Industry-Sponsored Research Week

Be proactive when addressing industry-sponsored research financial audits


By David Schwartz
Published: February 11th, 2020

When it comes to financial audits of industry-sponsored research projects, “proactivity is key; the process will go much smoother by preparing ahead of time,” said Kelsey Foreman, senior consultant in the Risk Internal Audit and Cybersecurity Practice with Baker Tilly, a leading accounting and consulting firm. Foreman was addressing participants in a webinar entitled “Financial Audits of Industry-Sponsored Research,” produced by University-Industry Engagement Advisor.

“Identify red flags before they occur. Make sure personnel are ready; know who can audit; and stay up to date on findings in the news and the kinds of audits that may arise.”

Before the auditor is on site, she added, you can ensure your department is aware of the main topics as well as what the auditing team’s role is, and the type of information they expect you to make available.

“It’s also a good idea to have a complete entrance conference so there’s a clear understanding for both parties on what the expectations are,” she continued. “All key parties should be involved. Have strong documentation, so information can easily be found, and only give what the auditor asks for. Ensure you have the opportunity to provide any additional support if auditors have missed something. Ask them to provide time for preliminary observation, and make sure enough time is allowed.”

Why pay such close attention to financial audits? “Audit findings can have a large impact,” said Brynn Tomlinson, CPA, CFE, manager in Baker Tilly’s Risk Internal Audit and Cybersecurity Practice. “Financially, there can be a requirement to refund the sponsor. If there is a minor error or small human errors they may be forgiven — send a small refund, take care of it and move on. But if they think poor stewardship of funds was involved, they may forego future funding.” In the worst case, she added, allegations can lead to legal fees, which “add up quickly.”

There may be added administrative burdens, she continued. “It might just be time-consuming, remediated findings or a negotiated solution, but the audit may recommend additional training, or updated internal policies and/or internal controls, which can take time,” she noted.

And then there’s reputational damage. “No one wants to see the headline, ‘University X returns $20 million,’” said Tomlinson. A poor audit result that brings bad press “might also trigger audits from other sponsoring agencies.” On the other hand, “a clean audit report will encourage other sponsors to continue, and you’ll get a reputation as being responsible financial stewards. Also, it can help you strengthen and improve your process, avoiding more serious problems.”

A detailed article on financial audits of industry-sponsored research appears in the January issue of University-Industry Engagement Advisor. For complete subscription details, click here.

The webinar “Financial Audits of Industry-Sponsored Research” is now available on DVD, online video, and transcript. For complete details, click here.

Posted under: University-Industry Engagement Week

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