*From the point of view of a full professor
PRIDE
at the College of Business at the University of Southern Mississippi*
 |
 |
 |
 |
 |
 |
 |
 |
Our core mission reflects taking PRIDE in all we do - Professionalism, Respect, Integrity, Discipline, Excellence
Before you conclude that an audit would resolve your questions, consider what an audit report really says and means. Audits do not report on the efficiency or effectiveness of management or on the accuracy of the numbers contained in the financial statements. Review a couple of examples.
If four laborers watch one worker dig a hole, the accounting records contain the cost of the five laborers doing a job. The auditor may review the labor cost records, but not report the inefficiency.
If the Foundation holds some of its investment in a bond fund, and pays someone four percent (4%) of the balance to manage the fund - even if the return on the fund is less than two percent (2%) -- the audit would not comment on the (un)reasonableness of the payment.
Assets subject to “fair value” assessment (real estate and marketable securities like stocks and bonds) may not be reported at market values as of the date of financial statements.
This means the Foundation can use an “alternative measurement” that makes it appear that it is better off than it really is. For example, if bonds have declined in value -- say, from $100,000 to $70,000 -- they can be reported at $100,000 on the financial statements. On the other hand, if bonds have gone up in value they may be reported at the current, higher value. Either way, the audit firm would say that values are in conformity with Generally Accepted Accounting Principles.
If the Foundation holds some of its investment in a bond fund, and pays someone four percent (4%) of the balance to manage the fund - even if the return on the fund is less than two percent (2%) -- the audit would not comment on the (un)reasonableness of the payment.
Assets subject to “fair value” assessment (real estate and marketable securities like stocks and bonds) may not be reported at market values as of the date of financial statements.
This means the Foundation can use an “alternative measurement” that makes it appear that it is better off than it really is. For example, if bonds have declined in value -- say, from $100,000 to $70,000 -- they can be reported at $100,000 on the financial statements. On the other hand, if bonds have gone up in value they may be reported at the current, higher value. Either way, the audit firm would say that values are in conformity with Generally Accepted Accounting Principles.