Municipal accounting: legislation impacting city auditors in the works.

• Author: Allen, Bruce C.
• Position: CapitolBeat

A number of legislative proposals are being advanced that could hold serious ramifications for municipal auditors in California. The proposals are a result of the issues related to the cities of Bell and Vernon, Modoc County and general dissatisfaction with California redevelopment agencies.

California's Controller is sponsoring live legislative bills, and the Bureau of State Audits also has legislation in the works. The most immediate concern to the profession is AB 229 (Lara), which would increase the state Controller's oversight of the independent auditors.

As introduced, AB 229 would have required audit firm rotation every five years. This position is based on a belief by some Controller representatives that having a new firm every five years would provide a new approach for the audit and a therefore a. more robust audit. The benefits of audit firm rotation is not supported by numerous studies or the experiences of other major countries. CalCPA objected to this requirement and the Controller agreed to replace the audit firm rotation requirement with audit partner rotation every six years.

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AB 229 also would require all local government audit reports be filed with the Controller's office. Currently only those entities covered by the federal single audit act are required to file with the Controller.

Audit guides for all local government entities would be developed under AB 229. This may be an effective solution to improving the quality of local government audits. State and local representatives, in consultation with representatives of CalCPA, would develop the audit guide for each entity It's anticipated that the audit guide would identify those compliance items that would be included in any audit of that entity (e.g., joint powers authorities, redevelopment districts, special districts, cities and counties).

While compliance parameters could be helpful, it should be noted that the redevelopment audit guide that is being used in California was adopted in 1998 and does not. include any statutory changes enacted by the California Legislature since then. As with any guide, a major issue would be the regular updating and release of the audit guide far enough in advance for auditors to price the audit so it accurately rellects the time required to measure existing and any new compliance items.

AB 229 would also authorize the Controller to perform audit work paper reviews of audit firms. It's anticipated this would be...