Auditor outlines FY25 audit plan, flags revenue recognition and management override as primary risks

Robert Anderson, a partner with Denman CPAs, told the Waukee City Council the firm will be on-site next week to conduct the city’s fiscal year 2025 audit and expects to present the final report to the council in the fall or early winter. The audit will produce an opinion on the city’s financial statements, opinions on supplemental information and a report on internal control observations. Anderson said the audit team will focus procedures on areas with heightened risk, including nonroutine transactions, the city’s relationship with CIWW, the gas utility course, and management’s estimates such as pension liabilities. "We do assess those major risks, and we do report those to you as governance," he said. He identified two specific, standard risks for this engagement: management override of controls and revenue recognition, and said Denman will design procedures to address those risks. Anderson reminded the council that auditors do not audit internal controls but will report deficiencies if observed. He explained materiality and sampling: "We're not testing every single transaction...we have to take into consideration materiality," he said, noting qualitative and quantitative factors used to set testing thresholds. The firm also noted GASB 101 (related to compensated absences) and other new accounting guidance the city is implementing. Council members were invited to raise concerns for inclusion in the audit plan; Anderson emphasized the firm wants to understand the council’s observations and said staff can contact Denman during the on-site period. Denman said it expects to be back later in the fall — possibly December — to present the completed audit report. No formal council action was taken at the meeting on the audit engagement; Denman presented its plan and solicited questions. The audit presentation occurred during the regular council meeting and was advisory in nature; any audit findings and management letters will be reported to the council after fieldwork and review.