In 2018, Arizona Revised Statute (A.R.S.) §15-213 was amended by law to limit audit contracts for school districts to a maximum of three years. A school district may not hire the same auditor or auditing firm for more than three consecutive years. Prior to this change, there were no limitations on the number of consecutive contracts an audit firm signed with a school district. As the state did not make this law retroactive, the AZ Auditor General provided the following possible scenarios on how to proceed for firms already auditing school districts on preexisting contracts:
- If the district originally entered into a five-year contract, and on August 3, 2018 the contract still has one year left to cover the FY 2018 audit, the district may use the existing contract for the last year. If the district chooses to enter into an additional contract with the same audit firm after the original contract expires, the next audit contract cannot exceed two years.
- If a district has an existing contract that still has four years remaining for the FY 2018, 2019, 2020 and 2021 audits, the district may continue to use this contract. However, the next audit contract cannot exceed three years and the district must select a different audit firm.
- If the district entered into a new audit contract on August 3, 2018, the contract cannot exceed three years.
In addition to the mandatory rotation of auditors, (A.R.S.) §15-213 was also amended to disallow an auditor hired by a school district from receiving consulting fees, also with an effective date of August 3, 2018.
For more information on these changes, check out the AZ Auditor General’s list of FAQs.