North Carolina Administrative Code › Title 20 - STATE TREASURER › Chapter 03 - LOCAL GOVERNMENT COMMISSION › Section .0500 - AUDIT CONTRACTS › Section 03 .0502 - AUDIT CONTRACT

Current through Register Vol. 39, No. 2, July 15, 2024
(a) The Secretary
				may promulgate a standard audit contract designed to include the specific
				requirements in Paragraph (c) of this Rule. The Secretary may revise the
				standard audit contract provided that the contract continues to include the
				requirements of this Section. The requirements may be included in the contract
				either specifically or by reference to this Section.
(b) Government units and their independent
				auditors may submit contracts on their own forms provided that the form
				includes all requirements, either specifically or by reference, in Paragraph
				(c) of this Rule.
(c) The following
				requirements and conditions shall be included in all contracts for government
				units:
(1) The scope of the audit shall
				include all funds and ledgers of the government unit, and the requirement that
				the audit shall be conducted in accordance with generally accepted auditing
				standards and shall include such tests of the accounting records and such other
				procedures (including direct confirmation of tax, utility and other
				receivables) as are considered by the auditor to be necessary in the
				circumstances. Exceptions to the scope of the audit may be made only by
				specific approval of the Secretary or a deputy secretary and only for reasons
				that are explained as to the circumstances of the particular
				situation.
(2) The audit shall
				include a review of the internal control system of the government unit as
				provided by generally accepted auditing standards. The auditor shall forward a
				management letter to the government unit, detailing the auditor's findings and
				recommendations for improvement. The auditor shall forward a copy of the
				management letter to the Secretary.
(3) All audit engagement terms shall be
				stated, and all audit engagement fees shall be stated and show the amounts and
				calculations necessary to compute the final fee.
(4) The auditor shall, after completion of
				his or her examination, submit to the governing body a report of the audit with
				as many copies as requested in the contract. The report shall include all funds
				and ledgers included in the scope of the audit, and an expression of opinion on
				the financial statements included therein. If the expression of opinion is in
				any way modified or if an opinion is disclaimed or not included for any reason,
				the reason therefor shall be included in the report of audit. Copies of the
				audit report and any special reports issued as a result of the audit engagement
				shall be transmitted forthwith to the Secretary.
(5) The auditor shall present the audited
				financial statements including any compliance reports to the government unit's
				governing body or audit committee in an official meeting in open session as
				soon as the audited financial statements are available but not later than 45
				days after the submission of the audit report to the Secretary. The auditor's
				presentation to the government unit's governing body or audit committee shall
				include:
(A) the description of each finding,
				including all material weaknesses and significant deficiencies, as found by the
				auditor, and any other issues related to the internal controls or fiscal health
				of the government unit as disclosed in the management letter, the Single Audit
				or Yellow Book reports, or any other communications from the auditor regarding
				internal controls as required by current auditing standards set by the
				Accounting Standards Board or its successor;
(B) the status of the prior year audit
				findings;
(C) the values of
				Financial Performance Indicators based on information presented in the audited
				financial statements; and
(D)
				notification to the governing body that the governing body shall develop a
				"Response to the Auditor's Findings, Recommendations, and Fiscal Matters," if
				required under Rule .0508 of this Section.
The Secretary shall verify auditors' compliance with the
				  presentation requirement of Subparagraph (c)(5) of this Rule.
(6) Information based on the
				audited financial statements shall be submitted to the Secretary for the
				purpose of identifying Financial Performance Indicators and Financial
				Performance Indicators of Concern.
(7) The auditor shall notify the governing
				body and the Secretary if circumstances disclosed during the audit call for an
				expanded scope of work by the auditor beyond that indicated by the auditor's
				audit planning and risk assessment.
(8) No agreement(s) relating to the audit
				engagement but not attached to and referenced in the audit contract shall be
				enforceable by any party to said agreement(s).