How to Hire an Auditor: A Brief Primer

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Beginning in 2015, organizations that expend more than $750,000 in federal funding in any fiscal year will be required to retain an independent auditor to perform a Single Audit. Previously, $500,000 in federal expenditures triggered the Single Audit requirement. While the new threshold is a bit higher, federal funds in the form of grants, pass-through dollars, contracts, and loans add up quickly so be sure you’re ready. This brief primer explains how to select a qualified auditor and provides a simple check-list to guide your selection process.


Auditors must be retained through a competitive negotiation process. Most audit engagements can be accomplished using established procedures for small purchases which means your organization must select from two or more qualified sources. Audit engagements for large organizations, however, often exceed the small purchase threshold that is currently set at $150,000 and must therefore be procured through the competitive negotiation process for large purchases. For these large audits, your organization will have to meet the full requirements of competitive negotiation procedures laid out in (2 CFR 200.320 (d) (1) to (4).


A number of your organization’s staff or board members will be involved in selecting an audit firm. But to keep the process organized and moving, appoint a project coordinator who will lead the charge, complete or delegate tasks, and ensure that appropriate organizational expertise is applied to the process.  


You can identify potential audit firms through your professional connections, business associations, the Chamber of Commerce, internet searches, or even the phone directory. Compile a list of ten to fifteen possible firms, then communicate with each by letter or email. Request that each provide documentation of its qualifications and ask that each describe its experience conducting Single Audits under the Single Audit Act. The firms that present strong professional qualifications along with Single Audit experience will become your preliminary pre-qualified list.


With a pre-qualified list in hand, you’re ready to solicit firms for the audit engagement. This is done by preparing a Request for Qualifications (RFQ) document and sending it to pre-qualified firms. The RFQ should describe the scope of the required services and the time frame within which the services must be delivered, and request that interested firms provide their official proposal along with professional references by a set deadline. 


Once your organization receives the proposals, it must evaluate and rank the firms from best to least suited for the engagement. When ranking the firms, it’s best to develop a simple evaluation instrument assigning points to items such as experience with Single Audits, experience of the audit team, description of technical approach, and references. 


Once written proposals are rated, it’s customary to conduct in-person interviews with the three firms with the highest scores. These interviews should provide a deeper look into the qualifications, experience, and approaches of competing firms, and allow your organization to assess both competence and compatibility issues. 


Finally, your organization will select the firm that rates best when both the proposal review scores and in-person interviews are considered. Should negotiations fail with the top-rated firm, your organization would then proceed to the next highest rated firm until the negotiation is successful.


Click here for a simple checklist to guide your selection process.

— Henry Flood, Senior Advisor for Grant Administration
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