[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1773.20]

[Page 985-986]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1773--POLICY ON AUDITS OF RUS BORROWERS--Table of Contents
 
    Subpart C--RUS Requirements for the Submission and Review of the 
  Auditor's Report, Report on Compliance and on Internal Control Over 
               Financial Reporting, and Management Letter
 
Sec. 1773.20  CPA's submission of the auditor's report, report on compliance, report on compliance and on internal controls over financial reporting, and 
          management letter.


    (a) Time limit. As soon as possible after completion of the audit, 
but within 90 days of the as of audit date, the CPA should deliver the 
auditor's report, report on compliance and on internal control over 
financial reporting, and management letter to the president of the 
borrower's board of directors. As a minimum, copies should be provided 
for each member of the board of directors and the manager. Further, 
three copies must be provided to the borrower for transmittal to RUS.
    (b) Communication with the board of directors. In addition to 
providing sufficient copies of the auditor's report, report on 
compliance and on internal control over financial reporting, and 
management letter for each member of the borrower's board of directors, 
RUS requires that the CPA report all audit findings to the borrower's 
board of directors. RUS recommends that audit findings be communicated 
orally; however, the communication may be oral or written, at the 
borrower's discretion. If the information is communicated orally, the 
CPA must document the communication by appropriate memoranda or 
notations in the workpapers. If the CPA communicates in writing, a copy 
of the written communication must be included in the CPA's audit 
workpapers or permanent file.
    (c) Matters to be communicated. Matters communicated to the board of 
directors must include, but are not limited to the matters to be 
communicated to the audit committee as prescribed in SAS No. 61, 
entitled ``Communication with Audit Committee'',:
    (1) The initial selection of and changes in significant accounting 
policies;
    (2) The methods used to account for significant or unusual 
transactions and the effects of significant accounting policies in 
controversial or emerging areas;
    (3) The process utilized by management to formulate significant 
accounting estimates and the basis for the CPA's conclusions regarding 
the reasonableness of these estimates;
    (4) Audit findings and recommendations, including audit adjustments 
that either individually or in the aggregate have a significant effect 
on the borrower's financial statements;
    (5) The CPA's responsibility for other information presented with 
the audited financial statements, any audit procedures performed, and 
the results thereof;
    (6) Any disagreements with management, whether or not satisfactorily 
resolved, concerning matters that individually or in the aggregate may 
be significant to the borrower's financial statements or the auditor's 
report, report on compliance and on internal control over financial 
reporting, or management letter;
    (7) Significant matters that were the subject of consultations with 
other accountants;
    (8) Significant issues discussed with management with regard to the 
initial or recurring retention of the CPA; and

[[Page 986]]

    (9) Any serious difficulties encountered in dealing with management 
during the performance of the audit.

[56 FR 63360, Dec. 3, 1991, as amended at 59 FR 659, Jan. 6, 1994; 66 FR 
27835, May 21, 2001]