AN IMPACT ANALYSIS OF AUDIT REPORTS
OF SELECTED FLORIDA PUBLIC
HERMAN ROY ANDRESS
A DISSERTATION PRESENTED TO TIE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA
The writer wishes to express sincere appreciation to
the many persons whose cooperation and assistance made
this research possible. He is especially grateful for the
skilled guidance given by Dr. James L. Wattenbarger, the
chairman of his advisory committee. The helpful contribu-
tions of the other committee members, Dr. Ralph B. Kim-
brough and Dr. Jordan B. Ray, are also deeply appreciated.
To the Florida public community college chief busi-
ness officers whose participation made this study a
reality, goes a special thank you.
Others who deserve thanks for their contributions are
Mr. Alan J. Robertson, Mr. Joseph E. Dougheny, Mr. Thomas
M. Baker, and Mr. Leo T. Hury.
No words of thanks can display the gratitude the
writer feels for his wife, Cecilia, for her encouragement,
assistance, and devoted love.
TABLE OF CONTENTS
ACKNOWLEDGMENTS ...... . . . . . ii
LIST OF TABLES. . . . . . . . . .. v
LIST OF FIGURES . . . . . . . . . vi
ABSTRACT. . . . . . . . . ... . . vii
I INTRODUCTION. . . . ... . . . 1
Statement of the Problem . . . . 4
Delimitations. . . . . . . . 5
Limitations. . . . . . . . 6
Definitions of Terms . . . . . 6
Procedures . . . . . . .. 10
Selection of Participating Colleges . 11
Obtaining Audit Reports . . . .. 11
On Campus Interviews. . . . .. 12
Treatment of Data Gathered. . . .. 13
IT REVIEW OF THE RELATED LITERATURE. . . .. 15
The Audit. .. . . . . . . . 16
The Audit Report . . . . . . 19
The Business Officer . . . . . 20
Financial Accounting . . . . .. 25
Accountability . . . . . . .. 27
The Nature of Change and the External
Change Agent . . . . . . .. 29
Conflict as a Result of Change . . .. 31
Generalizations. . . . . . .. 33
III THE AUDITING PROCESS AS IT RELATES TO GENERAL
SYSTEMS THEORY. . . . . . . .. 35
TABLE OF CONTENTS (Continued)
IV DATA OBTAINED FROM THE EXAMINATION OF AUDIT
REPORTS. . . . . . . . . ... .. 45
Audit Report Classification of Adverse
Comments. . . . . . . . . . 46
Standard Audit Comment Classification of
Adverse Comments. . . . . . . .. 49
Classification of Responses to the Adverse
Comments. . . . . . . . . .. 52
Summary . . . . . . . . ... 57
V INTERVIEW RESPONSES OF THE COMMUNITY COLLEGE
BUSINESS OFFICERS. . . . . . . .. 60
Changes in Accounting Procedures. . . .. 61
Changes in Business Office Organization
Structure . . . . . . . . .. 63
Changes in Business Office Job Descriptions 65
Increased Business Office Efficiency. ... . 67
Audit Reports as a Tool of Management . 70
Audit Reports as Effective External Change
Agents for Business Office Accounting
Procedures. . . . . . . . .. 72
Future Audits . . . . . . .... 75
Relationship Between Adverse Comments and the
Change Process. . . . . . . .. 78
Summary . . . . . . . . .. 81
VI CONCLUSIONS, IMPLICATIONS, AND SUGGESTIONS FOR
FURTHER STUDY. . . . . . . . .. 84
Conclusions . . . . . . ... 84
Implications. . . . . . . . .. 89
Suggestions for Further Study . . . .. 92
A INTERVIEW GUIDE USED FOR ON CAMPUS INTERVIEWS
WITH CHIEF BUSINESS OFFICERS . . . . .. 94
B ADVERSE COMMENTS FROM THE NINE AUDIT REPORTS .. 96
REFERENCES . . . . . . . . ... . . 180
BIOGRAPHICAL SKETCH. . . . . . . . . ... 186
LIST OF TABLES
4.1 Distribution of Adverse Comments According to
Audit Report Classification. . . . . ... 47
4.2 Distribution of Adverse Comments According to
Standardized Audit Comments. . . . . ... 50
4.3 Distribution of Responses to the Adverse
Comments . . . . . . . . ... . 53
5.1 Responses of Chief Business Officers Concerning
Changes in Accounting Procedures as a Result of
1973-1974 Audit Reports. . . ... . . 62
5.2 Responses of Chief Business Officers Concerning
Changes in Business Office Organization Struc-
ture as a Result of 1973-1974 Audit Reports. .. 64
5.3 Responses of Chief Business Officers Concerning
Changes in Business Office Job Descriptions as
a Result of 1973-1974 Audit Reports. . . .. 66
5.4 Responses of Chief Business Officers Concerning
More Efficient Functioning of Their Business
Offices as a Result of 1973-1974 Audit Reports 68
5.5 Responses of Chief Business Officers Concerning
Top-Level Administrators' Use of Audit Reports as
a Tool of Management . . . . . ... 71
5.6 Responses of Chief Business Officers Concerning
the Effectiveness of Audit Reports as External
Change Agents. . . . . . . .. 73
5.7 Distribution of Adverse Comments and Their
Tendency to Influence Change . . . . .. 79
LIST OF FIGURES
3.1 Basic Control Cycle . . . . . .. 37
3.2 Auditing Process. . . . . . . ... 37
3.3 Feedback Loop in a System . . . . .. 42
3.4 Feedback Loop in a Business Office. ... . 42
Abstract of Dissertation Presented to the Graduate Council
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
AN IMPACT ANALYSIS OF AUDIT REPORTS OF SELECTED
FLORIDA PUBLIC COMMUNITY COLLEGES
Herman Roy Andress
Chairman: James L. Wattenbarger
Major Department: Educational Administration & Supervision
The purpose of this study was to determine whether the
1973-1974 audits of the Auditor General of selected Florida
public community college business offices were effective as
(1) external change agents for business office operations
and (2) tools of management used to minimize conflict re-
sulting from change.
One institu ion was selected at random from each of the
nine audit divisions for public community colleges, and
through the cooperation of the Bureau of Fiscal Administra-
tion, Division of Community Colleges, Tallahassee, Florida,
and the Auditor General's office, Gainesville, Florida,
copies of the 1973-1974 audit reports were obtained. An
examination of the adverse comments found in the audit re-
ports was then made, and these comments were grouped accord-
ing to subheadings found in each of the audit reports.
The intent of the examination of audit report comments
was to measure the effectiveness of audit reports as an ex-
ternal change agent for business office accounting procedures;
to determine the nature of the adverse findings; and to iden-
tify the area of responsibility within the business office
in which the discrepancies occurred.
Audit reports show each adverse comment classified ac-
cording to one of twelve standard subheadings. Those com-
ments classified under the subheading of Expenditures
comprised 21% of the total discrepancies, followed by those
under Auxiliary Fund with 16%. No adverse findings were
made in the Debt Service Fund classification, and those
classified under Budgets account for only 1% of the total.
Other concepts of interest were disclosed by additional
analysis. One college's audit report revealed that 38% of
its discrepancies were classified as Expenditures, while
only 6% of another college's discrepancies were found in
this classification. One college was responsible for 20%
of the total adverse comments, and another college was re-
sponsible for only 4% of the total.
The adverse findings were also classified according to
standard audit comments, as found in The Audit Program, a
handbook used by the auditors. Adverse comments classified
as violations of Procedures, Policies, and Internal Control
comprised 55% of the total. Violations of Rules of the
State Board of Education are second at 15% of the total,
while violations of American Council on Education recommenda-
tions and violations of College and University Business Ad-
ministration recommendations each contributed only 1% to
A classification of responses to the adverse comments
by the nine college presidents revealed that 57% of the
total adverse comments were responsible for changes in busi-
ness office operations. Another 12% of the comments re-
sulted in partial changes, making a total of 69% of all
adverse comments which brought about changes or partial
After examination of the audit reports, in-depth
interviews were conducted with the chief business officers
of the nine selected colleges. An interview guide was
developed to assist in measuring the extent of changes
resulting from the audit reports in the following areas:
business office accounting procedures; organization and
structure of the business office; job descriptions; and
business office efficiency. In addition, the chief business
officers were asked to indicate whether the presidents and
other top-level administrators of their colleges responded
to the audit reports by the use of audit reports as tools
The findings showed that five of the nine business
officers were of the opinion that audit reports were a
stimulus for change in business office accounting procedures.
Only one of the nine business offices had a change in its
organization structure and only two had job description
changes. Three of the nine reported increased efficiency
in business office operations, and three replied that their
top-level administrators view audit reports as effective
tools of management.
The intent of this study was to determine whether the
1973-1974 audits of the Auditor General of selected Florida
public community college business offices were effective as
(1) external change agents for business office accounting
procedures and (2) tools of management used to minimize con-
flict resulting from change. In accomplishing this task, it
is hoped that the results of the research will serve as a
common denominator not only for those now in positions of
chief business officers, but also for future business offi-
cers and their staffs. A study that brings together common
audit discrepancies and subsequent changes in accounting
procedures may provide some insight into ways in which all
Florida public community colleges might improve their
future audit reports.
Legislative mandate requires that Florida's 28 public
community colleges submit to a biennial compliance audit
conducted by the Office of the Auditor General of the
State of Florida. If one views the network of Florida's
community colleges as a system, then the audit can be con-
sidered a process of control aimed at assuring that the
business activities of the individual colleges--or subsys-
tems--are being administered as prescribed by the Division
of Community Colleges--a suprasystem.
Where the performance of the individual college is in
accordance with the Accounting Manual for Florida's Public
Junior Colleges, 1968, it can be said that this subsystem
is in equilibrium with the suprasystem. Where it is not,
there is a disequilibrium and conflict.
If there is conflict, there are pressures for change.
Gibson, Ivancevich, and Donnelly (1973) classified these
forces into two groups, external and internal. Bennis
(1966) has stated that significant change depends on the
impetus generated by an external agent. It is argued that
"only a skilled outsider-consultant can provide the per-
spective, detachment, and energy so necessary to affect a
true alteration of existing patterns" (pp. 114-115).
Was the 1973-1974 audit such a change agent? Did it
serve to resolve conflict and establish equilibrium among
selected subsystems of the Division of Community Colleges?
If not, what prevented the changes recommended by the vari-
ous audit reports? Answers to these questions can be found
in later chapters of this study.
A community college business office is unique in that
it differs significantly from both a public school business
office and a university business office. Being a political
subdivision of the State of Florida, the community college
differs in basic philosophy and role and scope from those
of other state supported educational institutions. Business
offices in the private sector are only remotely comparable
to the community college business office.
The researcher's interest in this study is a result of
having been employed for a period of eight months as an
accountant in a Florida public community college business
office. Additionally, to the best of the researcher's
knowledge, this is the first attempt to research Florida
public community college audit reports, and thus contributes
to the knowledge and literature on the subject.
The research in this study involves an analysis of
selected adverse comments listed in the audit reports of
the participating colleges. Responses to these comments
by the presidents of the colleges clearly indicate what
changes in business office accounting procedures, if any,
were made subsequent to the audits. In addition, personal
interviews were made w th each of the chief business offi-
cers in order to acquire further insight into the effective-
ness of the audit as an external change agent. The personal
interview also helped significantly in determining how the
audit report is used as a tool of management to (1) effect
change, (2) reduce conflict, (3) eliminate disequilibrium,
and (4) improve future audit reports.
Statement of the Problem
The focus of this investigation was to identify changes
which have taken place in selected Florida public community
college business offices subsequent to the 1973-1974 audit
examinations conducted by the Office of the Auditor General.
Specifically, answers to the following questions were sought:
1. What changes in business office accounting pro-
cedures were a direct result of the 1973-1974
2. What changes in business office organization
structures were a direct result of the 1973-
1974 audit reports?
3. What changes in business office job descriptions
were a direct result of the 1973-1974 audit reports?
4. Do these business offices function in a more effi-
cient manner as a result of the 1973-1974 audit
5. Do top-level administrators at these colleges view
audit reports as effective tools of management?
6. Do the chief business officers at these colleges
view audit reports as effective external change
agents for business office accounting procedures?
This study was confined as follows:
(a) One public community college was selected at
random from each of the nine audit divisions
within the State of Florida.
(b) Information was gathered from a review of the
nine 1973-1974 audit reports on file in the
offices of the Division of Community Colleges,
Department of Education, Tallahassee.
(c) Information was gathered from personal interviews
with the nine chief business officers by use of
a structured interview guide.
This study, being ex post facto in design, is limited
because a specific cause and effect relationship cannot be
shown. It is also limited in the number of colleges and in-
dividuals participating and, thus, generalization beyond
these participants is speculative.
Because nine different audit divisions are involved,
nine different audit teams have prepared the audit reports.
This may in fact be a weakness in that uniformity is not
insured, but it could also be considered a strength in that
breadth of scope of perception is assured.
Definitions of Terms
Accounting procedures. Those designed to fulfill the
requirements of generally accepted governmental accounting
principles and practices and good internal control and in
keeping with generally accepted accounting forms, accounts,
records, methods, and practices relating to colleges and
Audit. The examination of documents, records, reports,
systems of internal control, accounting procedures, and
other information to determine the propriety, legality, and
arithematical accuracy of transactions to ascertain whether
all transactions have been recorded and to determine whether
transactions are accurately reflected in the accounts and
in the financial statements drawn from them in accordance
with generally accepted accounting principles.
Balance sheet. A statement showing the financial posi-
tion of an institution at a given time, disclosing assets,
liabilities, and fund balances. In college accounting the
balance sheet should set forth the assets, liabilities,
and fund balances of each fund group in balanced sections.
Budget. A statement of proposed expenditures for a
fixed period or for a specific project, or program, and the
proposed means of financing the expenditures. When approved
by the proper authorities, budgets are authorizations to
incur the expenditures and to collect and apply the revenues
as set forth therein.
Change. A difference in the administration of finan-
cial operations of the college as prescribed by the Rules
of the State Board of Education and the Accounting Manual
for Florida's Public Junior Colleges, 1968.
Chief business officer. The college official who is
directly responsible for the financial operations, budget,
physical plant, nonacademic personnel, purchasing,
auxiliary enterprises, and other functions as determined by
his job description.
Compliance audit. An audit with findings and recommen-
dations limited to comments on the compliance with applicable
laws and regulations, verification of assets, errors in
accounting, and whether major policies and procedures are
controlled by the Board of Trustees.
Conflict. Sharp disagreement or opposition, as of the
vested interests and ideas of chief business officers and
Current funds. Funds expendable for current operating
purposes, either unrestricted or restricted. This term is
not synonymous with current assets as used in commercial
Disbursements. Payments in cash. In institutional
accounting it refers primarily to deductions from the
balances of the funds and all fund groups except the
current fund group, where the term expenditures is used.
Educational audit. An institutional objectives ap-
proach to management by objectives by means of statistical
reporting of measurable output and cost figures for
courses and programs.
Encumbrances. Obligations incurred in the form of
orders, contracts, and similar items that will become
payable when goods are delivered or services rendered.
Feedback. Information concerning the outputs or the
process of the system, which could lead to changes in the
process and/or future outputs.
Independent audit. An audit performed by an independ-
ent auditor, in contrast to an audit performed by an internal
auditor on the institution's staff.
Operational audit. A systematic review of and evalu-
ation of an organization, or subunit thereof, made with the
purpose of determining whether the organization is operating
efficiently. It is, in effect, an organized research for
efficiency-related problems within the organization, from
the viewpoint and perspectives of management.
Plant. The physical property owned by an institution
and used for institutional purposes, i.e., land, buildings,
improvements other than buildings, and equipment.
Political subdivision. A separate agency or unit of
local government created or established by law.
Public community college. An institution supported by
public funds and governed by a publicly appointed board,
which offers courses and/or programs limited to the first
two (2) years of postsecondary education in at least two
of the following areas: transfer, occupational-technical,
and community service.
Restricted current funds. Funds expendable for
operating purposes but restricted by an outside agency
or person as to use.
Standard. A desired level of performance.
State agency. A separate agency or unit of state
government created or established by law.
System. A complex of elements in mutual interaction,
e.g., the Florida system of public community colleges.
Unexpended plant funds. Funds specified by external
sources or designated by governing boards for the acqui-
sition or construction of physical properties to be used
for institutional purposes.
The procedures section is divided into subsections
describing (1) the selection of the participating Florida
public community colleges, (2) obtaining and examining
audit reports, (3) on campus interviews with chief business
officers, and (4) treatment of data gathered from
examinations of audit reports and from interviews with
chief business officers.
Selection of Participating Colleges
One institution was selected at random from each of
the nine audit divisions for public community colleges
within the State of Florida, and a letter was mailed to
each of their chief business officers asking for coopera-
tion in making this study possible. If for any reason a
college was unable to participate, another within the same
audit division was selected at random.
Obtaining Audit Reports
Audit reports for all Florida public community colleges
are on file at the Department of Education, State of Florida,
Tallahassee. The researcher communicated with Thomas M.
Baker, Chief, Bureau of Fiscal Administration, and Kenneth C.
Jarrett, Consultant, Fiscal Affairs, and both agreed to
assist in any way possible. During examination of the audit
reports of the nine participating colleges, adverse comments
by the auditors were noted, plus other unusual and/or sig-
nificant comments which, in the researcher's opinion, could
enhance the value of the study. Adverse comments are
grouped under each of the following headings:
Educational and General Funds
Scholarship and Endowment Fund
Unexpended Plant Fund
Debt Service Fund
Invested in Plant Fund
On Campus Interviews
After examining the audit reports the researcher
visited the campuses of each of the nine colleges for an
in-depth interview with each of the nine chief business
officers. An interview guide (Appendix A) was developed
specifically to obtain information in the following cate-
1. Changes in business office accounting procedures
which have taken place subsequent to the 1973-
1974 audit reports.
2. Changes in accounting procedures, which in the
opinion of each of the chief business officers,
were a direct result of the 1973-74 audit reports.
3. The perceived influence of audit reports as:
(a) External change agents.
(b) Tools of management.
4. Ways in which future audit reports can better
serve Florida's public community colleges.
Treatment of Data Gathered
The analysis of data gathered from an examination of
the nine audit reports has been interpreted in such a way
as to arrive at the most frequently identified adverse
comments under each major heading. Responses from inter-
views with the nine chief business officers have been
segregated according to the manner in which each chief
business officer reacted to the list of preliminary and
tentative adverse audit findings submitted to the presi-
dents of the nine participating colleges by the Auditor
General subsequent to the 1973-1974 audit. Further analy-
sis of data includes changes in business office accounting
procedures subsequent to the audit reports and the relation-
ship, if any, of the changes with the reports. The
significance of the audit report as an external change
agent and as a tool of management has been evaluated at
this point, followed by suggestions as to how future audits
can better serve the community college system.
Neither the names of the participating colleges nor
their chief business officers will be revealed in this
REVIEW OF THE RELATED LITERATURE
A review of the literature contained herein will con-
centrate on audits of college and university business
offices, but will not be limited to the audit itself. In
order to develop a thorough understanding of the audit,
further emphasis must be placed on the total function of
the business office and its relationship to the audit as
an external change agent and as a tool of management. The
topical outline is organized as follows:
1. The Audit
2. The Audit Report
3. The Chief Business Officer
4. Financial Accounting
6. The Nature of Change and the External Change Agent
7. Conflict as a Result of External Change
In determining the relationship of accounting pro-
cedures and external audits, a workable definition of the
audit must be presented. McMickle and Elrod (1974) wrote
Auditing is an analytical processs consisting of
preparation, conduct (examination and evaluation),
reporting (communication), and settlement. The
basic elements of this process are: an independent,
competent, and professional auditor who executes
the process upon an auditee for an audit recipient.
The scope or area of concern can involve matters
of the following nature: financial (accounting
error, fraud, financial controls, fairness of
financial statements, etc.), and/or compliance
(faithful adherence to administrative and legal
requirements, policies, regulations, etc.), and/or
performance (economy, efficiency, and/or effective-
ness of operational controls, management information
systems, programs, etc.). The objective or purpose
of auditing can be some combination of accountabil-
ity and management control. (p. 34)
Most definitions of auditing attempt to provide an-
swers to four frequently asked questions: Why, What, Who,
and How? Every auditor, auditee, and audit recipient
should know the answers to these questions.
In describing the audit, Russell (1967) wrote
The primary purpose of the audit is to provide as-
surance to those responsible for the ultimate control
of the institution that the finances have been han-
dled exactly as reflected in the accounts and reports.
To this end not only should the audit test the ac-
curacy of the bookkeeping itself but it should deter-
mine whether all income received was actually entered
in the accounts, whether all the expenditures recorded
were actually made after being duly authorized,
whether the liabilities are completely and correctly
indicated. (pp. 108-109)
Auditing, as it is known today, is not the same as it
was 500 years ago, or even 20 years ago. The evolution of
auditing has accelerated rapidly during the last century.
Prior to 1900 auditing was concerned principally with de-
tection of fraud, but in the 20th century the direction of
auditing has turned toward a new goal of determining whether
financial statements give a fair picture of financial posi-
tion, operating results, and changes in financial position
(Meigs, Larsen, & Meigs, 1973).
In discussing the evolution of the audit, Brown (1905)
The origin of the audit goes back as far as 2,000
B.C., when the Egyptians employed a type of checking
process. Money was unknown at that time and a barter
economy existed. This system necessitated a large
number of government storehouses for the keeping of
the royal treasury. Shipments in and out of the
storehouses were carefully controlled. For example,
when grain was to be carried to a storehouse, each
sack was filled in the sight of an overseer; and noted
and recorded by a scribe. When the grain was delivered
to the storehouse, a scribe stationed there recorded
the amount received. Thus, the activities of one man
were checked--and, in a sense audited--by another.
An audit can be used in any manner the auditee wishes.
Furthermore, an audit need include only those parts of the
accounting system that management wishes to have in-
spected. For example, only revenue and expenditure items
can be checked and verified. In another situation only
liabilities could be tested. A college business officer
may want to make the audit part of his closing procedure
at the end of the fiscal period. Many would question
whether the audit should serve as a bookkeeping function.
Jordan (1969), addressing himself to the topic of audits
wrote, "When the audit is conducted by representatives
of a state agency, the nature of the audit will be
determined by that agency" (p. 157). In summarizing
audits, Russell (1967) wrote
Whatever else the audit does, it must present a
truthful picture of the financial situation of the
institution. An audit without this basic quality
of truthfulness is worse than useless; it is
positively dangerous. Unfortunately, even a
certified public accountant has been known to
be induced to present an untruthful audit. Any
officer of the college who stoops to bring pres-
sure in this direction, even if he believes that
for the moment such an action is in the best in-
terests of the institution, is guilty of a serious
breach of the faith that has been reposed in him
by the constituency. Such an action is almost
certain not to prove of ultimate benefit to the
institution, for in the long run nothing is
gained by attempting to concel the true financial
situation of the institution from those responsible
for its control and maintenance. (p. 113)
The Audit Report
Upon completion of the audit examination an auditor
writes a report stating the results of the examination.
The audit report has been described by Silvoso and Bauer
(1965) as follows:
Normally all of the audit procedures undertaken in a
particular engagement are designed to enable an audi-
tor to express his opinion concerning the financial
statements under examination. Thus, the report of
the auditor is the focal point of audit procedures.
It is the major public evidence of the services per-
formed by the public accounting profession and is
relied upon whenever business decisions are based on
financial statements. Therefore, it is evident that
the report must be clear, concise, and reliable. Im-
portant qualifying or explanatory material must be
stated in a manner that creates the clearest Dossible
understanding in regard to the financial status and
results of operations of the entity under examination.
Any omission or deviation from generally accepted
auditing standards must be indicated in the report.
The form of the audit report issued by the Office of
the Auditor General upon examination of accounts and records
in a Florida public community college business office will
not be exactly the same as the audit report submitted to
a commercial enterprise by an independent auditor. How-
ever, the essence of the audit report, the expression as to
whether the statements fairly present what they purport
to present, should be the same regardless of whether the
audit deals with a public or a private institution.
Brasseaux and Miles (1972), in discussing the audit
The auditor's report is the culmination of the audit.
It is the most critical part of the audit process for
it is the visible representation on which outsiders
will rely. Thus, the report must convey clearly the
scope of the work done and the responsibility assumed
by the auditor regarding the fairness of financial
statements. Each audit involves gathering evidence
about the client's financial statements through what-
ever means the auditor deems appropriate or necessary.
Once the evidence has been assembled, the auditor
must sift and weigh that evidence with professional
care. He must bring to bear his professional judge-
ment and experience to draw the appropriate conclu-
sions from the evidence he has accumulated. This
complex decision-making process carries a very high
degree of responsibility. (p. 3)
The auditor then communicates with the auditee and
the audit recipient by means of the audit report. In the
case of the Florida public community college, the auditor
also communicates with taxpayers and various elected and
appointed state officials.
The Business Officer
The person in whose hands can be found primary respon-
sibility for overall financial operation of the college is
the chief business officer. Although the president is
charged with total responsibility for the college, he
(president) will normally know little of such a technique
as accounting, and will not interfere with an expert in
The 1969-1970 fiscal year was the first that Florida's
public community colleges were audited as an entity separate
from the public schools. This resulted from the 1968 law
which established separate community college districts.
The Florida public community college business office has
been in existence only briefly when compared to the public
schools and universities. The Florida public community
college business officer has had a relatively short period
of time in which to learn the peculiarities of his duties
The actual functions normally assigned to a Florida
public community college chief business officer may vary
through the state due to location and enrollment size,
but chief business officers would be expected to carry out
most of the following duties:
1. Financial accounting
2. Assistance in the preparation of the annual budget
3. Internal auditing
4. Property control
5. Preparation of financial reports
6. Expenditure of college funds
7. Collection of revenues
8. Financial relations with students
9. Management of investments
11. Employment of career service personnel
12. Management of auxiliary services
13. Supervision of the physical plant
The list of essential and desirable characteristics of
a chief business officer could be quite extensive. Accord-
ing to the American Council on Education (1973) the prin-
cipal qualifications needed by a college business officer
are as follows:
In addition to special training, a position of re-
sponsibility in college and university business
management calls for certain personal qualities.
Among these, honesty and integrity are, of course,
first. In close succession follow the qualities of
tact, ability to cooperate, congeniality, and busi-
ness judgement. There must then be added the essen-
tial qualities of untiring industry, initiative, and
resourcefulness. An institutional business officer
has contacts with a wide variety of persons. He is
in contact with the members of the academic organiza-
tion, with boards of trustees made up chiefly of busi-
ness and professional men, with business concerns,
students, and alumni. If he is in a public institu-
tion he must have contact with members of the state
legislature and with state and federal officers.
A wide variety of problems and personalities present
themselves in rapid succession. (p. 10)
The rapid growth of Florida public community col-
leges has created a need for specialists within the
business office. The management and administration of
the various categories of responsibility make proper
training of the chief business officer more important
than ever before. College and University Business Ad-
ministration (1968) stated
The chief business officer cannot be a specialist
in all the operations for which he is responsible.
He must be aided by staff members with profes-
sional training and experience in the various
divisions into which the business and financial
operations of the institution are organized.
The main divisions of such operations are charac-
teristic of all educational institutions regard-
less of size and the complexity of their objectives,
programs, and organization. (p. 12)
The development of advanced office systems technology
has allowed the business office to assume many new roles.
Elmore (1970) wrote
Few can argue with the fact that the business office
today is the chief source of fiscal advice not on]
to the president, but also to the go'.: :i
We have graduated from bookkeepers to mi; .:.:; with,
in most cases, responsibilities and opportunities
for service broader in scope than our brothers in
business. Centralized purchasing and personnel
departments are coping with a volume of state and
federal regulations that stagger the imagination.
Sophisticated boards and legislatures are demanding
modern systems and business programs, including
planned program budgeting and planning models.
The role of our institutions in educating vast
numbers of students, in community affairs, and in
research, has forced the business office to employ
the most up-to-date advances in the areas of computers
and business equipment. Our physical plant, with its
laboratories, air conditioning, and problems connected
with vehicle parking, traffic control and power dis-
tribution requires the highest managerial and en-
gineering skills. Finally, and of greatest importance,
the business office has the responsibility for creating
an economic climate and a service organization that
will assist the institution in the fulfillment of its
academic goals. (pp. 3-4)
Scheps and Davidson (1971) concurred in stating
The internal organization of the business office has
a direct bearing on the adequacy of the accounting
system. An accounting system however scientific does
not operate itself. Accounting personnel however
competent and well trained cannot operate at peak
efficiency without carefully planned internal organi-
zation which clearly fixes responsibilities, eliminates
duplications, and avoids vacuums in the operations of
the business office. (p. 25)
As Florida public community college business offices
grow in size and complexity, so does the importance of the
biennial audit by the Office of the Auditor General as a
means of insuring adherence to the Accounting Manual for
Florida's Public Junior Colleges.
The preparation of the annual financial report is the
responsibility of the chief business officer. The report
ordinarily includes the balance sheet, statement of changes
in fund balances by fund groups, and the statement of cur-
rent funds revenues, expenditures, and transfers. The
report may also include other schedules which supplement
the three primary statements.
In defining financial reports, College and University
Business Administration (1968) states
The financial report of a college or university is
a summary of financial information covering the
operation of the institution for a period of time
and showing its financial position at the end of
that period. Colleges and universities are the
recipients of a variety of kinds of revenues: those
that may be expended for general institutional opera-
tions; gifts, appropriations, endowment funds income,
and other revenues that must be expended only for
restricted current purposes; and funds that must be
kept intact and invested, with only the income avail-
able for expenditures. Educational institutions
function as owners, operators, and trustees. Their
financial reports, therefore, must deal not only
with receipts and disbursements of other fund groups
and with the principal and balances of funds. (p. 16)
There can be no questioning the fact that financial
accounting as it is practiced in colleges and universities
is a highly specialized area of endeavor. Chambers (1968),
in discussing college and university accounting, wrote
Accounting is an exacting profession. Mastery of its
technicalities requires years of study and practice.
College and university accounting is a specialized
branch, or might perhaps better be called a separate
profession. This is because the main body of account-
ing knowledge and techniques has been developed for
use in business wherein the dollar profits or losses
usually quickly determine the fate of the enterprise;
whereas in higher education nearly all the institu-
tions are either public or private corporations, in
whose operation monetary gains to private individuals
are interdicted. (p. 49)
The chief business officer must see to it that the
accounting system of the institution is adequate. Watten-
barger (1972) wrote, "the development of soundly based
record keeping systems is essential. When the chief fiscal
officer learns to carry out this responsibility with a
high degree of skill, he will make his most important con-
tribution" (p. 284). In carrying out this responsibility
the requisites of the accounting system must be considered.
In this regard, Russell (1967) stated, "Three general charac-
teristics are requisite to a satisfactory accounting system:
(1) the system must safeguard the funds of the institution;
(2) it must yield the information that is necessary for
administrative control; (3) it must be as simple as pos-
sible" (p. 50).
A satisfactory accounting system is necessary to achieve
many desirable goals. Miller, Madden, and Kincheloe (1972)
Accurate accounts serve several purposes: (1) They
represent a prudent control upon public funds. Such
accounts, accurately audited periodically, give as-
surance that public servants handling the funds have
done so honestly in accordance with the will of the
people and the laws of the state. (2) They also
serve as a protection to the custodian of funds, for
he has objective proof of his faithful performance
whenever he may be challenged. (3) Such accounts
provide the basis for reporting to the public on the
condition of the schools and their needs. They pro-
vide the basis for filling out reports to the state
or to federal agencies entitled to such information.
(4) Accurate accounts provide the basis for analyzing
the business practice with an eye to making improve-
ments in it. (p. 319)
The audit and the audit report are parts of the total
system of accountability. In attempting to arrive at a
workable definition of accountability, Kohler (1970) stated
The obligation of evidencing good management, con-
trol, or other performance imposed by law, agreement,
or regulation, as on corporate executives, trustees,
public officials, and other persons controlling the
financial policy of an organization or the deposit,
investment, or disposition of funds. In the interest
of maintaining good human relations and earning pub-
lic confidence, many persons in positions of respon-
sibility voluntarily explain their conduct of affairs
to others interested and to the public generally,
this practice often acquiring the force of custom.
Public confidence in public education is a matter of
increasing importance to educators. Administrators should
welcome the opportunity to undergo an external audit. The
audit should not be considered a weapon to be used by per-
sons or agencies who seek to damage an institution of higher
education. The audit serves a useful purpose; it is a tool
of management which can be used for the good of the insti-
tution. Audits and accountability are characteristic of
the society in which we live. Roueche, Baker, and Brownell
(1971) stated, "accountability is nothing more than a com-
monly accepted ethic that we expect from other professions
and enforce by regulations in many segments of our society.
Education's acquired right to control the processes of our
schools rests upon a willingness to meet the needs of public
clients" (p. 6).
If educators are willing to look upon accountability
as an opportunity to restore public confidence in education,
the true purpose of audits can thus be realized. Roueche
et al. (1971) further stated "accountability implies that
two-year colleges must be accountable externally to the
community" (p. 8). Allen (1972) observed "the people have
a right to be assured that . increasingly large invest-
ments in public education . will produce results" (pp.
3-4). Lessinger (1972) stated "the American education sys-
tem today is experiencing the most sustained, diverse,
widespread, and persistent challenge ever to confront it.
Virtually everyone agrees that something has gone wrong,
that corrective action is needed" (p. 4).
The corrective action to which Lessinger alludes can
be benefited greatly by a proper acceptance of external
audits and the concept of accountability.
The Nature of Change and the
External Change Agent
Change is essential if one is to plan for the future.
Yet, one cannot completely predict the future of an organ-
ization by knowing its present state because [most] organ-
izations are open systems and therefore are continually
influenced by--and are in turn influencing--their environ-
ment (Bertalanffy, 1962).
Pressures for change affect people and the organiza-
tions in which they work. These pressures can create
problems, which,unless resolved, can bring about chaos and
confusion--because change requires adjustments to be made
if needs are to be met (Morphet et al., 1959).
Major obstacles to change include the habits, atti-
tudes, precedents, and belief systems of people, and as Gard-
ner (1963) wrote, "they are among the most powerful forces
producing rigidity [in organizations] and diminishing
capacity for change . these are the diseases of which
organizations and people die" (p. 53).
Because of resistance to change, the process of planned
change often involves a change agent, brought in to help a
client system, which refers to the target of change. The
change agent, in collaboration with the client system,
attempts to apply valid knowledge to the client's problems
Often the client-system holds well-established views
of itself, which are hard to change. Yet they must be
changed if any lasting improvement is to occur. The change
agent must assess the client's readiness to enter into a
helping relationship, and he must determine whether or
not the client possesses sufficient motivation and capacity
to hold up its end of the partnership. The change agent's
ideas about how to help with change are intimately bound up
with his diagnosis of why the client system got into dif-
ficulty in the first place (Lippitt, 1958).
Conflict as a Result of Change
The audit, as an external change agent, may create
The very fact of change creates two types of prob-
lem: (1) Less can be left to routine; careful
planning, deliberate orders, and elaborate communi-
cations are essential. Since personal experience
and tradition are less valued, there is a corre-
spondingly greater need for rules and regulations.
(2) People normally resist change, particularly
when it is imposed on them. Consequently, the
problems of motivating people to work together
have grown more complex. (Sayles & Strauss, 1966)
Boulding (1962), in developing a general theory of
conflict, observed that conflict is an activity that is
found almost everywhere:
Economics studies conflicts among economic organiza-
tions; political science studies conflict among states
and among subdivisions and departments within larger
organizations; sociology studies conflict within and
between families, racial and religious groups, and
conflicts within and between groups; anthropology
studies conflict of cultures; psychology studies
conflict within the individual; history is largely
the record of conflict; and conflict is an important
part of the specialized study of industrial relations,
international relations or any other relations. (p. 1)
Butler (1969) related control systems to conflict when
The conflict of an individual with an organization
frequently stems from the various control devices
which hierarchical superiors employ to impose their
will and image on subordinates. An important example
of these control mechanisms is the budget, the
planned schedule of disbursements for various purposes
within a given time. If hierarchical superiors dis-
approve of subordinate activities, a threat to cut
off resources is an effective method of control. A
closely related method of control is the right to
hire and fire. Another important part of a control
system is the audit which supplies information about
the organization through an outside agency rather
than through the hierarchy or its own stuff. (p. 296)
If one is willing to accept the position that conflict
as a result of resistance to change is inevitable, then an
objective should be to seek ways to resolve this conflict.
According to Gorton, compromise is the key to conflict
resolution. When two or more parties are in dispute,
one or more of them must be willing to compromise their
differences in order to resolve the conflict successfully.
As long as no one is willing to modify his position, then
conflict cannot be resolved (1972). Bennis suggested
that adaptability may be the key to resolving conflict.
If change has now become a permanent and accelerating
factor in American life, then adaptability to change be-
comes increasingly the most important single determinant
of survival (1966).
In regard to the end of conflict, Butler (1969)
Conflict itself does not end, for conflicts are
continually being recreated; however, each par-
ticular conflict can be viewed as having a life
cycle; it is conceived and born, it lives for a
time, and then dies, perhaps as a result of certain
processes which are probably inherent in its own
dynamic system. Resolution is only one way of
terminating conflicts, and it may not always be
clear which of the alternative methods for termi-
nating conflicts should be called "resolution."
Within organizations as well as between organizations,
the successful resolution of conflicts almost always
involves a combination of unilateral and organiza-
tional methods. Unless an organization has peace-
makers inside it, that is, persons who are capable
of unilateral conflict resolution, it is unlikely
to operate successfully. On the other hand, an
organization which lacks an adequate apparatus for
resolving conflicts will place too much of a burden
on the peacemakers, and may allow itself to be
destroyed by factional dispute. (p. 320)
Based on a review of the literature, the following
opinions appear to be valid:
1. The need for audits is as old as recordkeeping
2. Accounting for public institutions is signifi-
cantly different than accounting for private
3. There is a useful purpose served by audits of
Florida public community college business offices.
4. The rapid growth of Florida's public community
colleges has greatly increased the complexity
of the functions of the business office.
5. The chief business officer should be a well-
6. Audits and audit reports are a part of the concept
7. The process of planned change often involves a
8. The process of planned change, together with a
change agent, often creates conflict within an
THE AUDITING PROCESS AS IT RELATES
TO GENERAL SYSTEMS THEORY
The purpose of this chapter is to conceptualize the
auditing process as an agent for change and as a source of
conflict. This examination will follow along lines sug-
gested by the theories of general systems, change, and
conflict. The intention is to provide not only a struc-
tural design of the auditing process but also to allow for
a model against which the dynamics of the auditing process
and the data in this study may be interpreted.
The purpose of general systems theory is to create
a science using common elements found in all systems as a
starting point. It seeks to identify those general system
laws which will apply to any system of a certain type, ir-
respective of the particular properties of, or the elements
involved in, the system (Millman, 1962).
The auditing process is a form of control usually by
one system over another, such as control by the Division
of Community Colleges over each of the 28 public community.
colleges. Structurally this can be visualized as suggested
by Kast and Rosenzweig (1970) and as shown in Figure 3.1.
The auditing process is shown as a form of control because
the process is as Litterer (1965) stated "concerned not
only with events directly related to the accomplishment of
major purposes but also with maintaining the organization
in a condition in which it can function adequately to
achieve these major purposes" (p. 528).
Figure 3.1 is an illustration of a basic control cycle
showing how control can take place as a result of comparing
actual performance with predetermined standards of per-
An adaptation of this design to fit the demands of this
study is shown in Figure 3.2. A comparison of Figures 3.1
and 3.2 will show how the auditing process, through the
use of performance standards, serves as a form of control.
The cycle of events a business office experiences from
the start of the audit to the point where corrective action
is taken or resistance is offered can be compared to the
steps seen in the basic control cycle. There is a data-
gathering device generally referred to as a sensor, but
in this situation called the audit. Then follows an
Figure 3.1 Basic Control Cycle
Figure 3.2 Auditing Process
Auditor Accounting Regulations
-- I I_
examination phase, where actual performance is compared with
expected performance by a unit referred to as a discrimina-
tor (audit). After comparison has taken place, a decision
is made regarding whatever action is to be taken. The
decision maker is the college's chief business officer, who
must compare standards (accounting regulations) with the
gathered data on performance (audit report), and take cor-
rective action when and where it is needed.
It is at the decision making step that conflict is most
likely to appear. In the case of the community college
audit, there is little or no probability that a standard
will be adjusted immediately following the point in the
cycle at which performance data were compared with stand-
ards--the reason being the time factor involved in changing
an accounting regulation. Changes in public community
college accounting regulations are made as a result of a
joint effort involving an accounting committee comprised
of community college business officers and the Office of
Fiscal Affairs in the Division of Community Colleges.
Where there are standards of performance, one tends
to find a control system. The auditing process is a form of
postcontrol, which occurs when there is an effort to check
on whether events did come out as desired. For example,
the business officer checks to see whether fund balances
were maintained at desired levels as of the end of the
fiscal year. Postcontrol is checking after the fact and
does not permit corrective action to take place in regard
to past performance. However, it does allow the business
officer an opportunity to evaluate the system and adjust
for future audits.
The business officer may choose not to adjust, and
allow conflict to occur. Suggestions made by the auditors
at the time of the audit, and adverse comments appearing in
the audit report, may be ignored. There can be many rea-
sons for allowing conflict to take place. Among these
are (1) lack of funds to staff properly the business office,
(2) lack of confidence in the auditors, (3) lack of con-
fidence in the accounting regulations, and (4) tradition
and vested interests. Gardner (1963) wrote
As an organization matures it develops settled ways
of doing things and becomes more orderly, more effi-
cient, more systematic. But it also becomes less
flexible, less innovative, less willing to look
freshly at each day's experience. Its increasingly
fixed routines are congealed in an elaborate body of
written rules. In the final stage of organizational
senility there is a rule or precedent for everything.
Someone has said that the last act of a dying organi-
zation is to get out a new and enlarged edition of
the rule book. (pp. 44-45)
Chin (1969) concurred when he wrote
The presence of tensions, stresses or strains,
and conflict within the system often are reacted
to by people in the system, as if they were shame-
ful and must be done away with. Tension reduction,
relief of stress and strain, and conflict resolution
become the working goals of practitioners but some-
times at the price of overlooking the possibility
of increasing tensions and conflict in order to
facilitate creativity, innovation, and social
change. (p. 204)
Regardless of the intent of the business officer
either to accept or to resist change, systems must have
two mechanisms which are often in conflict. Kast and
Rosenzweig (1970) in their discussion of these two mechan-
First, in order to maintain an equilibrium, they
must have maintenance mechanisms which ensure that
the various subsystems are in balance and that the
total system is in accord with its environment.
The forces for maintenance are conservative and
attempt to prevent the system from changing so
rapidly that the various subsystems and total sys-
tem become out of balance. Second, adaptive
mechanisms are necessary in order to provide a
dynamic equilibrium, one which is changing over
time. Therefore, the system must have adaptive
mechanisms which allow it to respond to changing
internal and external requirements. (p. 117)
If the business office is large enough and if the college
budget allows, an internal auditor is on hand and charged
with the responsibility of the maintenance mechanism.
The chief business officer, usually with the cooperation
of the college president, and sometimes with indirect
assistance from the Board of Trustees, ensures that the
adaptive mechanism is functioning properly.
Inherent in systems theory is the process of feedback,
or as it is sometimes referred to, the concept of cyber-
netics. According to Banghart (1969), the essential and
distinguishing feature of cybernetics is that of feedback
derived from an internal communication network which pro-
vides constant monitoring of the internal activities and
the subsequent adjustments made to the system.
Feedback control operates in a system expected to make
errors, for the error is depended upon to bring about cor-
rection. The objective of such a system is to make the
error as small as possible within practical limits. The
relationship of the feedback loop may be illustrated by
Figure 3.3, as suggested by Johnson, Kast, and Rosenzweig
(1963). For the purposes of comparison, a feedback loop
for a community college business office is shown in Figure
3.4. The components of the feedback loop in Figure 3.3
may be defined as follows:
Input--the activity element
Processor--the operating system
INPUT PROCESSOR OUTPUT
Control Channel Measurement Channel
Figure 3.3 Feedback Loop in a System
BUSINESS OFFICE BUSINESS FINANCIAL STATEMENTS,
ACCOUNTING PROCEDURES OFFICE STAFF REPORTS, ETC.
Control Channel Measurement Channel
Figure 3.4 Feedback Loop in a Business Office
Output--the accomplishment of the system
Measurement Channel--the sensor element
Comparator and Control Channel--the control group
Objective or Standard--the controlled item.
Whether or not the system of Florida's public community
colleges represents a closed loop or an open loop could be
argued at length. This same thought applies to the commun-
ity college business office. According to Kimbrough (1970),
systems have the nature of neither an open loop nor a
closed loop. He stated, "Actually, there is no such thing
as an absolutely closed or an absolutely open living system.
An absolutely closed system would be dead. An absolutely
open system would become so loaded with conflicting inputs
that it would cease to survive as a system" (p. 64).
It should be pointed out that the system of community
colleges does not subscribe to the concept of constant
monitoring, unless one is to consider a series of biennial
audits a process of constant monitoring. In the subsystem,
however, one can find constant monitoring in the activities
carried on daily by the internal auditor of the college.
The business office can be perceived as an open, con-
trived system with boundaries, in interaction with its
environment. In general, the business office is composed
of subsystems of a lower order, and is also part of a
suprasystem. The business office is able to adapt to
changes in its environment brought about by audit criti-
cisms and to maintain a continued dynamic equilibrium.
The business office has both adaptive and maintenance
mechanisms which together provide for change and prevent
the business office from changing so rapidly that its sub-
systems become out of balance.
Through the process of feedback both the business
office and its subsystems receive information from their
As the subsystems in meeting their objectives assist
the business office in meeting its central objective, so
then does the business office assist its suprasystem in
meeting its central objective.
DATA OBTAINED FROM THE EXAMINATION OF AUDIT REPORTS
The purposes of this chapter are (1) to analyze
selected adverse comments shown on the nine audit reports
according to both audit report classification and stand-
arized audit comments, and (2) to analyze responses to these
comments made by the presidents of the participating col-
leges. A full text of these selected comments is shown
in Appendix B. Data from these audit report comments are
presented and discussed in the following sections.
These comments were subjected to content analysis to
classify them into the following: (1) audit report classi-
fication of adverse comments; (2) standard audit classifi-
cation of audit comments; and (3) classification of responses
to adverse audit comments. The intent of the examination of
audit report comments was to measure the effectiveness of
the audit reports as an external change agent for business
office accounting procedures; to determine the nature of
the adverse findings; and to identify the area of responsi-
bility within the business office in which the discrepancies
The nine colleges are identified in this chapter by
Greek letters. This same means of identification was used
in Chapter V, Interview Responses of the Chief Business
Officers. With this means of identification, one can relate
adverse comments and responses to the personal interviews.
Audit Report Classification of
The data presented in Table 4.1 show how the adverse
findings of each college are classified according to audit
report classification. The classification of Expenditures
has been identified most often as the area of responsibility
within the business offices in which discrepancies occurred.
As a percent of total adverse findings, those classified
under Expenditures comprise 21% of the total findings,
followed by those under Auxiliary Fund with 16%, with those
under Fiscal Management and those under Invested in Plant
Fund, each with 13%. No adverse findings appeared in the
Debt Service Fund classification, and those classified
under Budgets account for only 1% of the total. Considering
the high volume of disbursements a college must make for
such purposes as salaries and operating expenses, one can
readily comprehend how the greatest number of discrepancies
occurred in the Expenditures classification. Conversely,
Table 4.1 Distribution of Adverse Comments According to Audit Report Classification
14 F Fa -
(u .-i c; T3 u
BETA C. C. O0
GAMMA C. C. 0
DELTA C. C. 3
EPSILON C. C. 8
ZETA C. C. 2
IOTA C. C. 1
THETA C. C. 0
ETA C. C. 2
TOTALS 1 19
1 2 0 1
1 5 2 4 -
12 31 8 23
0 0 _
1 1 0 0 0 0 6
0 2 0 0 0 0 18
17 8 3 5 0 19 147
one would expect to find fewer discrepancies in those clas-
sifications representing less activity.
Additional analysis of the data disclosed other con-
cepts of interests. Alpha Community College's audit report
revealed that 38% of their discrepancies were classified as
Expenditures, while only 6% of Zeta Community College's dis-
crepancies were in the Expenditures classification. The
Invested in Plant Fund classification accounts for 63% of
Beta Community College's discrepancies; Fiscal Management
accounts for 32% of Epsilon's discrepancies; Auxiliary Fund
accounts for 36% of Iota's discrepancies; and Loan Fund and
Auxiliary Fund together represent 50% of Delta's discrepan-
cies. Weaknesses in the areas of responsibility within each
business office can easily be determined by an analysis of
adverse comments according to audit report classification.
Of the total adverse comments, Delta Community College
was responsible for 20% and Theta Community College for 4%.
These percentages represent the high and the low for the
nine colleges, and one can do no more than speculate as to
why Delta Community College had five times as many adverse
comments as Theta Community College. Many factors could
contribute to such a difference. Among these are lack
of competent personnel, including the chief business officer;
lack of funds to hire needed personnel; lack of an internal
auditor; lack of proper job descriptions; lack of a proper
organization chart; lack of support by the college presi-
dent and/or the Board of Trustees; and lack of attention
paid to rules, regulations, statutes, principles, pro-
cedures, and recommendations, which control the activities
of a community college chief business officer and his staff.
Finally, differences in attitudes of the various audit teams
should be given consideration. Again, one can do no more
than speculate as to what the results would have been had
Delta Community College and Theta Community College exchanged
audit teams prior to the 1973-1974 audits.
Standard Audit Comment Classification
of Adverse Comments
The data presented in Table 4.2 show how the adverse
findings of each college are classified according to
standard audit comments, as found in The Audit Program, a
handbook used by the auditors.
Adverse comments classified as violations of Procedures,
Policies, and Internal Control comprise 55% of the total
discrepancies. The bulk of the discrepancies in this
category involve internal control problems. This is
probably true because the smaller institutions cannot
Table 4.2 Dis
ALPHA C. C.
BETA C. C.
GAMMA C. C.
DELTA C. C.
EPSILON C. C.
ZETA C. C.
IOTA C. C.
THETA C. C.
ETA C. C.
;tribution of Adverse Comments
Q) Id a
-1 4J 4J
3 0 0
According to Standardized Audit Comments
' )0 0 0 r O 0
C -4 1-1 a (D 4oJ .0 i
o 0 C3 U 0 0c OC
3 o i I o1i 0 3 0
2 2 0 1 21
S c2 1 0 8
03 0 0 U V
U 3 0 30
U 0 I E 01 0 3
3 2 1 0 30
afford to employ the services of an internal auditor.
Another factor to be considered in regard to internal con-
trol is that the smaller institutions also cannot afford to
employ sufficient business office personnel to provide
proper separation of duties. Without proper separation of
duties, the business office is left open to criticism by
the auditors not only for poor internal control but also
for failure to adhere to established procedures in carrying
out the day-by-day operations of the business office. With
the exception of Delta Community College and Zeta Community
College, the other seven colleges all showed that close
to one-half of their total discrepancies were classified
as violations of Procedures, Practices, and Internal Con-
trol. For Delta Community College, however, the figure is
63%, and for Zeta Community College the figure is even
higher at 75%.
Violations of Rules of the State Board of Education at
15% of the total, and violations of the Accounting Manual
for Florida's Public Junior Colleges, 1968, at 14% of the
total, are the second and third highest in violations. No
college showed a relatively high percentage of its total
discrepancies in either of these two classifications, as
was found under Procedures, Policies, and Internal Control.
One might conclude from these figures that all nine chief
business officers are fairly well acquainted with both the
Rules of the State Board of Education and the Accounting
Manual of Florida's Public Junior Colleges, 1968, and that
these discrepancies were a result of nothing more than not
keeping abreast of recent changes.
Violations of American Council on Education recommenda-
tions and violations of Collece and University Business Ad-
ministration recommendations each contributed approximately
1% to the total number of violations. These recommendations,
though admittedly helpful and significant, obviously are
not looked upon with great concern by either the auditors
of the chief business officers.
No further concepts of interest were revealed by the
study of adverse comments according to standardized audit
Classification of Responses to
the Adverse Comments
Table 4.3 shows a distribution of responses by the nine
college presidents to adverse comments in the audit re-
ports. After giving consideration to the discrepancies
found in his audit report, the president of each college
was required to resoond to the Auditor General's Office.
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There are no standardized responses to audit criticisms--
how the president replies, if at all, is in words of his
This distribution of responses, combined with Chapter
V, Interview Responses of the Chief Business Officers, is
the basis for conclusions drawn in regard to the effective-
ness of the audit report as an external change agent.
The data presented in Table 4.3 show that 57% of the
total adverse comments were responsible for changes in
business office operations at the nine participating col-
leges. Another 12% of the comments resulted in partial
changes, making a total of 69% of all adverse comments
which brought about changes or partial changes. Consider-
ing that an additional 6% of the adverse comments were
replied to in a positive manner (Concur), one may conclude
that audit reports are serving as highly effective external
change agents, when based on audit report responses.
Among the nine colleges, however, the effectiveness
of the audit reports as external change agents varies sig-
nificantly. Alpha Community College, for example, showed
changes as a result of 90% of its adverse comments, while
Eta Community College showed changes derived from only 11%
of its comments. The examinations of audit reports do not
attempt to determine why changes in business office account-
ing procedures were or were not made. However, Chapter V,
Interview Responses of the Chief Business Officers, dis-
cusses this matter extensively.
Additional analysis of the data revealed other con-
cepts of interest in this study.
Again, referring to Eta Community College, one can see
that this college is responsible for 88% of the "No Re-
sponse" category of responses. In addition, Eta's "No
Response" responses make up 83% of their total responses to
audit report comments. This may be a matter that the Audi-
tor General wishes to investigate. The Auditor General has
no way of knowing what action, if any, was taken regarding
83% of Eta's criticisms. The Auditor General can wait for
the next biennial audit to learn the answer, but if the
purpose of the audit is to provide feedback to the Legis-
lature regarding the use of state tax dollars, then a
"No Response" response partially defeats the purpose of the
Delta Community College produced another concept of
interest. Fifty-three percent of Delta's responses were in
the categories "No Change," "Concur," and "No Comment."
These responses provide the Auditor General with very
little feedback in regard to changes in Delta's business
office accounting procedures.
As was discussed in Chapter III, feedback is an essen-
tial element in general systems theory. The "No Response"
and "No Comment" types of response tell the Auditor General
nothing. The audit criticism is there, but both the Auditor
General and the Legislature need to know what action was
taken as a result of the criticism. If no action was taken,
the Auditor General and the Legislature need to know why.
A failure on the part of the colleges to initiate change
based on audit criticisms could indicate a weakness in the
system, of which the colleges, the Office of the Auditor
General, and the Division of Community Colleges all are
part. The standards, which are used by the auditors, and
set by the Accounting Committee and the Division of Community
Colleges, could be unreasonable or impractical. If this is
the case, there exists another cause for the system to be in
The types of responses to adverse comments warrant a
careful evaluation by those who provide the feedback within
the system, and also by those who receive the feedback.
The conceptual analysis of the examination of audit re-
ports incorporated within this chapter focused on three
aspects: (1) audit report classification of adverse com-
ments; (2) standard audit comment classification of adverse
comments; and (3) responses to these comments made by the
presidents of the participating colleges.
Diversity is the most striking characteristic of the
examination of audit report comments and responses for the
nine participating colleges.
The audit report classification of Expenditures was
clearly shown as the area of responsibility in which dis-
crepancies most often occurred. Twenty-one percent of all
adverse comments were found in this classification. In the
opposite direction, no adverse findings appeared in the Debt
Service Fund classification. Furthermore, no common pattern
could be identified with respect to Expenditure classifica-
tion errors among the various business offices. Thirty-
eight percent of Alpha Community College's discrepancies
were classified as Expenditures, while only 6% of Zeta's
errors were found in this classification.
Of the total adverse comments, Delta Community College
was responsible for 20%, and Theta Community College for 4%.
These percentages represent the high and the low for the
Regarding standard audit comment classification of ad-
verse comments, those classified as violations of Procedures,
Policies, and Internal Control accounted for 55% of the
total, while violations of American Council on Education
recommendations and violations of College and University
Business Administration recommendations each contributed
only 1% of the total. Some uniformity was noted when this
type of classification of audit comments was examined on a
college-by-college basis. With the exception of Delta and
Zeta, the remaining seven colleges all showed that close to
one-half of their discrepancies were classified as viola-
tions of Procedures, Practices, and Internal Control. Delta,
however, showed 63% of its violations in this category, and
Zeta showed even more, at 75%.
The conceptual analysis of responses by the nine
college presidents to adverse comments in the audit reports
showed that one may conclude that audit reports are serving
as highly effective external change agents. Of the total
comments, 57% were shown to be responsible for changes in
business office operations, and another 12% resulted in
partial changes. Among the nine colleges,however, the
effectiveness of audit reports as external change agents
The analysis of responses further revealed a signi-
ficant lack of feedback on the part of some of the presi-
dents to the Office of the Auditor General. The nature of
some of the responses or the lack of responses, does not
allow the system as a whole to function properly, and pro-
vides cause for the system to be in disequilibrium.
INTERVIEW RESPONSES OF THE COMMUNITY COLLEGE
As was discussed in Chapter I, personal interviews
were conducted with each of the chief business officers of
the nine selected colleges. The purposes of these inter-
views were to gauge the extent of changes resulting from
the 1973-1974 audit reports in the following areas:
business office accounting procedures; organization and
structure of the business office; job descriptions; and the
efficiency of the business office. In addition, the chief
business officers were asked to indicate whether the presi-
dents and other top-level administrators of their colleges
responded to the audit reports by the use of audit reports
as tools of management.
The chief business officers who participated in the
interviews reported that they had served in their positions
on an average of nine years, the range being five years to
twenty-four years. Three had previous teaching experience
and two had previous business experience. This group
represents a.professional commitment to this profession
since there is so little teaching and business experience.
It may be assumed that these individuals represent a typical
group of chief business officers in the Florida public
Changes in Accounting Procedures
The data presented in Table 5.1 show how each chief
business officer responded to the question that was asked as
What changes in your business office accounting
procedures have been made or will be made as a
direct result of the 1973-1974 audit report?
Five of the chief business officers were of the opinion
audit reports were a stimulus for change. One of these five
felt that because change is slow and difficult at his col-
lege, he needs the assistance of the audit report to be
successful in obtaining permission from top-level adminis-
tration and the Board of Trustees to make changes in account-
ing procedures. Another of these five was not previously
aware of the discrepancies cited in his audit report, and he
made the changes immediately after they were called to his
Table 5.1 Responses of Chief Business Officers Concerning Changes in Accounting
Procedures as a Result of 1973-1974 Audit Reports
All changes a Some changes a No changes
direct result of direct result of resulted f
the 1973-1974 the 1.973-1974 the 1973-1
audit report audit report audit repo
ALPHA C. C. X
BETA C. C. X
GAMMA C. C. X
DELTA C. C. X
EPSILON C. C.
ZETA C. C.
IOTA C. C.
THETA C. C.
ETA C. C.
Two business officers reported that some changes made
subsequent to the 1973-1974 audit were a result of the audit
report. One stated that changes had been contemplated prior
to the audit, and the audit report provided the impetus to
proceed with these changes. The other stated that more
changes would have been made if a better relationship had
existed between himself and the auditors.
Of the two business officers who reported no changes,
one stated that all changes were "self-generated," meaning
that he was aware of what had to be done before the audit,
and he had intended to make all changes. The other business
officer said that he knows accounting procedures and the
accounting manual as well as or better than the auditors,
and he was aware of the problems prior to the audit. He was
not able to make the changes because the college was short
of personnel. He further stated,however, that the audit re-
port should be given credit for speeding up these changes.
Changes in Business Office
Table 5.2 shows how each business officer responded to
the following question:
What changes have been made in your business office
Table 5.2 Responses of Chief Business Officers Concerning Changes in Business
Office Organization Structure as a Result of 1973-1974 Audit Reports
Changes made in organi- No changes made in organi-
zation structure as a zation structure as a direct
direct result of the result of the 1973-1974
1973-1974 audit report audit report
ALPHA C. C. X
BETA C. C. X
GAMMA C. C. ___ X
DELTA C. C. X
EPSILON C. C. X
ZETA C. C.
IOTA C. C.
THETA C. C.
ETA C. C.
- --_- __ ____________ _____
organization structure as a result of the 1973-1974
Only one of the nine business offices had a change in
its organization structure. Of the other eight, one said
there was a change, but it was a result of college initia-
tive, and not from the audit report. Another business
officer reported there were changes in his college's organi-
zation structure subsequent to the audit, but Health,
Education and Welfare guidelines were entirely responsible.
Iota Community College's business officer responded that a
change recommended by the auditors to alter the organization
structure was not followed by Iota's President and Board of
Changes in Business Office
The data presented in Table 5.3 show how the nine
business officers responded to the following question:
What changes have been made in job descriptions
within your business office as a result of the
1973-1974 audit report?
Two business officers replied that changes in job de-
scriptions has been made, and in each case new employees
Table 5.3 Responses of Chief Business Officers Concerning Changes in Business
Office Job Descriptions as a Result of 1973-1974 Audit Reports
Changes made in job No changes made in job
descriptions as a descriptions as a direct
direct result of the result of the 1973-1974
1973-1974 audit report audit report
ALPHA C. C. X
BETA C. C. X
ETA C. C
were hired. At Alpha Community College some changes were
recommended, but Alpha's President decided not to comply
with the auditors' recommendations. At Eta Community Col-
lege a major change was recommended in the job description
of the chief business officer, but top-level administrators
at Eta believed this change was unworkable, and the auditors'
recommendation was not followed.
Increased Business Office Efficiency
Table 5.4 shows how each business officer responded
to the following question:
Does your business office function in a more efficient
manner as a result of the 1973-1974 audit report? If
your answer is yes, tell how it functions more
Three of the nine business officers said that their
business offices function more efficiently as a result of
the audit report. At Alpha Community College changes in
organization structure, and improved controls over payroll
have helped Alpha's efficiency. Epsilon's business officer
said they do not have an internal auditor, and the auditors
find problems that otherwise would be overlooked because of
the pressure of day-to-day details.
Table 5.4 Responses of Chief Business Officers Concerning More Efficient Functioning
of Their Business Offices as a Result of 1973-1974 Audit Reports
Does function more Does not function more
efficiently as a direct efficiently as a direct
result of the 1973-1974 result of the 1973-1974
audit report audit report
ALPHA C. C.
BETA C. C.
GAMMA C. C.
DELTA C. C.
EPSILON C. C.
ZETA C. C.
IOTA C. C.
THETA C. C.
ETA C. C.
_ __ __x
Of the six who reported no increase in efficiency one
said his college's business office is now less efficient
than prior to the audit report because a new position was
created which necessitated the addition of another employee.
Although effectiveness has increased, efficiency has de-
creased. Another business officer also felt his business
office is less efficient because recommendations made by the
auditors have put into operation unnecessary changes which
have caused additional work. This additional work is wasted
because the college receives no benefit from it and, there-
fore, the rate of return from the college's investment is
less as a result of the audit report.
At Eta Community College, the business officer stated
that he is responsible for the efficiency of his business
office; the auditors cannot claim this honor. He further
named three obstacles to efficient business office opera-
tions: (1) lack of time; (2) lack of space; and (3) lack of
Gamma's business officer replied that an audit report
will make no difference in the efficiency of his business
office, because he concerns himself with efficiency every
day of the year.
Audit Reports as a Tool of Manacement
The data presented in Table 5.5 show how each
business officer responded to the following question:
Do top-level administrators at your college view
audit reports as a tool of management? If your
answer is yes, tell how.
Three of the nine business officers responded in the
affirmative to this question. At Alpha Community, the
President, Vice-Presidents, and Provosts all share the
feeling that the audit reports can be used effectively as
tools of management to assist in the change process. At
another college both the President and the chief business
officer use the added clout of audit reports to help con-
vince the Board of Trustees that changes are needed.
Of those who responded in the negative, one business
officer stated that top-level administrators at his college
look upon audit reports as "evils" which are not needed, and
at auditors as persons who attempt to "disrupt" the organiza-
tion. At another college, top-level administrators see the
audit as an invasion of privacy, and audit reports as
casting doubts about their integrity. In addition, these
same administrators are convinced that many changes
Table 5.5 Responses of Chief Business Officers Concerning Top-Level Administrators'
Use of Audit Reports as a Tool of Management
recommended by the auditors cost the college additional
money, but did nothing to increase efficiency. Another
business officer reported that top-level administrators at
his college feel the audit reports have lost their effec-
tiveness as tools of management because the audit reports
contain so many "asinine" comments. At another college top-
level administrators have become offended by what they re-
ferred to as the auditors nit-picking attitude. These
administrators feel the auditors should present a helping
attitude rather than an adversarial attitude. A changed
attitude would then bring about an interest on the part of
top-level administrators in using the audit reports as a
tool of management. Finally, another business officer re-
plied that his President and the Deans view the audit and
audit reports as just something that has to be endured. The
audit reports are put to no practical use whatsoever.
Audit Reports as Effective External
Change Agents for Business Office
Table 5.6 shows how each business officer responded to
the following question:
Are audit reports serving as effective external change
Table 5.6 Responses of Chief Business Officers Concerning the Effectiveness of Audit
Reports as External Change Agents
ALPHA C. C.
BETA C. C.
GAMMA C. C.
DELTA C. C.
EPSILON C. C.
ZETA C. C.
IOTA C. C.
THETA C. C.
ETA C. C.
Are serving as effec-
tive external change
1--- ---- _
Are not serving as
agents for business office accounting procedures?
If your answer is yes, tell how.
Of the nine business officers, six answered this
question affirmatively. At Beta Community College the
business officer said that audit reports assist him in
making change by the support the reports lend when he is
confronted with objections from his President or Board of
Trustees. At Gamma, the business officer's fear of a poor
audit causes changes to be made sooner than they would with-
out an audit report. At another college, the business
officer stated that his President would totally ignore
fiscal management if not for audit reports.
At both Delta and Eta, the business officers replied
that they were more capable than the auditors regarding the
proper operation of a community college business office, and,
therefore, audit reports are not needed to make changes. At
Zeta, the business officer said that audit reports could
serve as effective external change agents if the Office of
the Auditor General was willing to provide auditors with
helpful attitudes. He further stated that the auditors he
now gets are not there to help him and his staff, and this
is the key to whether the audit report serves effectively as
an external change agent.
The final question on the interview guide did not lend
itself to the use of a table, as did the preceding ques-
tions, but the responses produced many concepts of
interest. The final question was as follows:
How can audits better serve you and your staff in
Several business officers mentioned attitudes of the
auditors, and all said much the same in this regard. The
essence of what was said is that a good auditor will not
undertake an audit in a negative sense, meaning that he is
determined to find problems. Rather, the good auditor will
approach the audit concerned primarily with how he can help
the business officer and his staff. To carry this idea one
step further, Delta's business officer noted that the
auditors should function as though they were part of a team
effort at the college undergoing the audit. lie further
suggested that auditors should not feel that in order to con-
duct a successful audit they must find problems. This type
of attitude forces the colleges to seek opinions from the
college attorneys when there exists sharp disagreement with
the auditors. Some disagreements have become serious. On
this same concept Zeta's business officer asked that the
Auditor General send him better auditors with better atti-
tudes rather than policemen or enforcers. He believes that
the auditor should be someone who comes as a guest of the
college, who is friendly and courteous, and is ready to
Another concept of interest that emerged from the re-
sponses relates to how well auditors are trained for their
duties. At Beta Community College, the business officer
mentioned that he should not be expected to teach an
auditor Beta's system so the auditor can audit the Beta
Community College business office. Further regarding
training, he felt the auditors should make the same recom-
mendations regarding accounting procedures as past auditors.
An auditor should not make a suggestion, and two years later
another auditor tell the business officer to do it dif-
ferently. Epsilon's business officer felt that some
auditors are unqualified to conduct an audit because they do
not know the accounting manual well enough. At Eta Com-
munity College, the business officer expressed the opinion
that the Auditor General should either use more experienced
auditors, or he should provide closer supervision for the
younger, less experienced auditors.
Another interesting concept which appeared in the re-
sponses involved the type of audit now being performed. As
was discussed in Chapter I the 28 community colleges under-
go a compliance audit. Epsilon's business officer has
asked for more management analysis, which evaluates people
rather than procedures. Theta's business officer alluded to
this same concept in suggesting that the auditors look more
closely at the way the duties of various business office
employees are performed in relation to both the job descrip-
tion and the need for each of these positions. For example,
the auditor can better serve a college by making recom-
mendations regarding the need for a certain position within
the business office organization structure. An outside,
objective review of a position or an employee can sometimes
reveal that which cannot be seen from within. Personnel
recommendations of the auditors should not be limited to
changes in job descriptions. An audit report recommending
elimination of an employee and/or a position could be used
by college officers as a tool in helping to convince the
Board of Trustees that such a change has merit. The audit
report would also take the "heat" away from college officers
in the event that such a recommended change is carried out.
Recommendations for personnel changes could accompany an
audit report in the form of an addendum.
The entire audit program should be updated according
to Iota's business officer. He suggested modern auditing
techniques which would accommodate today's fast-paced
business office activities. Modern techniques call for
sampling instead of a 100% audit, unless evidence indicates
otherwise. Many thousands of state tax dollars could be
saved in this manner.
Fortunately not all responses to the question were
negative. Gamma Community College's business officer said
the auditors should continue to do as they now do, i.e.,
not irritate him or his staff, and not nit-pick in order to
make adverse comments in the audit reports. He believes he
has had super auditors in past years and wants to continue
to work with only the best.
Relationship Between Adverse Comments
and the Change Process
The data presented in Table 5.7 show a summarization of
concepts of interest from both Chapters IV and V. In Table
5.7 the nine colleges have been ranked according to total
adverse comments. Beside this ranking are columns showing
Table 5.7 Distribution of Adverse Comments and Their Tendency to Influence Change
DELTA C. C. 30 None No No No
EPSILON C. C.
ALPHA C. C.
ETA C. C.
ZETA C. C. 16 Some No No
GAMMA C. C. 12 All No No
IOTA C. C. 1 Al L No No
BETA C. C. 8 All No No
THETA C. C. 6 All No Yes
TOTAL 147 --- ---
how each business officer responded to questions relating
to changes in accounting procedures, organization struc-
ture, and job descriptions, plus the reaction of top-level
administrators to the use of audit reports as tools of
The purpose of this type of analysis is to seek to de-
termine whether a large number of adverse comments produces
conflict in the business officers and their top-level admin-
istrators, which in turn would cause them to reject change.
On the other hand, a small number of adverse comments may
produce an opposite kind of perception by these same college
In comparing Delta, which had the highest number of
discrepancies, and Theta which had the lowest, one might be
persuaded that this theory has merit. With 30 adverse
comments, Delta's business officer reported that no changes
in accounting procedures, organization structure, and job
descriptions resulted from the audit report. In addition,
Delta's other top officers did not view audit reports as
effective tools of management. On the other hand, Theta's
business officer replied that all changes in accounting pro-
cedures were a direct result of the audit report, job de-
scription changes were made as a result of the audit report,
and Theta's other top-level officers view audit reports as
effective tools of management.
This theory fails to hold up when one looks further at
the data in Table 5.7. Epsilon, with the second highest
number of audit criticisms, indicated that all changes in
accounting procedures were a direct result of the audit.
And Alpha, with the third highest number of audit criticisms,
showed some accounting changes related to the audit report,
plus organization structure and job description changes. In
addition, Alpha's top officials look upon audit reports
favorably as tools of management.
In this chapter, audit reports were viewed within the
perspectives provided by the chief business officers of the
nine selected colleges. Personal interviews with the
business officers provided an opportunity to judge the ex-
tent of changes in business office operations and to evaluate
attitudes of top-level administrators toward the use of
audit reports as tools of management.
It was observed that only five of the nine business
officers felt that the audit reports were responsible for
all changes in accounting procedures made subsequent to the
1973-1974 audit reports. Two of the remaining business
officers, however, felt that at least some changes were
triggered by the audit reports. Thus, a clear majority of
the business officers perceived changes in accounting pro-
cedures as having been produced by the audit reports.
Extensive changes in business office organization
structure and job descriptions were not stimulated by the
Many interesting responses were received in regard to
the question involving improved business office efficiency.
Although three business officers reported increased effi-
ciency, there were others who felt their business offices
were less efficient because of recommendations made by the
auditors. Additional work and additional, unnecessary
business office personnel account for the decreased effi-
The analysis of responses also revealed several inter-
esting comments relative to the views taken by top-level
administrators toward audit reports as tools of management.
At three of the colleges, top-level administrators all share
the feeling that audit reports can be used to assist in the
change process. At the other six colleges, however, hostility
could well describe the attitude toward audits, auditors,
and audit reports.
Responses to the final question on the interview guide
regarding future audits produced very informative concepts
of interests. The attitude of the auditors toward the
auditing process emerged as a most serious consideration.
In essence, a majority of the business officers want the
auditors to approach their task with a helping attitude
rather than an adversarial frame of mind. Lack of proper
training and lack of sufficient business office auditing
experience on the part of young auditors were also men-
tioned as problems faced by the business officers. Further
regarding future audit improvement, a change from today's
compliance audit to a management analysis type audit, was
suggested by several business officers. In this same con-
cept, it was further suggested that modern auditing tech-
niques, which involve sampling rather than a 100% audit, be
used unless evidence indicates otherwise.
Although no clear-cut conclusions can be reached, there
are indications that a high number of adverse comments pro-
duces greater resistance to change, and a small number of
criticisms produces a willingness to follow the auditors'
CONCLUSIONS, IMPLICATIONS, AND SUGGESTIONS
FOR FURTHER STUDY
The following conclusions are presented relative to
1. As was pointed out in Chapter III, general systems
theory requires that the system provide itself
with feedback. This research shows that the
auditing process has failed to provide adequate
feedback to adverse comments found in the audit
reports as may be illustrated in some of the re-
sponses of the college presidents. The nature
of the response can indicate little or nothing in
the way of feedback, as was the case with both
Eta and Delta Community College. Of Eta's total
responses, 83% were in the "No Response" category.
Of Delta's total, 53% were in the categories "No
Change," "Concur," and "No Comment." The auditor
General and the Legislature need to know what
action has been taken because of the audit
criticism. If no action was taken, they need to
know why. A failure on the part of the responses
to provide proper feedback indicates a serious
weakness in the system and shows the systems
theory in this instance does not describe the situ-
ation as it currently exists.
Audit reports alone do not cause the system
to be in disequilibrium. The auditing process, as
an agent for change,however, does create conflict.
Resistance to change is manifested in the following
actions: (1) refusal by some of the colleges to
initiate change; (2) refusal by some of the col-
leges to provide the system with adequate feedback
to audit criticisms; (3) refusal by some of the
colleges to accept the system's standards; and (4)
refusal by some of the colleges to fully embrace
the philosophy inherent in the entire auditing
As a form of control, the auditing process in
Florida's public community colleges cannot be con-
sidered satisfactory when one considers not only
the amount of resistance to change but also the
amount of hostility produced within the system by
the biennial audits.
The auditing process does not provide the
system with a means of constant monitoring as is
recommended by general systems theorists. With
audits now being conducted every other year, or in
some cases every third or fourth year, the central
objective of the system is lost.
2. Audit reports are serving as effective external
change agents for business office accounting pro-
cedures. Seven of the nine chief business officers
who participated in this study stated that their
1973-1974 audit report was in some way responsible
for change. One who answered in the negative
stated that the audit report could be an effective
change agent if the attitude of the auditors was
helpful rather than adversarial. The other who
denied the effectiveness of the audit report as
a change agent did comment, however, that outsiders
can sometimes detect minor problems that go un-
noticed by those on the job.
Responses by the presidents of the nine par-
ticipating colleges to the preliminary and tentative
audit findings also show that the audit reports are
serving as effective external change agents. In
examining a total of 147 selected audit findings,
the following was noted:
a. Fifty-seven percent of the responses indicated
that changes in business office accounting
procedures were made as a direct result of
b. Twelve percent of the audit findings were
given no response by the president.
c. Twelve percent of the responses indicated
partial changes as a result of the audit
d. Ten percent of the responses indicated that no
changes in business office accounting pro-
cedures were made as a result of the audit
e. Six percent of the audit findings were
answered by an indication that the President
concurred with the auditor's comment.
f. Three percent of the audit findings were
answered with no comment.
3. Top-level administrators at the nine Florida public
community colleges that participated in this study
do not view audit reports as effective tools of
management. At only three of the nine colleges are
audit reports used to assist management in the
change process. It should be pointed out, however,
that at Epsilon Community College the chief business
officer reported that their top-level administrators
do not look upon the audit report as a tool of
management, but they do see the audit report as a
means of informing management of what is happening
so management can make changes.
4. The 1973-1974 audit report was not responsible for
major changes in business organizational structures
of the participating colleges. Only at Alpha Com-
munity College were any changes noted, and these
were considered minor.
5. Changes in business office job descriptions as a
result of the 1973-1974 audit reports were few.
Only at Alpha and Theta Community Colleges were
changes made, and these were minor. Changes were
recommended in the audit report for Beta Community
College, however, but were not acted upon by
6. Six of the nine chief business officers stated their
business offices do not function in a more efficient
manner as a result of their 1973-1974 audit reports,
and two of these six felt that their business of-
fices function less efficiently as a result of their
audit reports. Beta's chief business officer con-
ceded, however, that his business office while func-
tioning less efficiently is now mrre effective.
7. Changes in the philosophical approach of auditors
to the auditing procedure and an upgrading of the
auditing skills of young auditors, in particular,
could go a long way toward improving the effec-
tiveness of audit reports as external change agents
and as tools of management.
The results of this study suggest that major changes
are needed in the entire auditing process of Florida's
public community colleges.