The GAO issued updated guidance in April 2005 for audit organizations and auditors to implement continuing professional education requirements contained in the 2003 revision of Government Auditing Standards. The guidance replaces the 1991, Interpretation of Continuing Education and Training Requirements. GAO also issued a technical amendment to GAS 3.45 that clarifies that auditors who perform field work but are not involved in planning, directing, or reporting on the audit/attestation and charge less than 20 percent of their time each year on projects conducted under Government Auditing Standards are subject to the 24-hour rule but do not have to comply with the remainder of the 80-hour CPE requirement. The technical amendment and new guidance are effective for CPE measurement periods beginning on or after June 30, 2005.
The GAO issued updated guidance in April 2005 for audit organizations and auditors to implement continuing professional education requirements contained in the 2003 revision of Government Auditing Standards. The guidance replaces the 1991, Interpretation of Continuing Education and Training Requirements. GAO also issued a technical amendment to GAS 3.45 that clarifies that auditors who perform field work but are not involved in planning, directing, or reporting on the audit/attestation and charge less than 20 percent of their time each year on projects conducted under Government Auditing Standards are subject to the 24-hour rule but do not have to comply with the remainder of the 80-hour CPE requirement. The technical amendment and new guidance are effective for CPE measurement periods beginning on or after June 30, 2005.
Government Auditing Standards 2003 Revision states that auditors should complete at least 80 hours of CPE every two years that “directly enhances the auditor’s professional proficiency to perform audits and/or attestation engagements” (2003 GAS 3.45). The previous requirement was for auditors to complete at least 80 hours of CPE every two years that “contributes to the auditor’s professional proficiency” (1994 GAS 3.6). The revised standard still requires that at least 24 of the 80 hours of CPE should be in subjects directly related to government auditing, the government environment, or the specific or unique environment in which the audited entity operates. At least 20 hours of the 80 should be completed in any 1 year of the 2-year period.
What’s the difference between “directly enhancing” and “contributing to” professional proficiency? In both cases, the auditor and audit organization must exercise professional judgment to determine whether CPE fulfills the requirement. The new guidance provides criteria to help audit organizations decide who is subject to the CPE requirement, how to measure and document compliance, and what qualifies as acceptable CPE.
Who is subject to CPE requirements? The requirements apply to government and commercial auditors performing audits or attestation engagements under Government Auditing Standards. The requirements do not apply to consultants, support staff, or student interns. The guidance states that organizations may exempt staff from a portion of the requirements under certain circumstances such as ill health or extended leave but should not grant exemptions for workload, budget, or travel constraints.
How should compliance be measured? Audit organizations may establish a standard 2-year measurement period for all its auditors. The standard 2-year period can be either fixed or rolling. The guidance clarifies how to pro rate hours for partial periods. Audit organizations may grant a two-month grace period to make up deficiencies for any 2-year period. The grace period isn’t applicable to the requirement that at least 20 of the 80 hours be completed in any year. And CPE hours taken to make up a deficiency in a prior period do not count for the next 2-year period.
What qualifies as acceptable CPE? The guidance clarifies that CPE programs should have a learning objective and updates and expands the list of example topics that could satisfy the 80-hour rule and the 24-hour rule. The guidance now allows auditors to earn CPE hours for segments of meetings of accounting or auditing standard-setting organizations or professional organizations under certain circumstances.
The guidance also lists topics, programs or activities that do not satisfy the CPE requirements: tax services not related to the subject matter of audits, on-the-job training, programs designed for personal development, training on administrative operations or demonstrations of office equipment not used in conducting audits, business sessions at conferences or meetings, preparation and presentation time for repeated presentations of the same subject matter within the 2-year period, and sitting for professional certification exams. Despite ALGA’s advocacy, conducting peer review still doesn’t qualify for CPE, but we’ll keep trying. The guidance cautions that some topics that meet the requirements of other professional certification or licensing bodies may not meet GAS requirements and vice versa.
Measuring CPE hours. The guidance now allows credit for half-hour increments of CPE after the first full hour is earned in a given program.
Keeping records. The audit organization is responsible for maintaining records of the number of CPE hours completed by each auditor subject to GAS requirements. The organization may delegate responsibility of keeping information about individual CPE programs – such as the name of the organization providing the CPE, title of the training program, subject matter, number of hours earned toward the 80-hour and 24-hour rules, and evidence of completion – to the auditor. The guidance calls for all CPE records to be maintained long enough to satisfy legal and administrative requirements, including peer review.
How does peer review look at compliance with CPE requirements? Peer reviewers will review the organization’s policies and procedures regarding training and test a sample of training records to ensure that staff members received training.
Tips for organizations undergoing review:
- Set a standard measurement period.
- Become familiar with GAO’s guidance regarding CPE.
- Ensure your procedures are up-to-date.
- Document or at least be prepared to describe your criteria for deciding whether training topics are applicable – especially for the 24-hour rule.
- Keep records – including records for staff members who left employment during the review period.
- Periodically monitor compliance – especially if you’ve delegated record keeping to individual staff members.
Tips for peer reviewers to assess compliance:
- Know whether the organization uses a fixed or rolling measurement period and design tests accordingly.
- Become familiar with GAO’s guidance regarding CPE.
- Recognize that because the scope of local government auditing is so broad, many topics enhance auditors' proficiency. Don’t second-guess the organization’s professional judgment.
- Don’t spend too much time testing CPE records.
- If you find an exception, consider compensating controls when determining the likelihood of negative impact on audit quality.
CPE is important but don’t mistake means for ends. The bigger changes in the competence standard were changing the focus from qualifications to competence and adding the requirement that audit organizations have a process for recruiting, hiring, continuously developing and evaluating staff. Ensuring that staff receives CPE is only one of the ways in which audit organizations are supposed to ensure that staff assigned to a project collectively possess adequate professional competence for the tasks required.
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Amanda Noble is Amanda Noble is an Audit Manager with the Kansas City Auditor's Office.
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Peer Review