Audit Implications of the Americans with Disabilities Act

By Ratcliffe, Thomas A.; Waters, Gary L. | The National Public Accountant, May 1994 | Go to article overview

Audit Implications of the Americans with Disabilities Act


Ratcliffe, Thomas A., Waters, Gary L., The National Public Accountant


On July 26, 1990, President George Bush signed the Americans with Disabilities Act (ADA) into law. Most of provisions of the ADA became effective January 26, 1992.

The ADA is intended to extend civil rights laws to Americans with disabilities and eliminate discrimination against these individuals. Under the law, disabled Americans include those with physical handicaps, mental impairments, contagious diseases, and recovering alcoholics and drug addicts.

In Statement on Auditing Standards (SAS) No. 54, entitled "Illegal Acts by Clients," the Auditing Standards Board acknowledged that entities may be affected by a variety of laws and regulations that have an "indirect" effect on the financial statements. Examples cited in SAS No. 54 include laws and regulations related to securities trading, occupational safety and health, food and drug administration, environmental protection, equal employment and price-fixing or other antitrust violations. These types of laws and regulations relate more to an entity's operating aspects than to its financial and accounting aspects and, therefore, their financial statement effect is indirect. The provisions of the ADA should be included in this group of laws and regulations.

The purpose of this article is to explain the accounting and reporting implications of the ADA. But, first, an overview of certain provisions of the ADA is provided so that those who are not familiar with the conclusions reached in this act will have a basis for understanding the financial statement and audit report effects of the law.

An Overview of the ADA

For purposes of this discussion, ADA violations may be separated into five general categories: (1) employment violations, (2) violations of access to public services, (3) violations involving access to public accommodations, (4) public transportation violations, and (5) telecommunications violations. Exhibit 1 summarizes the effective dates and enforcement agencies applicable to each of these categories.

Employment Violations

Private sector employers with 25 or more employees and all state and local government entities, regardless of the number employed, are covered under the ADA effective July 26, 1992. Employers with 15 or more employees are covered effective July 26, 1994.

The ADA prohibits discrimination against qualified disabled persons in employment practices. Areas covered by the act include job application procedures, hiring practices, advancement and discharge, employee compensation, training and other employment privileges.

Although the ADA does not require employers to hire disabled persons, it does provide disabled persons an equal opportunity to compete for jobs for which they are qualified. Employers are prohibited from using employment tests or setting job qualifications that prevent the hiring of disabled persons, unless the prohibitive standard is job-related. In addition, a medical exam may not be required of an applicant unless it is job-related, nor may an employer inquire as to the existence or severity of an applicant's disability. Inquiries must be limited to the applicant's ability to perform the required job-related function.

Further, employers are required to accommodate the disabilities of both applicants and employees unless the accommodations would result in an undue hardship for the employer. Examples of reasonable accommodations include restructuring job requirements, rescheduling work hours, providing readers or interpreters, providing telephone amplification, lowering a desk, providing adapted equipment and making architectural changes. Such accommodations must be made by a covered employer unless undue hardship would result. Undue hardship, although not specifically defined, is considered unreasonable expense and difficulty and will be determined by considering the employer's size, type of business and financial resources.

Charges under the employment title of the ADA must be filed first with the Equal Employment Opportunity Commission (EEOC) within 180 days of the violation. …

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Audit Implications of the Americans with Disabilities Act
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