Academic journal article The Journal of Government Financial Management

Getting It Right the First Time: Accounting, Auditing, Financial Systems and the Federal Government

Academic journal article The Journal of Government Financial Management

Getting It Right the First Time: Accounting, Auditing, Financial Systems and the Federal Government

Article excerpt

The Enron fiasco shows the failure of overly complex rules that remove the incentives for sound judgment on the part of finance professionals in the private sector, where showing a profit-real or not-is king. In the U.S. government we face a different challenge. We have a Standard Chart of Accounts; we do not have fancy derivative products or revenue recognition games to play. We do, however, have a rapidly changing profession. Financial systems, especially commercial-off-the-shelf (COTS) systems, are the future of our profession. I call this the need, and opportunity, for "getting it right the first time."

Government accounting is changing to take advantage of technological advances. Offices, once full of mid-level accountants making fund accounting entries, are seeing the advent of financial systems that track and control funds automatically. A clerk makes an entry one time, and it ripples through the system. The preparation and audit of a financial statement, a picture of an economic position at one point in time, is not as important now.

What is important is setting up the financial system correctly. The series of transactions all feed into the statement, which is "prepared" bythe system automatically. It is important that a government entity set up its system to make sure that these source transactions are captured correctly and on time. It is less important if the financial statement compiler hits the "print" button on September 30 at 11:59 or October 1 at 12:01. (Unless somebody is obligating more than their annual appropriation or trust fund limit, but the system would have already caught and prevented that.)

Financial auditing is changing from tests over the data shown on the financial statement to the testing of systems and controls. If you know the data going into the system is solid and the system maintains the data integrity, then you have an assurance that what comes out ofthe system can be reliable. Data mining and transaction tracing tools are becoming more sophisticated and necessary.

The "getting it right the first time" concept applies to auditing as well. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.