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Quality Control Review of the Deloitte & Touche LLP FY 2015 Single Audit of Battelle Memorial Institute

DODIG-2018-005

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Oct. 31, 2017 — Objective

We conducted a quality control review of the Deloitte & Touche LLP (D&T) FY 2015 single audit of Battelle Memorial Institute (Battelle) to determine whether the single audit was conducted in accordance with auditing standards and the requirements of the Office of Management and Budget (OMB) Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.”

BackgroundPublic Law 104-156, “Single Audit Act Amendments of 1996,” was enacted to promote sound financial management of Federal awards administered by non Federal entities and to establish uniform requirements for audits of Federal awards. OMB Circular A-133 implements this Act and establishes the standards for the audit of non-Federal entities expending Federal awards. The audit includes the non-Federal entity’s financial statements and Federal awards as described in OMB Circular A-133.

Findings

The D&T single audit contained quality deficiencies that require corrective action. The D&T auditors:
• did not include an opinion paragraph in the report on Battelle’s compliance with requirements that are direct and material to the research and development cluster (see Appendix B for a list of the requirements that are direct and material to the research and development cluster), October 27, 2017 
• did not always properly define the population of transactions when performing audit sampling, and
• did not adequately document audit procedures performed to support conclusions on the cash management, reporting, and key personnel requirements.


Recommendations

We recommend that the Partner, D&T, revise the audit report to include an audit opinion paragraph on Battelle’s compliance with the requirements that are direct and material to the research and development cluster. In addition, we recommend that, for future audits, the Partner, D&T:

• properly define the population of transactions for audit sampling that are relevant to the audit objective and planned audit procedures and
• improve audit documentation for the internal control testing of the cash management compliance requirement, the compliance testing for the reporting compliance requirement, and the identification and evaluation of the key personnel requirement.

Management Comments and Our Response
Comments from the Partner, D&T, addressed all specifics of the recommendations, and no further comments are required. The Partner, D&T, has revised the audit report and agreed to take corrective action on future audits to address the additional findings and recommendations. We verified the actions taken on the revised report and closed the recommendation. We will close the other recommendations related to future audit work after we perform followup upon completion of the next single audit by D&T.