Understanding the Tribal Annual Audit Proces
Key Points
The audit provides assurance that management has presented an ‘accurate and fair’ view of financial position and financial performance.
A clear understanding of the audit process can help Tribal Councils develop and strengthen financial oversight and accountability.
Communication of roles and responsibilities can alleviate expectation gaps given frequent changes in Tribal Council members.
Why the Annual Audit Matters
For tribal governments, the annual audit is more than a compliance exercise - it is a critical tool for ensuring the reliability of financial information, transparency, and accountability to both internal and external stakeholders. An audit is the underpinning between trust and obligation of stewardship between management and the Tribe, as the owner.
Federal and state funding agencies, tribal members, and other partners rely on the audit to gauge the tribe’s financial health, resource management, and compliance. An effective audit can result in observations and recommendations for process improvement. Likewise, a well-managed audit process can reinforce strong governance and control, as well as management oversight.
In the following we’ll discuss key elements of the audit process for tribal governments.
Audit Process at a Glance
The audit cycle typically spans several months and can be broadly summarized as follows:
Planning – Formal acceptance of the client by the external audit firm. Audit firm will verify compliance with independence requirements, communicate scope and timing of the audit, establish the audit team, and begin to develop the nature, timing and extent of audit procedures
Risk Assessment – Auditors use their knowledge of the business, industry and operating environment for identifying and evaluating risks that could impact the financial statements.
Audit Strategy – Given scope and risk assessment, audit strategy is developed and tailored specific to the organization.
Gathering and Analyzing – Auditors gather information, review records, perform observations, use knowledge of the business, industry and operating environment to test internal controls, and confirm compliance with applicable regulations (such as Uniform Guidance for federal grants).
Reporting – Using professional judgment and the collective evidence obtained from audit procedures, auditors form their conclusions which is the basis of the audit opinion. The auditors will prepare the Independent Auditor’s Report, financial statements, and any findings or recommendations.
Follow-Up – Management responds to any findings and recommendations and the Tribal Council, or other oversight body (e.g. Audit Committee), should monitor corrective action.
Goal of the Tribal Annual Audit
At its core, the audit process supports the tribe’s sovereignty by demonstrating strong stewardship of resources. Having an engaged and informed Tribal Council that understands the importance of an audit sends a clear message to tribal members, stakeholders, and partners – financial integrity of the Tribe is of utmost importance, which all tribal members expect and deserve.
Role of the Auditor in the Audit Process
Grinding Rock CPAs helps tribal councils and governments strengthen every stage of the audit process. From consulting on audit readiness or advising Tribal Councils as they interpret findings, our team provides the expertise and guidance tribal leadership needs to carry out its fiduciary responsibilities with confidence.
For any questions about improving the outcome of your annual tribal audit, please reach out to our team for a consultation.
