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Financial Improvement and Audit Readiness
May 13, 2013 |
Audit Readiness, Financial Improvement, and Auditability … FIAR.
Have you been hearing these terms a lot lately? Have you been wondering what exactly they all mean and why they matter? To begin to understand these words and how they are going to impact our daily Navy life, we have to start with the basics, and the basics begin with FIAR.
Financial Improvement and Audit Readiness (FIAR) supports the Department of the Navy’s Audit Readiness initiative, with the long-term goal of improving financial processes and systems across the entire Navy. In turn, it will lead the way to successful financial audit readiness. The Navy has committed to placing resources at each Budget Submitting Office (BSO) to support the FIAR initiative. These resources have been established across every major command, and are working towards standardizing internal controls and identifying areas where financial process improvement is needed. Simply put, they are working towards establishing a Navy wide standardization process for financial management and audit readiness, which will become how we do business on a day-to-day basis.
Why Does Financial Statement Auditability Matter?
So why does it matter if the Navy is auditable? In the private sector, corporations depend on an auditor’s unqualified or “clean” audit opinion, as a way of demonstrating a clean bill of financial health. It also demonstrates viability and veracity to shareholders and the market. In the past decade, penalties for deceptive, inaccurate financial reporting have become more stringent. You may be thinking, “The Navy doesn’t have shareholders and market valuation”. In terms of the private sector, no, however since we are funded by tax dollars, every taxpaying citizen is a shareholder, and by obtaining an unqualified opinion, we are providing them confidence in our business practices. Obtaining a clean opinion also improves stewardship, reduces cost of business operations, and complies with congressional direction.
Making decisions based on sound financial data will provide positive results. On the contrary, making decisions on financial data that cannot be trusted is a roadmap to failure.
What is an Audit?
A financial audit is an independent evaluation of whether an organization’s financial statements are fairly presented, and in accordance with appropriate accounting standards. There are four types of audit opinions that can be issued … Unqualified (clean) Opinion, Qualified Opinion, Adverse Opinion, and Disclaimer of Opinion.
Are you Audit Ready?
An organization is audit ready when it can state with confidence that it is ready for an independent evaluation of its financial statements. Audit readiness is the process of preparing the Department of the Navy to undergo an audit with confidence. Audit readiness is a team sport, not just a Comptroller drill. As a member of the Navy, you are responsible for the accuracy of the financial statements and important transparency of business processes. Many actions you take at work result in a financial transaction.
What does it mean to be “audit ready?”
* To always be prepared to demonstrate that …
* Proper documentation is maintained and sound processes are in place
* The organization is adhering to appropriate accounting standards and policy
* To have business processes that are sustainable, traceable, and repeatable
Most business events that take place in the field result in a financial transaction
Almost everything we do in the Navy has a financial impact. From the procurement of ships and aircraft, the pay we receive, down to the food we eat aboard ships and galleys ashore, they all have an impact on the Navy’s bottom line. Accounting for the funds we receive and how we spend it requires absolute accountability. That is why audit readiness is very important. With reduced funding available, it is imperative that we move toward an environment where each command is “audit ready.” As a result, YOU are one-step closer to achieving the Business “E”.
Day-to-day operations have an impact on audit readiness and financial integrity. Take into consideration what you do on a daily basis; you will discover that YOU have a significant impact on helping the Navy be audit ready. Here are some day-to-day questions within your work environment that by maintaining procedure and documentation will continually have a positive impact for audit readiness …
Whether by land or sea, all sources of operational and administrative transactions have an impact for year-end audit readiness. As you handle a document, receipt, bill, contract, timesheet, ask yourself, “Do I need to take extra steps now to have a process in compliance with audit standards?” Timely adhering and acting upon policies in place will lead to successful audit opinion being issued.
In conclusion, audit readiness is important because we are being directed at the highest levels, and it is of significant value to you as a taxpayer as well as a member of the Navy. While the dates may seem far into the future, your actions today matter! The audit evaluates the Navy’s financial processes from day to day activities to the final product … the financial statement.
A clean audit depends on your ability to be accurate, follow the process and validate your work! Audit readiness shows that we are prepared to meet the requirements of an audit as well as address gaps that are discovered on our road to audit readiness. Our steps down this road will ensure that we can achieve the goals of the Navy and Department of Defense!
For further information on NAVSUP’s Audit Readiness Initiative, please go to … http://www.fmo.navy.mil/Divisions/FMO4/financial_improvement_program.html, or route any questions/requests through Dave Orr at
By Cheryl Murphy-Sweet,
NAVSUP Financial Improvement and Audit Readiness