company held a current “Employers” license and its 

applicable Principal and Audit Manager held active CPA licenses. We consider the Web 

site a reliable source of information, based on prior usage; we did not use any other 

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-09-005 

External Peer Review 

We reviewed the most recent peer review report on Howard, Wershbale & Company, 

which was prepared by Reed & Company of Mayfield, PSC, for the year ended April 30, 

2007. The report, issued on September 13, 2007, stated that the system of quality control 

for the accounting and auditing practice of Howard, Wershbale & Company was 

designed to meet the requirements of the quality control standards for an accounting and 

auditing practice established by the AICPA. The report further stated that Howard, 

Wershbale & Company complied with the system during the year then ended, providing 

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

review report identified no deficiencies. 
ENCLOSURE 2 

REPORT NO. IG-09-005 7 

RESULTS OF THE HOWARD, WERSHBALE & COMPANY AUDIT 

OF THE GRC EXCHANGE 

FOR FY 2007 

Howard, Wershbale & Company Audit Report 

Howard, Wershbale & Company issued its December 11, 2007, report on the audit of the 

GRC Exchange’s balance sheet as of September 30, 2007, and the related statements of 

income and equity and cash flows for the year then ended, to the GRC Exchange Council. 

Howard, Wershbale & Company 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 GRC 

Exchange as of September 30, 2007, and the results of its operations and its cash flows 

for the year then ended. 

Howard, Wershbale & Company Report on Internal Control and 

Compliance and Other Matters 

Howard, Wershbale & Company’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,” December 11, 2007, 

stated that Howard, Wershbale & Company did not identify any deficiencies in internal 

control over financial reporting considered to be material weaknesses and did not identify 

any instances of noncompliance or other matters required to be reported under GAGAS. 

The report noted that Howard, Wershbale & Company reported certain other matters to 

GRC Exchange management in a separate letter, dated December 11, 2007. That letter 

identified deficiencies in internal control relating to the lack of segregation of duties for 

the store manager and suggested that the GRC Exchange consider strengthening its 

controls over the Exchange store. 
ENCLOSURE 3 

8 REPORT NO. IG-09-005 

MANAGEMENT COMMENTS
ENCLOSURE 4 

DRAFT REVIEW REPORT A-06-010-00 9 

REPORT DISTRIBUTION

Independent Audit Firm 

Stanley J. Olejarski, CPA 

Howard, Wershbale & Company 

Four Commerce Park Square 

23240 Chagrin Boulevard 

Cleveland, Ohio 44122-5450 

National Aeronautics and Space Administration 

Deputy Administrator 

Chief of Staff 

Chief Financial Officer 

Assistant Administrator for Infrastructure and Administration 

Director, Glenn Research Center 

Chief Financial Officer, Glenn Research Center 

NASA Exchange – Glenn Council Chair 

NASA Exchange – Glenn Council Treasurer 

Major Contributors to the Report: 

Mark Jenson, Director, Financial Statement Audits 

David Gandrud, Project Manager 

Bobbie Wells, Auditor 

REPORT NO. IG-09-005 11 
NOVEMBER 7, 2008 

REPORT No. IG-09-005 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

ADDITIONAL COPIES

Visit http://oig.nasa.gov/audits/reports/FY09 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 Special 

Projects and 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://oig.nasa.gov/hotline.html#form. The identity of 

each writer and caller can be kept confidential, upon request, to the extent permitted by law.