A6 (4) - GOVERNMENT AUDITING

Question 1

SOURCES OF GOVERNMENT AUDITING STANDARDS

Answer 1

A GAAS: Generally Accepted Auditing Standards
B.GAGAS: Government Auditing Standards (Yellow Book)
C. Audit Requirements for Federal Financial Assistance

Question 2

SOURCES OF GOVERNMENT AUDITING STANDARDS- GAGAS contain standards for audits

Answer 2

1- Government bodies ,programs ,activities, & functions
2- Government assistance received by contractors
3- Not-for-profit organizations
4- Other non-governmental organizations

Question 3

SOURCES OF GOVERNMENT AUDITING STANDARDS- Audit Requirements for Federal Financial Assistance

Answer 3

1- Expanded internal control documentation and testing requirements

2- Expanded reporting to include formal written reports on the consideration of internal control and the assessment of control risk.

3- Expanded reporting to include whether the federal financial assistance has been administered in accordance with applicable laws and regulations

4- Application of single audit standards to federal financial assistance

Question 4

PURPOSES AND TYPES OF GOVERNMENT AUDITS

Answer 4

A. Financial Audits
B. Attestation Engagements
C. Performance Audits

Question 5

EFFECTS OF LAWS ON FINANCIAL STATEMENTS - Management Responsibilities Identified by GAGAS

Answer 5

1- Identify applicable laws with compliance requirements

2- Establishment of internal controls to provide reasonable assurance that the entity complies with those laws and regulations.

3-Preparation of supplementary financial reports, including a Schedule of Expenditures of Federal Awards.

4- Obtaining an audit that satisfies relevant legal, regulatory, or contractual requirements.

Question 6

EFFECTS OF LAWS ON FINANCIAL STATEMENTS - Auditor Responsibilities Identified by GAGAS

Answer 6

Obtain Reasonable assurance that the financial statements are free of material misstatements resulting from violations of laws and regulations that have a direct
and material effect on the determination of financial statement amounts

Question 7

Auditor is not Responsible

Answer 7

Provide reasonable assurance of detecting

abuse since it is subjective

Question 8

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Objectives of Compliance Audits

Answer 8

1- Obtain sufficient evidence to form an opinion on whether the entity complied, in all material respects, with the compliance requirements applicable to its programs

2- Report at the level specified in the governmental audit requirement

3- Identify audit & reporting requirements supplementary to GAAS and GAGAS and address those requirements

Question 9

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - management assumptions

Answer 9

1- Identify government programs
2- understand & comply with compliance requirements
3- Maintain effective controls
4-Conduct evaluation&monitoring compliance requires
5- Take appropriate corrective action on audit findings.

Question 10

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Overall Standards for Compliance Audits

Answer 10

1- Perform a risk assessment

2. Design responses to the risk assessment.
3. Determine if supplementary audit requirements exist.
4. Obtain written representations from management.
5. Prepare reports.
6. Prepare required documentation

Question 11

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Audit Risk of Noncompliance Model

Answer 11

1- AR (should be low) = Risk of material noncompliance(Assess by auditor) X Detection Risk (control by auditor)

2- Same as Audit risk model

Question 12

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Design Responses to Risk Assessment

Answer 12

1- Auditor should consider in design audit procedures if risks of material noncompliance due to fraud or error.

2- The auditor should perform further audit procedures

3-Tests of controls required if risk assessment includes effective controls or Substantive procedures do not provide enough evidence and governmental requirements

Question 13

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Determine if Supplementary Audit Requirements Exist

Answer 13

A common example of supplementary audit requirements is the Single Audit requirements related to federal financial assistance described below.

Question 14

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Management Representation Letter

Answer 14

1- Management takes responsibility for understanding
2- Management takes responsibility for maintain. controls
3-Management asserts it has disclosed all programs
4-Management has made all contracts and agreements available
5-Management has disclosed any known noncompliance
6-Management believes entity complied with requirem
7- Identifies management’s interpretation of any applicable compliance
8- Management disclosed communications from grantors
9-Any events occurring between the balance sheet date and the last date of the report have been disclosed
10 -Management responsible correcting noncompliance

Question 15

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Prepare Reports

Answer 15

1- Opinion on compliance
2-Report on internal control over compliance
3-Combined report on compliance &internal control over compliance

Question 16

GAAS REQUIREMENTS FOR COMPLIANCE AUDITS - Prepare Reports

Answer 16

Ref to W/P A6-1

Question 17

Documentation

Answer 17

1- The assessed risk of material noncompliance
2- Responses to the risk assessment
3- The basis or rationale for materiality levels
4- Compliance with supplemental requirements

Question 18

GOVERNMENT AUDITING STANDARDS (GAGAS) - Quality Control Considerations

Answer 18

CPA firms conducting audits in accordance with government auditing standards should have an external quality control review at least once every three years by an organization not affiliated with them

Question 19

GOVERNMENT AUDITING STANDARDS (GAGAS) Independence categories

Answer 19

1. Personal Impairments to Independence - relationships
   2- External Impairments to Independence
   3- Organizational Impairments to Independence such as government inspectors

Question 20

GOVERNMENT AUDITING STANDARDS (GAGAS) - Fieldwork & Audit Documentation

Answer 20

1- Document an understanding of internal control
2-Document basis for assessing control risk at maximum
3-Document the planned audit procedures
4- Written Representations from Management

Question 21

GOVERNMENT AUDITING STANDARDS (GAGAS)- Reporting main characteristics

Answer 21

1- Include Statement of Compliance with GAGAS
2- Describe the Scope of Testing
3- Describe Omitted Information
4- Describe the Distribution of the Report
5- Opinion on Financial Statements and Supplementary Schedule of Expenditures of Federal Awards

Question 22

GOVERNMENT AUDITING STANDARDS (GAGAS) - Reporting Fraud and Illegal Acts

Answer 22

1- Like GAAS
2- Reporting Illegal Acts is Required to
a) Top official of entity
b). regulatory bodies
c). Officials of the entity audit organization
d) federal inspector if management fail to disclose or take a proper action

Question 23

GOVERNMENT AUDITING STANDARDS (GAGAS) - Reporting Internal control

Answer 23

1- Like GAAS
However :-
2- GAGAS requires a written report on the auditors understanding of internal control and the assessment of control risk in all audits.
and
3- GAAS requires written communication only when significant deficiencies are noted.

Question 24

SINGLE AUDITS: OMS CIRCULAR A-133

Answer 24

Entities that expend total federal assistance equal to or in excess of $500,000 in a fiscal year to have an audit performed in accordance with the Act.

Question 25

SINGLE AUDITS - Objectives

Answer 25

1- Audit of the entity’s financial statements and reporting on a separate schedule of expenditures of federal awards in relation to those financial statements

2- Compliance audit of federal awards expended during the year as a basis for issuing additional reports on compliance related to major programs and on internal control over compliance

Question 26

SINGLE AUDITS - Materiality

Answer 26

1- GAAS Like GAGAS materiality considered in relation to the financial statements being audited taken as whole
However
2-Materiality of transaction or other compliance finding considered separately relation to each major program

3-Threshold for classification of a program as a major program is expenditures in of excess of $300,000.

Question 27

SINGLE AUDITS - Specific Audits not Single

Answer 27

1- The auditor must contact the Inspector General of the applicable federal agency and obtain a current program-specific audit guide.

2- Follow GAGAS and specific audit guide

3-If a program-specific audit guide is not available, the auditor has basically the same responsibilities as in an audit of a major program for a singie audit

Question 28

SINGLE AUDITS - Internal Control

Answer 28

1- For Major Programs :- Auditor must perform procedures to obtain an understanding of internal control pertaining to the compliance requirements for federal programs sufficient to plan an audit and to support a low assessed level of control risk
However
2- For Non- Major Programs - No responsibility

Question 29

SINGLE AUDITS - Reporting Noncompliance

Answer 29

1 - For Material Instances auditor should modify the report

2- For Immaterial - should be reported but not identified

Question 30

SINGLE AUDITS - Reporting of compliance

Answer 30

1- Introductory Paragraph
2- Scope Paragraph
3- Opinion Paragraph

Question 31

SINGLE AUDITS - Reporting internal control over compliance paragraph.

Answer 31

1- Introductory Paragraph
2- Opinion Paragraph
3- Ending Paragraph

Question 32

All Audit - reporting requirements

Answer 32

please see W/P A6/2

Question 33

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Answer 33

1- Summary of Auditor’s Results
2- Financial Statement Findings
3- Federal Award Findings and Questioned Costs