Wayne State University

Aim Higher

Board of Governors

Wayne State University Statutes

2.70.02 Independent Auditors; Appointments
   
2.70.02.010 Preamble
 
The Board of Governors (hereinafter referred to as the Board) of Wayne State University (hereinafter referred to as the University) is a body corporate established by the Constitution of the State of Michigan, Article VIII, Sec. 5 of the Constitution of 1963, which has general supervision of the University and the control and direction of all expenditures from its funds. The Constitution also requires that the Legislature be given an annual accounting of all income and expenditures of the University.
   
2.70.02.020
It is the policy of the Board that this annual accounting be reviewed by competent independent auditors who are Certified Public Accountants, and that the auditors will render their opinion as to whether or not this accounting is presented fairly and in conformity with generally accepted accounting principles. In selecting and retaining auditors, the Board has developed expectations and criteria that must be responded to in a written proposal by any firm that wishes to be considered for this position. An outline of the Board's expectations and criteria follows.
   
2.70.02.030 Firm Qualifications and Structure
 
The firm must be nationally recognized. It must maintain a local office of at least 75 persons in order to provide adequate technical expertise and depth. A history of recognized service within the accounting profession both within the State and nationally is desired. Its litigation experience must be considered as a qualitative factor for evaluation. Quality of service before growth and profitability is a desirable philosophy of service. It must demonstrate the maintenance of formal requirements for recruiting, continuing education and adherence to professional standards. An active involvement in higher education financial organizations, particularly NACUBO, is desirable. Staff specialists in higher education operations are required. A formal affirmative action program with a history of accomplishment is required.
   
2.70.02.040 Scope of Audits
 
The Opinion. The basic assignment is the preparation of the opinions regarding the statements of Wayne State University and its related entities. In addition, separate reports are required for certain trusts created by the borrowing of funds for the construction of facilities.
   
2.70.02.050
Although not a part of the basic assignment, the University is required from time to time to have audits, opinions, accounting reports, etc., that cover individual accounts, principally accounts funded by the Federal Government. The auditor will be expected to undertake these assignments as they may be identified by the University's Office of Research and Sponsored Programs Services. Billings for services performed are to be made individually to the related entities, the various trusts, and the individual accounts (if any) on the basis of the value of the services actually performed in relation to these aspects of the total assignment.
   
2.70.02.060
Internal Control System. The Board also expects that the auditor will comment on the University's system of internal control and other related matters that should be called to the Board's attention.
   
2.70.02.070
The Board does not expect the auditor to provide management services operations audits unless specifically commissioned, in writing, to provide such services. The auditor should take care in making comments that they do not imply the need for the auditor to provide such services, and that they do not suggest specific remedies that would be subject to a subsequent audit.
   
2.70.02.080
Other Service. The Board expects that the auditor will be fully informed on accounting and auditing procedures including those in the developmental stage, and that the auditor will in turn inform the appropriate University officers of such developments in writing and by periodic conferences. Accounting and auditing procedures should cover general as well as specific items concerning higher education, nonprofit, and governmental activities, and related matters such as changes in the tax laws.
   
2.70.02.090 The auditor will maintain regular contacts and meetings with the University officers and other personnel including, but not limited to:

a) Engagement planning meeting

    - audit team training

    - selection of internal control "emphasis area"

b) Progress reports

c) Closing review meeting
   
2.70.02.100 Auditor's Requirements
 
General. In general, the Board expects that the auditor will bring a creative, dynamic, and progressive approach to the assignment. The comments should not evidence a ritualistic, shallow, or trite approach; they should be an accurate and unhurried outgrowth of a planned operation. They must be thoroughly reviewed with the appropriate University Officers prior to their presentation to the Board. The opinion, statements, and comments must be ready for review by the Board at its first regularly scheduled meeting after January 1.
   
2.70.02.110
Cost Estimates. The auditor will submit initially, and prior to each succeeding examination, an estimate of number of hours, by employee classification, required for engagement. Also submitted will be the billing rates for each of the classifications. The bill for the engagement must be related to the estimate and material differences must be explained. Interim billings are permitted.
   
2.70.02.120
Competency. The auditor will submit initially and update periodically a professional profile of the person responsible for the overall management of the engagement. There must be an indication of the availability of back-up services (if any) particularly in the areas of industry specialization and electronic data processing and the availability of resources from branches in other locations or other sources. There must be a description of the auditor's quality control and review system so as to indicate the methods of maintaining professional standards, and the criteria upon which these standards are based.
   
2.70.02.130
Prior to each examination, a professional profile must be submitted of all persons assigned to the engagement, and an outline of the supervisory responsibilities covering these persons. Assurance must be given that all assistants will be properly and regularly trained and supervised, that the work will be adequately planned, and that the plan will consider the timeliness of the auditing procedures and the orderliness of their application. Personal data should also be provided for these individuals including if the person is a woman, a member of a minority group, or handicapped.
   
2.70.02.140
Affirmative Action. The assignment of women, minority group members, and handicapped persons should be an outgrowth of an affirmative action plan of the auditor. Such a plan will be reviewed by the University's Equal Opportunity Office and must deal with the recruitment, selection, and advancement of such persons.
   
2.70.02.150
Special consideration will be given to an auditor who can form a joint venture, or other similar relationship, with a minority-owned firm or individual for the purpose of providing a portion of the services. This arrangement must, of course, be in accordance with professional standards and/or ethics.
   
2.70.02.160
Audit Plan. It is required that the auditor use a comprehensive audit plan, and to the extent permissible is willing to review this plan with the University. The plan should cover the study and evaluation of the internal control, the basis for reliance on the internal control, and the test of records to the extent necessary by the degree of such a reliance. It is assumed that many of the tests will be conducted by a sampling of the records maintained on the computer file.
   
2.70.02.170
It is understood that the auditor is responsible for the auditing procedures that in his/her professional judgment are considered necessary in the circumstances. Such judgments must consider the materiality of the audit area, the relation to specific standards, and the relation to expressing an opinion on the whole of the statements. University officers should be consulted when such judgments result in a disproportionate amount of effort being expended on a particular subject.
   
2.70.02.180 University's Requirements
 
General. In addition to providing the statements on which the opinion is to be expressed, the University will also provide accounting reports identifying the details of the various controlling accounts appearing on the statements. The University will assist in the gathering of the evidential matter as may be directed by the auditor. In this regard it is understood that the auditor must determine the amount of evidence needed to support a conclusion on an account, report, or statement. It is assumed that the amount of evidence so needed will be practicable, i.e., capable of being done with the available needs (not excessive), and reasonable, i.e., sensible in the light of surrounding circumstances.
   
2.70.02.190 The University will provide the auditor a copy of each report prepared by its Internal Audit Department.
   
2.70.02.200
Management Response. The University will provide such statements of managerial policies and representations as may be required by the auditor's presentation of the opinion and comments on the internal control system. In any case where the auditor has concern with a managerial response, or lack of response, the matter may be taken directly to the Board.
   
2.70.02.210
Evaluation. The University will annually present an evaluation of the services performed by the auditor during the prior fiscal year engagement.
   
2.70.02.220 Accounting Basis
  The University's accounting and reporting are generally based on the following publications:
   
2.70.02.230 Manual for Uniform Financial Reporting 1977, Presidents Council State Colleges and Universities.
   
2.70.02.240 Audits of Colleges and Universities, American Institute of Certified Public Accountants.
   
2.70.02.250
College and University Business Administration, National Association of College and University Business Officers (third edition with supplements).
   
2.70.02.260 Higher Education Finance Manual, 1975, U.S. Department of Health, Education, and Welfare.
   
2.70.02.270
Pronouncements of the Financial Accounting Standards Board and the Governmental Accounting Standards Board related to the institutions of higher education.

   
2.70.02.280 Other authoritative literature must be reviewed with the University officers prior to its usage.
   
2.70.02.290 Rotation of Auditors
 
The periodic change or rotation of auditors is not mandatory or necessarily desirable. However, the audit personnel will be rotated on a periodic basis.
   
2.70.02.300
The auditors may be appointed for five-year terms subject to the acceptability of the annual evaluations and the annual cost estimates. At the end of each five-year term, the administration will submit a report to the Audit Subcommittee of the Board of Governors that summarizes the activities of the auditors for the preceding five years, including fees, problems, concerns, etc. The report shall include a recommendation to reappoint the auditors or to request audit proposals from an appropriate list of audit firms.
   
2.70.02.310
If a decision is made to solicit new proposals, the current audit firm should not routinely be precluded from submitting a proposal and being reappointed.
   

Legislative History
Adopted 5-0; Official Proceedings 22:2935 (8 July 1977) Amended(1) 6-0; Official Proceedings 28:3876 (16 December 1983) Amended(2) 8-0; Official Proceedings 33:4391 (14 October 1988)

Compiler Notes
(1) This amendment changed the reporting deadline from October to the first meeting after January 1 to accord with the change from a July-June fiscal year to an October-September fiscal year.

(2) This amendment changed sections 2.70.02.040 and 2.70.02.270 through 2.70.02.310. (Official Proceedings 33:4391, 14 October 1988)


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