Risk Based Assessment

The following table is an example of how a MoDOT auditor performs a risk based assessment

It is important to have cohesion between the prequalification documents. The following table shows how the documents are inter-related and must reference one to another.

The example uses the process for an overhead rate schedule not audited by a CPA

1. MoDOT auditors reference costs listed on the overhead rate schedule to the costs listed on the Income Statement, General Ledger, or Trial Balance;

2. The income statement costs are then referenced to the tax return;

3. The accounts and costs listed on the overhead schedule are then referenced to the Internal Control Questionnaire (ICQ) which describes the accounting processes and procedures used by the firm to segregate direct and indirect costs, as well as, identify and remove from the overhead schedule all unallowable costs.

Overhead Account
Overhead Amount
General Ledger
Tax Return
Comments
ICQ
Auto Expense
51,000
65,000
65,000
Please explain the 14,000 difference between the G/L, tax return and overhead

Appendix B-11 Question H.4. Classification of Cost Items.

Your firm answered N/A for vehicle, therefore vehicle costs should not be included in the overhead.

Admin Travel
14,595
16,315
16,315

Please list the type of activities included in this costs. If the costs are associated with a project(s), those costs must be removed.

Please explain the 1,720 difference between the G/L, tax return and overhead schedule.

Appendix B-11 Question H.4. Classification of Cost Items.

Your firm answered Travel and Subsistence is treated as a Direct Expense therefore, the cost should not be included in the overhead.

Please revise the ICQ to show how Travel and Subsistence costs are managed by the firm.