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    The California State University

    GAAP Reporting Manual

    June 2008



Page Description

    9-2 Introduction

    9-10 Index Sample Schedules and Prepared by Client (PBC) Lists Exhibits 1-23 Sample Schedules

    Exhibit 24 Single Audit Risk Assessment Questionnaire Exhibit 25 Financial Statement Audit PBC List

    Exhibit 26 Single Audit (A-133) PBC List

    Exhibit 27 Sample Fluctuation Analysis

    Exhibit 28 Sample Non-GAAP Policies Memorandum Exhibit 29 Trial Balance for Campus/Legal/GAAP Ledger Exhibit 30 Sample Search for Unrecorded Liabilities Payables Query

     Campus example schedules (to be posted to the Chancellor’s Office website


     Reporting Package Template (YES)


    The California State University

    GAAP Reporting Manual

    June 2008


    For many organizations, the word “auditor” sends a message of negativity and panic; however,

    the audit process can be virtually painless if you are ready and your staff is educated on the audit process.

    This section of the manual is designed to provide the user with an understanding of how to

    prepare for a successful audit and, in addition, describes the roles of the independent auditor and campus personnel in the audit process.

    Understanding the Role of the Independent Auditor

    The role of the independent auditor is to examine, on a test basis, evidence supporting the

    amounts and disclosures in the financial statements. An audit includes consideration of internal

    control over financial reporting as a basis for designing audit procedures that are appropriate in

    the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

    internal control over financial reporting. An audit also includes assessing the accounting

    principles used and significant estimates made by management, as well as evaluating the overall

    financial statement presentation.

    It is not the responsibility of the independent auditor to prepare the financial statements or the

    footnote disclosures. It is also not the responsibility of the independent auditor to reconcile

    accounting information or to compile data for analysis or for financial statement or footnote

    disclosure. The independent auditor is available to assist with such matters, which are usually

    considered to be outside of the scope of an audit.

    It is the responsibility of the campus and audit teams to develop “ground rules” for the conduct of the audit. The following summarizes some key responsibilities of the independent auditor:

    ? To provide a prepared by client (PBC) list of items that will be required for the audit in

    advance of the start of fieldwork. The auditors will provide a PBC list (for both the financial

    statement audit and the single audit); however, additional requests should be expected during

    fieldwork based upon a review of the documents provided.

    ? To meet all deadlines set by the campus and audit teams.

    ? To plan and conduct the audit in a professional and effective manner. ? To be courteous to campus personnel and be mindful of their other work commitments. ? To communicate progress and any difficulties or issues encountered promptly and effectively

    to members of the campus management.

    ? To communicate any additional work required in performing the audit that may result in

    potential fee overages to the campus and systemwide management as soon as possible, and

    no later than the systemwide exit conference.

    Last revised April 30, 2008 9-2

    The California State University

    GAAP Reporting Manual

    June 2008

Understanding the Role of the Campus

    Management of each campus is responsible for preparing the reporting package provided by the

    Chancellor’s Office and their stand-alone financial statements, including footnotes and

    management’s discussion and analysis (MD&A). Further, management is responsible for the fair

    presentation of the financial statements in conformity with U.S. generally accepted accounting


    The following summarizes additional responsibilities of the campus team:

    ? To be prepared for the audit (see further discussion in “Planning” section later on in this


    ? To have all requested items on the PBC list, including the completed and approved reporting

    package provided by the Chancellor’s office, and the campus’ comprehensive analytical

    review prepared in accordance with the Chancellor’s Office established audit timeline. The

    majority of the items on the PBC list must be ready prior to the beginning of fieldwork. See

    sample schedules and PBC lists at the end of this chapter for further guidance. See also the

    2008 reporting package template in the Year-End System (YES).

    ? To provide a suitable work area for three to four auditors in close proximity to accounting

    and financial reporting personnel. The work areas should include a phone and data line and

    access to a fax machine.

    ? To communicate any difficulties or issues encountered during the audit process promptly to

    either the audit manager or partner.

    ? To provide a central contact to the audit team.

    ? To meet all deadlines set by the Chancellor’s Office, the campus and audit team. Key dates

    are as follows (refer to the CSU 2008 Audit and Reporting Timeline for complete listing of


Key Deadlines:

    ? Campus to submit preliminary schedule of expenditures of federal awards (SEFA) via

    YES (TM1) July 31, 2008

    ? All pass down schedules, except risk pool allocation, from the Chancellor’s office –

    August 20, 2008

    ? Campuses to have completed and approved June 30, 2008 reporting package,

    including the comprehensive analytical review, ready prior to the start of final

    fieldwork and arrival of their KPMG audit team (refer to Engagement Team Phone

    List for fieldwork start dates for each campus).

    ? Audited auxiliary organization financial statements due to the Chancellor’s office

    September 30, 2008

    Last revised April 30, 2008 9-3

    The California State University

    GAAP Reporting Manual

    June 2008

    ? Audited risk pool allocation passed down from the Chancellor’s office –

    September 30, 2008

    ? Campus audited reporting package due to the Chancellor’s office (must be

    submitted by KPMG audit team), including separate comprehensive analytical

    review (Word document) and note 15.3 of the reporting package (Excel document)

    October 16, 2008

    ? Campus A-133 findings due to the systemwide team (must be submitted by KPMG

    audit team) November 5, 2008

    (All findings must be discussed with campus personnel prior to submission)

    ? SCO GAAP adjusting entries due to Chancellor’s Office November 7, 2008 ? Campus draft stand-alone financial statements (including management approved

    MD&A) due to the KPMG audit team November 24, 2008. ? GAAP FIRMS submission due to Chancellor’s Office December 1, 2008

    ? Issue stand-alone financial statements.

    Last revised April 30, 2008 9-4

    The California State University

    GAAP Reporting Manual

    June 2008


    One of the key elements of an efficient audit process is campus preparedness. Because of the

    significant resources needed to complete an audit, it is essential that the campus plan properly for

    the audit process. Campus staff that will need to be available should be notified of the timing

    several months before audit fieldwork in order to ensure that they will be available. Key

    personnel should not plan to take vacations during audit fieldwork or during the time surrounding

    the submission deadline of the campus reporting package to the Chancellor’s Office. In addition,

    time should be set aside to prepare and review all of the audit schedules needed by KPMG (as

    listed on the PBC List) prior to the start of fieldwork.

    The independent auditor should make every effort to request and utilize schedules and reports

    that are already prepared by campus personnel in the conduct of their monthly or annual closing

    procedures. However, there are certain schedules that may be required to support financial

    statement balances and/or disclosures that are unique to the GAAP financial reporting process.

    If these audit requests have not been sent to you early enough for you to prepare, this should be

    communicated to your audit manager or partner. If items included on the PBC List are not clear

    to you, clarify these items with a member of your assigned audit team prior to their arrival for

    performance of fieldwork.

    Items on the PBC list must be centrally accumulated in a separate set of binders/flash drive to be

    provided to the audit team on the first day of fieldwork. All schedules in the binders or on the flash drive must be clearly labeled and cross-referenced to the PBC list. We suggest using

    tabs to separate each PBC item. For a PBC item that is only available electronically, please

    insert a page behind the related tab indicating this on the page. This will help facilitate easy

    identification of the PBC items by the audit team. If additional items beyond those on the PBC

    list are included in this set of binders, a supplemental index should also be provided.


    Communication with your own staff as well as your audit team is critical. It is important that you

    communicate issues, deadlines, and expectations in initial meetings with your campus personnel

    and audit team. It is likely that your audit team will communicate expectations they have for you

    as well. If they don’t, ask!! Communicate with your audit team regarding how and when audit

    adjustments will be discussed all together at the end or throughout audit fieldwork. Discuss

    with your audit team how staff should be contacted through a central contact or directly, whether they can be “dropped in on” or if appointments are preferred. Additionally, in order to

    help facilitate an efficient audit process, weekly “hands-on” meetings with the campus central contact and audit team are required to discuss such items as overall audit progress, proposed

    audit adjustments to date, and address various issues as they arise.

    Central Contact

    Although it is very important that the responsibility for audit preparation be delegated to relevant

    campus staff, it is key that one person from the campus acts as the central audit contact (GAAP

    contact). This person should be responsible for ensuring that all the requested schedules are

    completed properly and on-time. In addition, this person should be responsible for accumulating

    Last revised April 30, 2008 9-5

    The California State University

    GAAP Reporting Manual

    June 2008

all the audit schedules from the various preparers and reviewing them to ensure that these

    detailed schedules agree to the general ledger and the financial statements. This person should

    then centrally accumulate all schedules in a separate set of binders to be provided to the audit

    team on the first day of fieldwork. The GAAP contact should function as the audit liaison in

    working directly with the audit team.

    Audit Terminology

    The terminology used by independent auditors may not be understood by the individuals

    responsible for preparing audit schedules and thus they may be unable to provide the information

    requested. Following are some key terms with their definitions used by independent auditors:

    General ledger The accounting system in which all account balances and changes in fund balances are recorded.

    Reconciliation A procedure performed to ensure that one set of information agrees to another. A reconciliation often maps how detailed information (i.e., a subledger, subsidiary system, or

    other listing) agrees to the general ledger. A proper reconciliation provides a summary of

    reconciling items, the nature of their balances and their proposed disposition.

    Rollforward A schedule prepared that reflects beginning balances, additions, deletions, and the balance at year-end. The ending balances in the rollforward schedule should agree to the

    general ledger and beginning balances should agree to the prior year audit report. This type of

    schedule is typically requested for capital assets accounts, outstanding debt, net assets, and

    prepaid assets, if significant.

    PBC list The schedule of initial audit requests provided by the campus audit team, which are to be prepared by campus personnel. PBC stands for “Prepared By Client.” Additional requests

    should be expected throughout final fieldwork.

    IRM PBC list The schedule of initial audit requests provided by the KPMG IT audit team, which are to be prepared by campus IT personnel.

    Subledger A detailed listing of individual account balances (e.g., capital assets, student and other receivables, and inventory). These listings should not be rollforwards of the accounts, but

    rather a summary of the components of the ending balance or composition of each account on a

    GAAP basis. For example, a listing that shows additions and deletions to an inventory account is

    not a useful listing because it cannot be used to determine the composition of the ending balance.

    Aging report A type of subledger that groups account balances by the amount of time that has passed since the balance originated (e.g., a receivable report that lists all accounts that are current,

    30-60 days past due, etc.). The total balance on this report should agree to the total balance of the

    account on the general ledger.

    Leadsheet A summary of accounts and their outstanding GAAP balances that is included in one line item on the financial statements (e.g., a listing of all cash accounts and their balances

    that agrees in total to the cash balance presented in the financial statements).

    Check register A listing of all checks processed and disbursed in a certain period. Last revised April 30, 2008 9-6

    The California State University

    GAAP Reporting Manual

    June 2008

Methodology Thought process or reasoning behind the development of certain financial

    statement account balances, the recording of which requires management judgment or a selection

    from alternative methods of accounting.

    Trial balance A summary schedule of the general ledger, which includes the ending balances

    of each type of account at year-end. For CSU audit purposes, the GAAP conversion template

    prepared for each fund will be considered a trial balance. For PeopleSoft campuses, the GAAP

    conversion template is Report CSUFS169 “Pre-Closing Trial Balance by Net Asset Category,

    Leadsheet Summary”. The legal basis account balances per the GAAP conversion template must agree to the general ledger.

    Last revised April 30, 2008 9-7

    The California State University

    GAAP Reporting Manual

    June 2008

List of CSU Reports Commonly Used During the Audit and GAAP Conversion Process

SAM 99 Provides State Controller’s Office (SCO) balances available for General and Capital

    Outlay funds. This report is utilized to verify that the GAAP receivable balance for State

    Appropriations has been recorded accurately.

SAM 07 Pre-closing or post-closing trial balance used to prepare legal basis balance sheet

    accounts that support the GAAP conversion template. Commonly referred to as the general

    ledger for the audit process.

SAM 6 Provides budget amounts that are used for the schedule of State Appropriations revenue

    in the General Fund and to record adjustments for State Appropriations receivable.

CSUFS168 Statement of Net Assets.

CSUFS166 Statement of Revenues, Expenses, and Changes in Net Assets.

CSUFS169 Pre-Closing Trial Balance by Net Asset Category, Leadsheet - Summary.

CSUFS170 Leadsheet - Detail.

CSUFS167 Operating Expenses Summary.

CSUFS171 Leadsheet - GAAP Adjustments.

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    The California State University

    GAAP Reporting Manual

    June 2008

Other reports that have proved valuable for preparation of the GAAP conversion template and

    audit process are the following:

? A locally developed report that analyzes the reimbursed activities accounts to make sure that

    revenues equaled expenses for purposes of elimination or reclassification as necessary.

? A locally developed report for payments made and received and amounts receivable from and

    payable to “related parties” for footnote disclosure purposes.

? A locally developed Focus report run against the Customer Information Retrieval System

    (CIRS) database or the CMS Human Resources module to analyze vacation accruals for

    GAAP purposes.

? The June 30th report from ECSI, third party loan service provider, regarding Perkins and

    Nursing student loans receivable balances. This report can be used to determine entries

    needed for accrued interest income and allowances for doubtful accounts. This report should

    also be used to verify that the year-end GAAP balances for Perkins and Nursing loans

    receivable have been accurately recorded.

Last revised April 30, 2008 9-9

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