Wyo. Code R. 021-0003-11
General Agency, Board or Commission Rules
Chapter 11: General Auditing Rules and Procedures
Effective Date: 11/30/1992 to 03/12/2014
Rule Type: Superceded Rules & Regulations
Reference Number: 021.0003.11.11301992
The rules governing the conduct of audits by the Department of Audit are adopted by authority of W.S. 9-2-2003 (e) and (g)(ii).
(a) These general auditing rules and procedures are intended to define the rights and obligations of the auditors of the Department of Audit and the person or entity being audited pursuant to the requirements of W.S. 9-1-403 (a)(iv) and 9-2-2003 (e) and (g). The rules govern the following audits performed by the Department of Audit:
(i) Audits by the excise tax division for the Department of Revenue for enforcement of the excise tax statutes;
(ii) Audits by the excise tax division for the Department of Transportation for enforcement of commercial vehicle registration fees and special fuel tax requirements;
(iii) Audits by the minerals division for the Department of Revenue for enforcement of the state mineral tax statutes and for the State Land and Farm Loan Office for enforcement of state mineral royalty payments; and
(iv) Audits by the minerals division by agreement with the Minerals Management Service of the United States Interior Department for enforcement of federal mineral royalty requirements.
(b) To the extent not inconsistent with the express provisions of these rules, the Government Auditing Standards, 1988 Revision, published by the Comptroller General, United States General Accounting Office, shall be used to supplement and guide the use and interpretation of these rules. When conducting audits of mineral production from federal or Indian lands by agreement or contract with the federal Minerals Management Service, the Regulations Governing Audits of Federal and Indian Mineral Leases published by the Minerals Management Service of the United States Department of Interior, 30 CFR Part 217, shall be enforced as required by the agreement or contract.
(a) As used in these rules:
(i) 'Audit' or its derivative means and includes the words 'examine' or 'review' or a derivative of either of those words, and includes financial, performance or compliance audits performed by the Department of Audit. As used in these rules, the word 'audit' does not include verifications, examinations or reviews done by private auditors or examiners who are not employed by or under contract with the Department of Audit;
(ii) 'Compliance audit' means an examination of the programs and activities of the audited entity to determine whether the entity has complied with the laws and regulations established by the legislature or authorized regulatory agency relating to the audited program or activity;
(iii) 'Issue letter' or 'preliminary findings letter' means a preliminary audit report issued to the audited entity in a tax or royalty audit, which contains preliminary audit findings, conclusions and recommendations;
(iv) 'Draft demand letter' means an enumeration of specific audit findings, conclusions and recommendations of the auditors which are proposed to the Minerals Management Service for issuance in a final report.
(v) 'Final issue letter' means a final audit report issued to the audited entity in a tax or state royalty audit which contains final audit findings, conclusions and recommendations.
(a) Audit candidates shall be selected by the department, in its discretion, based upon:
(i) Random sampling methods appropriate for the vendors, consumers, dealers, mineral tax or royalty payers, or the general population of the class being audited, or upon such other sampling criteria as the director may approve, in accordance with generally accepted auditing standards (GAAS) and statements on auditing standards (SAS);
(ii) A request from another state agency;
(iii) Information obtained from other audits indicating a potential problem with another audit candidate;
(iv) The statute of limitation for tax audits provided by law;
(v) Agreements between the department and other states for audits of commercial vehicle registrations and fuel taxes; or
(vi) Agreements between the state or the department and an agency of the federal government for audits of federal mineral royalties or other federal programs.
It is the responsibility of the audit supervisor to assure that all audits are conducted by auditors who collectively possess the requisite knowledge and professional proficiency for the tasks required.
All auditors assigned to an audit shall be free from any personal, external or organizational conflict or relationship with the audited entity which could impair, or give the appearance of impairing, the independence essential to the rendering of fair and impartial findings, conclusions, opinions, judgments and recommendations. Any auditor assigned to an audit shall report any potential impairment of independence with respect to the assignment to the audit supervisor or division manager, or both. The supervisor or division manager, or both, shall review the report and consult with the audited entity to resolve the question of conflict or independence. If either the supervisor or the division manager believes an auditor's independence is impaired, the auditor shall be removed from the audit. All questions of independence and their resolution shall be documented in the audit file.
(a) The audit supervisor, together with the assigned auditors, shall prepare an audit plan. The plan shall define in writing:
(i) The purpose or objective of the audit;
(ii) The scope of the audit, including the different governmental agencies or authorities that will be served by the audit;
(iii) Statutory and regulatory requirements to be reviewed for compliance by the audited entity;
(iv) The records and documents to be reviewed and the personnel to be interviewed during the audit, to the extent possible;
(v) The methodology or processes and systems to be used to gather and analyze the data required to reach necessary conclusions.
(b) The plan is not intended to describe procedures used by the department to select audit candidates or methods used to identify areas of potential risk to be investigated.
(c) The appropriate administrative agency shall be consulted as necessary to assure complete and accurate analysis of audit requirements.
(d) The elements of the audit plan described in subsection (a) of this section are not exclusive and are not intended to limit the scope of an audit. Other elements may be included in the initial plan, or the audit plan may be revised during the course of an audit, as the auditors deem necessary or appropriate for the particular audit.
It is the responsibility of the audit supervisor to assure that staff involved in accomplishing the objectives of an audit receive adequate guidance and supervision to properly accomplish the audit objectives. If a problem arises during the course of an audit, the audited entity may contact the audit supervisor.
When an audit is to be conducted, the entity to be audited shall be contacted by telephone to establish the date and time when the audit will begin, the records and documents to be examined and their location and availability. The audited entity shall designate a contact person or representative with whom audit activities are to be coordinated. The auditor in charge may review the audit plan with the audited entity to provide an understanding of audit procedures and objectives.
(a) An engagement letter shall be sent to the entity to be audited to confirm the telephone contact and document the scope of the audit, the time period to be audited, the records and documents to be examined, the number of auditors assigned to the audit, the facilities required to accommodate them, and the name of the auditor in charge. An audit is commenced on the date the audited entity receives the engagement letter. The audited entity shall be given a minimum of fourteen (14) days from the date of the engagement letter is received before the auditors enter the premises of the audited entity to conduct the audit. The engagement letter shall also explain the purpose of, and the need for, an opening and closing conference between the auditors and the audited entity.
(b) The list of taxpayer rights set forth in W.S. 39-1-103 shall be included with the engagement letter.
The auditors shall meet with the person designated to coordinate the audit activities at the agreed time and place to commence the audit. The auditors will review the audit plan, the scope of the audit and the records that will be required to complete the audit.
(a) Auditors shall be given free and open access, during regular business hours, to any and all books, logs, journals, records or documents of the audited entity which the auditors deem relevant and necessary to the satisfactory completion of the audit and the rendering of a knowledgeable opinion, judgment or recommendation concerning the audited entity. If any book, log, journal, document, record or information relevant and necessary to the audit is kept or maintained electronically, the audited entity shall provide such data or access to such data in electronic form unless some other form is requested by the auditors and mutually agreed to by the audited entity. Auditors shall also be given necessary access to all personnel involved in the production of any records relevant to the audit, for discussion and explanation of the systems and operations which produce the records examined.
(b) The department may subpoena witnesses or documents as necessary for the audit, as authorized by W.S. 9-2-2003(g)(iv).
(c) If the records and documents defined in the engagement letter are not available to the auditors for commencement of the audit at the agreed time and place, or if additional records determined by the auditors to be necessary for conducting the audit are not made available within such time as the auditors may reasonably allow, the director of the department may apply to the attorney general for an action to obtain the records and for the assessment of costs or such other relief as may be appropriate because of the delay.
The auditors shall review and test the internal controls of the audited entity as necessary to determine the accuracy and credibility of the entity's records and accounting system. If computer processed data are an important and integral part of the audit, the audited entity shall allow the auditors to conduct such tests of the general and application controls of the computer system as necessary to determine the reliability of the data.
(a) Auditors may use sampling methods which are approved under generally accepted auditing standards to test the audited entity's accounting system and records. Based upon the results of the tests, the auditors, in consultation with the audit supervisor, shall determine whether to continue or terminate the audit.
(b) If the test results show that the audit should be continued, the auditors may conduct the audit by the use of approved sampling methods. If the auditors elect to use a sample projection, the audited entity will be informed and the sampling method used will be explained. Sampling means that a valid portion or percentage of accounts, invoices, purchase or sale documents, or other records representative of the time frame being audited, will be examined and the results will be projected for the total population from which the sample is drawn.
(c) When test results obtained during an audit to determine compliance with mineral production reporting and valuation requirements for severance tax or property tax show evidence of gross negligence by the audited entity, such evidence shall be evaluated by the director. The audited entity may request an informal conference with the director to consider the evidence. If the director determines there is evidence of gross negligence, the time period for the audit may be extended to prior years as provided by W.S. 39-2-214(h).
An exit conference will be held with the audited entity at the conclusion of the field audit and before issuing written preliminary findings. The auditors will review with the audited entity the audit methods used, the records examined, potential audit issues and the post audit process. Audit adjustments may be made at the exit conference if the audited entity can show good cause.
The auditors shall prepare an audit report or issue letter of proposed preliminary findings which describes the audit work performed, the period of time covered by the audit, and details the audit findings. A copy of the findings, together with a letter explaining the options available at this stage of the audit process, will be mailed or delivered to the audited entity.
(a) Within thirty (30) days after receiving the preliminary findings, the audited entity may provide additional information pertinent to the audit, or request a conference with the Department of Audit to review the proposed findings, or both. Before the expiration of the thirty (30) day response period, the audited entity may request an extension of time within which to respond or request a conference. The request for a review conference must be in writing, and must be made within the time allowed under this subsection.
(b) Within ten (10) days after receiving a request for a review conference, the audit supervisor shall arrange a conference between the audited entity and appropriate personnel from the administrative agency which administers the audited program, the Department of Audit, and attorney general's staff, or any of these people the audit supervisor deems necessary. The conference will be held within thirty (30) days immediately following the date when the request was received. The audited entity will be notified in writing of the date, time and place for holding the review conference.
(a) Within twenty (20) days after the period for responding to the preliminary findings has expired, or within twenty (20) days after the review conference provided in Section 17 of these rules has been held, the auditors' final findings, conclusions and recommendations shall be set forth in a final written audit report, issue letter or proposed demand letter for each audit.
The audit report, issue letter or proposed demand letter and information contained therein shall not be discussed or made public, except as authorized by Section 17(b) of these rules, until the final report or letter is issued. A copy of the final audit report, issue letter or proposed demand letter will be provided to the agency for which the audit was made, and to the audited entity unless the audit is performed for a federal agency which prohibits distribution to the audited entity. The department shall retain a copy for reference.
(b) Every audit report, issue letter or proposed demand letter shall contain a statement, prominently displayed, stating that the report is the property of the Department of Audit, is subject to the confidentiality protection provided by state or federal laws authorizing the audit of public or private entities, and that any publication, reproduction or dissemination of the report or the contents thereof without the consent of the Department of Audit may be subject to the penalties provided by law.