ago. The resolution specified that the audit committee, to consist of three members, was to be selected from nonmanagement directors. The same resolution also specified the four following responsibilities of the committee 31 years ago: One: To select certified public accountants to audit the books and accounts of the company. Two: To review the scope and adequacy of the examination. Three: To determine the advisability of having the public accountants make special studies or reports. Four: To consult with and review the work of the certified public accountants to such extent and in such manner as the committee shall deem advisable with respect to any matters pertaining to the auditing of the company's records. In the intervening 31 years, our audit committee has been expanded and have had its functions expanded. At the present time, it consists of five nonmanagement directors, including two who are chairmen of their own listed companies, one who is a partner in a Chicago law firm, and two who are from academia. Members of the audit committee Senator METCALF. May I interrupt? Mr. WAGNER. Certainly. Senator METCALF. Just behind you is the clock. I have 5 minutes to get over to answer a rollcall. I have been informed that both the Republicans in the Senate and the Democratic Senatorial Campaign Committees are keeping track of our attendance both at committee sessions and on the floor. So I had better get over there and vote. However, before I leave, I hope that Senator Percy will be back and resume the hearing right away-I heard one of Mr. Minow's suggestions that we take a look at the public sector, and Senator Percy had an inquiry about that. I think I should put in the record a letter that I wrote to Comptroller General Staats, asking him to give us a survey of the auditing of the Federal Government. [The letter referred to follows:] The GAO has responsibility for the development of accounting and auditing principles and standards for the various Federal agencies. This Subcommittee is reviewing the processes by which accounting and auditing practices and procedures, promulgated or approved by the Federal Goverment, are established. As part of that review the Subcommittee will appreciate preparation by your office of certain information regarding annual audits of each organizational unit within the executive branch. The April, 1977 inventory of those units, prepared by the President's Reorganization Project, is enclosed for convenient reference. Please advise the Subcommittee who performed the audit for each of these named units during fiscal 1976, 1975 and 1974. State to whom the audit results were reported. What questionable practices were revealed and reported by the outside auditor? What follow-up was taken by the agency? Did GAO evaluate the audit work that was performed? If the audit was made by a private firm, rather than the GAO or some other Federal entity, please provide the following information: 1. Reason for use of a private firm rather than a The Honorable Elmer B. Staats 25 May, 1977 Page Two 2. Name of the firm(s) which made the audit in fiscal 1976, 1975 and 1974. 3. Cost of the audit to the Federal Government in each year. 4. Did the form (s) have any other contractual or consulting relationship with the agency during these years? If so, for what purpose (s) and at what price(s) to the agency? 5. Method of selection of auditor--competitive bid, negotiation or other (specify) -- in fiscal 1976. If competitive bids were not used, were time constraints a major factor in deciding not to request bids? What guidelines does GAO provide agencies regarding use of competitive bids and consideration of small and medium-sized firms in selection of outside auditors? What guidelines has GAO issued to agencies regarding performance of audits or performance of management advisory services? What oversight did GAO exercise to assure that guidelines regarding competitive bidding are followed? For each governmental unit listed in the enclosure, please indicate whether the audit and financial reports were performed in accordance with standards established by the GAO, generally accepted auditing or accounting standards, or standards from some other source (specify the source). Staff Director Vic Reinemer and Counsel Jack Chesson have discussed this request with Director D. L. Scantlebury, John Adair and Jim Wright of your Financial and General Management Division. Very truly yours, ORIGINAL SIGNED BY LEE METCALF Enclosure We have received your letter of May 25, 1977, requesting information on 'annual audits of all executive branch organizations for fiscal years 1974-1976. This has been referred to our Financial and General Management Studies Division. Sincerely yours, Bitkillen DEPUTY Comptroller General |