This article was originally published in the March 1, 2024, Nebraska Examiner.
The recent controversy in Nebraska, involving an attempt by the Department of Health and Human Services (DHHS) to hire a CPA firm to perform the statewide federal single audit, underscores a critical debate about the role of external auditors in governmental auditing.
However, this incident should not be seen as an indictment of the CPA profession or the use of licensed accounting firms. Instead, it highlights the need for a nuanced understanding of the important role these professionals play in ensuring transparency, accountability, and the compliant use of taxpayer funds. In fact, more than 40,000 federal single audits are performed annually on states, local governments, and not-for-profit organizations, the vast majority of which are performed by CPA firms. Further, thousands of governmental financial statement audits are also performed by firms annually.
First, it’s important to recognize the value that certified public accountants bring to the table. CPAs must undergo rigorous educational preparation and continuing education requirements, pass a national entrance exam and adhere to high ethical standards and professional guidelines set by the U.S. Government Accountability Office, the American Institute of Certified Public Accountants, and the Nebraska Board of Public Accountancy. These standards are designed to ensure that auditors maintain independence, objectivity, and a commitment to the public interest—and apply to all CPAs, regardless of whether they are in public practice or are employees of an agency such as the State Auditor’s Office. The suggestion by State Auditor Mike Foley that a licensed CPA firm in public practice would inherently lack independence or expertise is a misunderstanding of the profession and its regulatory framework. (See the Feb. 21, 2024, Nebraska Examiner article, “Nebraska auditor says state agency was seeking to replace him and hire a ‘hand-picked’ CPA firm.”)
Licensed CPA firms play a crucial role in the auditing world, offering services that complement those of public auditors. They bring specialized expertise, innovative auditing techniques, and the capacity to handle complex financial and compliance landscapes. This diversity in the auditing sector enriches the quality of audits and can lead to more effective identification of noncompliance, fraud, and misstatements of funds.
The concern raised by State Auditor Foley regarding the independence of a “hand-picked” CPA firm can be addressed through stringent procurement processes, oversight, and the ethical obligations of CPAs themselves. Independence is a cornerstone of the auditing profession, and reputable CPA firms are diligent in maintaining this independence, regardless of who the client is. The assumption that a CPA firm’s audit would automatically be less stringent or sweep issues “under the rug” does not reflect the professional integrity that characterizes the CPA profession.
In response to State Auditor Foley’s concerns about cost and the possibility of his office losing a major funding source, the goal should always be to ensure the best possible use of taxpayer resources, whether that involves internal audits, external audits, or a combination of both.
Finally, the public’s trust in the auditing process is paramount. This trust can be maintained not by limiting the auditing function to a single office or individual but by ensuring that all auditors, whether public or private, adhere to the highest standards of independence, transparency, and professionalism. Any legislative measures in Nebraska should aim to strengthen, not weaken, these principles — and any political concerns should be resolved through normal political processes, not in the public condemnation of an entire respected profession.
In conclusion, while the issue of whether CPA firms should be allowed to perform single audit engagements in the state of Nebraska is understandable, the Nebraska state auditor’s comments are troubling. The words of an elected Nebraska official should not lead to a blanket distrust of the CPA profession or the use of licensed CPA firms in governmental auditing. With proper safeguards, ethical standards, and a commitment to the public interest, the involvement of licensed CPA firms can enhance, rather than undermine, the financial integrity of public institutions.
Joni Sundquist is president and executive director of the Nebraska Society of Certified Public Accountants, representing approximately 2,600 member CPAs. A native of Oakland, Neb., she is a graduate of the University of Nebraska-Lincoln College of Journalism and previously worked for the Nebraska Bankers Association for two decades.
Click this link to read the Feb. 21, 2024, Nebraska Examiner article.
https://nebraskaexaminer.com/2024/02/21/nebraska-auditor-says-state-agency-was-seeking-to-replace-him-and-hire-a-hand-picked-cpa-firm
Click this link to read the Nebraska Society’s March 1, 2024, Commentary.
https://nebraskaexaminer.com/2024/03/01/independence-is-a-cornerstone-of-the-auditing-profession/
