Use Of Other CPA Firms As Engagement Staff

The certified public accounting (CPA) firms that perform the audit and other attest engagements for the local government agencies and quasi-public organizations (local auditees) that report to the Louisiana Legislative Auditor (LLA) range in size from sole practitioners with one partner; to national firms with hundreds of staff, seniors, managers and partners.

Smaller firms sometimes engage for an audit or other attest engagement that they do not have the staff to perform. Those firms may partner with another CPA firm on LLA’s approved list to provide staff for the engagement, or may enlist the services of a CPA firm or sole practitioner that is not on LLA’s approved list.

LLA encourages interaction and collaboration between CPA firms, especially those on LLA’s approved list. Much may be gained by maintaining an open line of communication between CPA firms.

All CPA firms should be aware that the firm that signs a local auditee audit, review/attestation or compilation report is ultimately responsible for the quality of the engagement, whether they use their own staff or the staff of other CPA firms to perform the engagement.

Ultimate responsibility will be defined as:

• The assigning CPA firm remains responsible for every employee of their own staff and/or for every third-party agent who performs work in the audit;

• The assigning CPA firm shall also attest to the qualifications of every employee and/or every third-party agent;

• Every employee and/or third-party agent shall be trained as required by governmental auditing standards;

• Every employee and/or third-party agent shall be subject to all confidentiality requirements as mandated by R.S. 24:513(I);

• Every employee and/or third-party agent must have the cybersecurity training required  by R.S. 42:1267; and

• The assigning CPA firm agrees to indemnify the auditee, the Legislative Auditor, and the State of Louisiana for the work of every employee and/or every third-party agent.

Every auditee shall be notified within the body of the letter of engagement of the potential of any audit work being assigned to employees and/or third-party agents and include the above definition of "ultimate responsibility" as detailed in Section 400-1080.

CPA firms that are considering using other CPA firms as engagement staff should be aware that CPA firms that were formerly on LLA’s list of approved CPAs, but are no longer on the list, may have been suspended for cause; and may not always be forthcoming with this information.

On audits of large local auditees, or local auditees with several component units, the audit work may be divided between several firms. In these types of audits, the CPA firm that is auditing the primary government should consider whether the requirements of AU-C 600, Audits of Group Financial Statements, apply.

A CPA firm that engages for an audit, but who contracts the majority of the field work and supervision for the fieldwork out to another CPA firm, should consider whether they have enough knowledge of and participation in the engagement to sign the audit report. It may be best for the approved CPA firm to withdraw from the engagement, and the CPA firm that is performing the fieldwork be the auditor of record. In this instance, the approved CPA firm should discuss the matter with the local auditee and the firm that is performing the fieldwork. If all parties are in agreement that the auditor of record should be changed, the CPA firm that has the approved engagement should contact LLA about cancelling the engagement.