Printer-friendly Version

Step By Step Audit Contracting Process

Step 1 - Develop a list of audit firms eligible to perform government audits for the current fiscal year.

The State Auditor’s Office will issue an invitation to audit firms interested in performing government audits to complete an application known as the firm profile datasheet. Firms will submit the application along with the required documentation indicated on the profile datasheet to the State Auditor’s Office by a deadline specified by the State Auditor.
Upon reaching the deadline for receiving applications from the firms, the Office will conduct an extensive review of each application. The areas of review include verification that educational requirements have been met, the firm’s documents such as professional liability insurance, New Mexico firm permit, etc. are current and a review that the firms are in compliance with requirements set forth in the Audit Rule relating to due dates, late audit notifications, quality of work, etc. 

Upon the conclusion of the review, firms will fall into several categories: 1) approved, 2) approved with limitations (often limiting the number of audits they are eligible to perform), 3) approved to be on the list of firms eligible to perform audits however there is some requirement that must be met before the Office will approve and issue contracts. Some of the most common items that can cause this restriction is a) an expired or upcoming expiring peer review, b) not having an at least one audit manager with a current New Mexico CPA license, c) having outstanding audit reports for prior years, d) having expired documentation, e) not meeting the CPE requirements, etc.

Once the list of approved firms has been finalized the information is posted on our website.

Step 2 - Update and finalize the current year Audit Rule.

The Office annually reviews and updates the 2.2.2 New Mexico Administrative Code (NMAC) “Requirements for Contracting and Conducting Audits of Agencies”, known as the State Auditor’s Rule. The updates include administrative updates, changes based on the outcome of legislation and changes resulting from auditing standards.

Step 3 - The State Auditor selects the audits his Office will perform and all other agencies will be sent written notification that they can procure their auditor.

State Auditor has the option to select any agency and have his office perform the annual financial and compliance audit. Once he has made his selection all other agencies must wait until they receive written notification from the State Auditor that they can contract for audit services. 

Step 4 – The State Auditor’s Office conducts statewide trainings on the Annual Contracting Process.

The State Auditor’s Office will conduct statewide training sessions at the beginning of the audit contracting cycle. The trainings are usually 3-4 hours in length and cover a variety of issues including 1) highlights from the State Auditor, 2) the contracting department will cover the steps that agencies need to follow to get an auditor in place to perform their audit including providing statistics from previous audit years and 3) the audit department will cover overall changes that will affect the audit and give an overview of upcoming changes in standards that may affect future audits.
Registration is requested and can be completed on are website.

Step 5 - Agencies submit the recommendation forms and contract for the audit firm they are recommending perform their annual financial and compliance audit.

An agency will need to send to the firm they are recommending the signed recommendation forms and contract to the firm for signature. The firm will in turn send the recommendation forms and contract to the Office of the State Auditor.  Agencies that have a one year audit performed or agencies are in multi-year audit proposal must submit the information each year for approval.  IPA Recommendation Forms for Audits and the related audit contracts that are submitted to the Office with errors or omissions will be rejected by the Office. The Office will return the rejected contract and IPA Recommendation Form for Audits to the agency with a checklist indicating the reason(s) for the rejection. The Office will first process the correct IPA recommendation forms and related contracts that were submitted timely. The Office will then process any IPA recommendation forms and audit contracts that were submitted late or were rejected by the Office and not resubmitted correctly by the deadline. If the State Auditor denies an agency’s recommendation they will be notified in writing with an explanation and will be asked to make another selection. If the recommendation and contract are approved the State Auditor’s Office will e-mail the fully executed contract to the agency and selected IPA. 

If you are an agency who requires State of New Mexico Department of Finance (DFA) approval, you will need to make two additional copies so that when the contract is returned from DFA to the State Auditor’s Office there will be two original copies of the contract all with original signatures. The contract should be signed by the agency, audit firm, Taxation and Revenue and Legal Counsel. The contracts should be accompanied by all required DFA/CRB paperwork for contract submittal. The State Auditor will sign the contract and his office will hand deliver the contracts to the DFA for approval. When the contract has been approved by DFA they will return them to the State Auditor’s Office for distribution. The audit firms have 10 days from the entrance conference with an agency to submit the dated and signed engagement letter along with the list of client prepared documents to the State Auditor’s Office.

Step 6 – Audit firms will submit audit and AUP reports to the State Auditor for review and release upon completion.

Section 2.2.2.9 – Report Due Dates will outline the due dates for the audit and AUP reports. Once an audit or AUP report with the required documentation (completed audit review guide, management representation letter and letter of past adjustments or an indication there were none) is received in the State Auditor’s Office, we will post on our website the date the report was received. Any reports received lacking any of the required documentation, including the engagement letter, will not be considered received until all the required documents are received.

A completed audit or AUP report submission proceeds through a review process. Upon completion of the review, the Office will fax a letter of comments to the auditor and the agency. The audit firm has 2 business days to respond. 
When the final audit reports are received (including a required electronic copy) the Office will briefly review it making sure the final version reflects the accepted draft or the draft version with required changes. The Office will then issue a release letter which indicates that the audit or AUP report will have 5 days before it is considered a public record. An agency can request a waiver of the 5 day holding period; however the request must be in writing (sample 5 day waiver) and should be submitted PRIOR to the report being released.