Engagement Agreements – Louisiana Legislative Auditor Requirements

The majority of audit, review/attestation and compilation engagements of local government agencies and quasi-public organizations (local auditees) in Louisiana are performed by certified public accounting (CPA) firms that have been approved by the Louisiana Legislative Auditor (LLA).

LLA has the authority under the audit law (Louisiana Revised Statute 24:513 A. (6)) to prescribe the terms and conditions of these engagements, and to approve these engagements prior to commencement of the engagement.

LLA approves routine audit, review/attestation, and compilation engagements through a web-based portal on the LLA website called the Local Government Reporting System (LGRS)⁵. The CPA is required to attach the signed engagement agreement to the Engagement Approval Request form in the LGRS portal as a condition of LLA approving the engagement. Instructions for submitting an Engagement Approval Request may be found in Submitting an Engagement Approval Request to the Legislative Auditor. LLA also approves non-routine engagements through the LGRS portal.

The Louisiana Governmental Audit Guide requires that specific provisions be included in the underlying engagement agreement that is signed by the local auditee and the CPA firm. By submitting the Engagement Approval Request form through the LGRS portal, the CPA is affirming to LLA that the attached engagement agreement complies with all provisions of the Louisiana Governmental Audit Guide.

R.S. 24:514(F)(1) provides that auditees are considered to be engaged timely if the agency has filed an approved engagement agreement with the Legislative Auditor within 60 days of the close of he fiscal year.

LLA does not usually perform a detailed review of the signed engagement agreement; however, LLA may reject any engagement agreement if it does not include all of the provisions required by the Louisiana Governmental Audit Guide. These provisions are:

• The engagement will be performed in accordance with the Louisiana Governmental Audit Guide, authorized by Louisiana Revised Statute 24:513 A. (5) (a) (i), which is published jointly by the Louisiana Legislative Auditor and the Society of Louisiana Certified Public Accountants.
• The engagement will be performed in accordance with Government Auditing Standards, Standards for Accounting and Review Services, Standards for Attestation Engagements, and/or US Office of Management and Budget Publication Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, as applicable.
• If the CPA firm (assigning CPA firm) is engaging with another CPA firm (third-party agent) to provide staff for the engagement, (a) notification of the potential of any audit work being assigned to employees and/or third-party agents, (b) the assigning CPA firm is ultimately responsible for the quality of the engagement, and (c) that bearing ultimate responsibility is 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 Louisiana Legislative Auditor (LLA), and the State of Louisiana for the work of every employee and/or third-party agent.

• It is understood that the CPA's audit/engagement documentation is confidential information. However, the CPA will make his/her audit/engagement documentation available to the Legislative Auditor, any successor auditor/accountant, or any organization of the Louisiana Board of Certified Public Accountants authorized to perform quality assurance reviews. The CPA will follow the Louisiana Legislative Auditor’s policy regarding confidentiality of audit/engagement documentation found in the Louisiana Governmental Audit Guide when giving access to audit/engagement documentation to any parties other than those previously named individuals and organizations. Should the CPA become aware of any illegal acts, he/she will make their engagement documentation available to the local district attorney and/or any other state or federal enforcement or regulatory agency without liability.

• The CPA will retain the audit/engagement documentation for a minimum of five years.
• Immediately upon completion of the engagement, the CPA will submit a copy of the report to the local auditee and the Legislative Auditor.
• Either the CPA or the local auditee will submit a copy of the report to the following persons and agencies, as applicable:
  • Each member of the local auditee’s governing board
  • Each Louisiana state agency providing financial assistance to the local auditee
  • The Federal Audit Clearinghouse, as required by 2 CFR Section 200.512
• Subsequent to the issuance of the report, should it be necessary to revise and reissue the report, the CPA will notify the Legislative Auditor immediately. The CPA will distribute such revised and reissued report in the same manner and to the same individuals and organizations as the original report.
• (To be included in the compensation portion of the engagement agreement):
  • Our fee for this engagement, which we estimate, will range from $_____to $_____, including out-of-pocket expenses. This fee estimate is based on the assumption that you will provide assistance, anticipated cooperation from your personnel, and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Any amendments to the not-to-exceed amount of the fees will be in writing and signed by both the our firm and your agency.
• The engagement agreement includes the estimated completion date.
• The CPA will notify the local auditee of any breach of the security of the firm's computer system, defined in Louisiana Revised Statute. 51:3073 as the compromise of the security, confidentiality, or integrity of computerized data that results in, or there is a reasonable likelihood to result in, the unauthorized acquisition of and access to the local auditee's personal information, as defined in Louisiana Revised Statute 51:3073.
• The CPA will notify the Legislative Auditor, in writing, and within ten days of the CPA firm's constructive knowledge of the occurrence of these events:
  • Any fraud, abuse or illegal acts that are detected during the engagement
  • Any client imposed scope restrictions, to include failure to provide the appropriate books and records in a timely manner; or denial of access to appropriate books and records
  • Any significant disagreements with the local auditee
  • Any change in the scope of the engagement, to include all reasons for such change
  • The CPA's or agency's decision to withdraw from or cancel the engagement, to include all substantive reasons for the withdrawal or cancellation
  • The CPA's decision to disclaim the auditor’s opinion or to render an adverse opinion on the financial statements for any reason other than omitted component units
  • Any breach of the security of the CPA firm's computer system, defined in Louisiana Revised Statute 51:3073 as the compromise of the security, confidentiality, or integrity of computerized data that results in, or there is a reasonable likelihood to result in, the unauthorized acquisition of and access to the local auditee's personal information, as defined in Louisiana Revised Statute 51:3073
    

A list of the required provisions for engagement agreements that are specific to audit and non-routine local auditee engagements may be found in the Louisiana Governmental Audit Guide. 

LLA also has sample engagement agreements available on its website for:

• Review/attestation engagements with agreed-upon procedures for governmental agencies, quasi-public agencies, and charter schools
• Compilation engagements
• The agreed-upon procedures engagement to be performed on the schedules of performance and statistical data included in the audit reports of school boards and charter schools, required by Louisiana Revised Statute 24:514 I.
• The agreed-upon procedures engagement required by LLA of all agencies that are required to provide for an audit under R.S. 24:513 (also referred to as the Statewide Agreed-Upon Procedures Engagement).

The Legislative Auditor approves engagement agreements at its discretion and may not approve or may hold engagement agreements if the prior year report has not been submitted; the CPA is not in good standing, is unresponsive to requests for additional information from the Legislative Auditor, does not meet the requirements for CPA firm approval as detailed in Section 400-1010, or does not meet the requirements for peer review as detailed in Section 400-1020; or for disciplinary actions as detailed in Section 400-1030.