A5/M8 Single Audits

Question 1

what is single audit and its objectives?

Answer 1

• single audit is required for entities expended equal or more $750K of federal financial assistance in a fiscal year. If entity spends less than $750K, it is exempt from federal audit requirement for that year.
• 2 objectives:
  + audit of the entity’s FS and report on a separate schedule of expenditures of federal awards related to the FS
  + compliance audit of federal awards expended during the year as a basis for issuing additional report on compliance related to major programs and IC over compliance

Question 2

what is program-specific audit?

Answer 2

• is only available to certain grant recipients who meet highly restrictive criteria :
  + awards are expended under a single federal program
  + no FS audit is required

Question 3

what is materiality determination for single audit?

Answer 3

• materiality is considered separately in relation to each major program, not relates to FS taken as a whole
• major programs are programs that expend $750k or more. A smaller programs could be major if they are high risk
• set by the auditor’s judgement

Question 4

what are auditee’s responsibilities?

Answer 4

• to select auditor, which is subject to federal guidelines that seek to ensure the appointment of auditor possessing the necessary expertise though an open and competitive proposal process
• responsible for the production of FS, schedule of federal expenditures, corrective actions
• auditee’s reports, along with auditor report and findings, must be submitted by the auditee within 30 days of the receipt or 9 months after the end of the audit period

Question 5

what are auditor’s responsibilities?

Answer 5

• express an opinion regarding the fair presentation of FS and related schedules
• consider internal controls, compliance, and previous audit findings
• not required to test controls that are ineffective, but additional tests of compliance must be considered
• express an opinion regarding major program
• required to follow up with audit findings from previous audit
• expands auditor’s responsibilities to include procedures designed to test and report on compliance matters having a direct and material effect on major federal award programs

Question 6

what are the 5 required audit reports issued under single audits?

Answer 6

1. Financial statement report (GAAS): express opinion
2. Schedule of expenditures of federal awards report: express opinion
3. Report on internal control over financial reporting and compliance with federal regulations (GAGAS or Yellow book)
4. Single audit: report on compliance for each major program and on internal control over compliance
5. Schedule of findings and questioned costs (exceed $25k)

Question 7

how long must both auditee and auditor retain audit documentation for?

Answer 7

3 years

Question 8

what are major program determinations?

Answer 8

• Risk based approach: type A (750k or more) is low risk if it’s been audited at least one of two most recent year; and type B (less than 750k) could be high risk if there is material weakness in IC, a modified opinion rendered, and questioned cost exceeds 5% of total federal award spent
• Percentage of coverage: low risk (20%) others (40%) depending on auditor’s judgement

Question 9

what is the grant recipient vs sub recipient?

Answer 9

• A nonfederal entity that receives a grant award and in turn contracts or provides that award to another entity to carry out the program would be a recipient.
• Ex: a state night receive federal funds and in turn provides those fund to a not-for-profit organization to accomplish an objective (mental health care, homeless relief,..). the state is the grant recipient vs. the not-for-profit organization is the sub recipient

Question 10

what is cognizant agency most likely to be assigned to auditee?

Answer 10

a federal agency who provides the most funding to the auditee