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Auditing Standards and Requirements - Section A
auditor’s reports. If the release of the annual financial report will be delayed due to an on-going
fraud investigation, the auditor should contact the Division of Local Government Audit. The
Schedule of Cash Shortages and Thefts – Current and Prior Years should include a note regarding
the on-going investigation and that final amounts are not yet available. Any known amount should
be disclosed unless precluded based on the standards.
The information in this schedule will be included in an annual report published by Local
Government Audit and posted on the web.
However, certain required audit procedures have been established by various state departments’
rules, regulations, and policies. The audit procedures in Appendix C should be assessed prior to
conducting any audit to identify those procedures which this office requires the auditor to consider
when developing an audit plan. The information included in Appendix B should be reviewed and
considered as a part of the auditor’s fraud risk assessment.
Although the Comptroller’s web site addresses some of the recurring inquiries from
auditorscompliance requirements,, it should not be considered to be a comprehensive resource for
all requirements related to an audit. If an auditor is not sure of the compliance issues governing a
particular state funding source, the appropriate department should be contacted. Selected state
department addresses and telephone numbers may be located at the following web site (STATE
DEPARTMENT PHONE NUMBERS).
Item 7 of the Contract to Audit Accounts stipulates the following:
Any reasonable suspicion of fraud, (regardless of materiality) or other unlawful acts
including, but not limited to, theft, forgery, credit/debit card fraud, or any other act of
unlawful taking, waste, or abuse of, or official misconduct, as defined in Tennessee
Code Annotated, § 39-16-402, involving public money, property, or services shall,
upon discovery, be promptly reported in writing by the auditor to the Comptroller
of the Treasury, State of Tennessee, who shall under all circumstances have the
authority, at the discretion of the Comptroller, to directly investigate such matters.
Notwithstanding anything herein to the contrary, the Comptroller of the Treasury,
State of Tennessee, acknowledges that the auditor’s responsibility hereunder is to
design its audit to obtain reasonable, but not absolute, assurance of detecting fraud
that would have a material effect on the financial statements, as well as other illegal
acts or violations of provisions of contracts or grant agreements having a direct and
material effect on financial statement amounts. If the circumstances disclosed by the
audit call for a more detailed investigation by the auditor than necessary under
ordinary circumstances, the auditor shall inform the organization's management and
those in charge of governance in writing of the need for such additional investigation
and the additional compensation required therefor. Upon approval by the
Comptroller of the Treasury, an amendment to this contract may be made by the
organization's management and those charged with governance and the auditor for
such additional investigation.
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