Compliance Audits

Question 1

Define “governmental audit requirement.”

Answer 1

A governmental requirement established by law, regulation, rule, or provision of contracts or grant agreements requiring that an entity undergo an audit of its compliance with applicable compliance requirements related to one or more government programs

Question 2

Describe the auditor’s responsibility for communicating various matters relating to a compliance audit.

Answer 2

The auditor should communicate these matters with those charged with governance:

1. )The auditor’s responsibilities under GAAS
2. )The auditor’s responsibilities under Generally Accepted Government Auditing Standards (GAGAS)and the governmental audit requirements
3. )An overview of the planned scope and timing of the compliance audit
4. )Any significant findings

Question 3

Under what two circumstances would the Applicabilityof Statement on Auditing Standard No. 117, Compliance Audits, apply?

Answer 3

When an auditor is engaged to perform a “compliance audit” in accordance with generally accepted auditing standards (GAAS) and Government Auditing Standards, also called “Generally Accepted Government Auditing Standards” (GAGAS); and when there is a governmental audit requirement requiring an expression of opinion on compliance with applicable compliance requirements.

Question 4

List the procedures that an auditor should undertake regarding risk assessments as it relates to the performing a compliance audit.

Answer 4

1. )Perform risk assessment procedures to obtain an understanding of applicable compliance requirements and internal controls over compliance.
2. )Assess risks of material noncompliance for each applicable compliance requirement and consider whether any are “pervasive” to compliance.
3. )Perform further audit procedures in response to assessed risks and develop an overall response to any risks that are “pervasive” to the entity’s compliance.

Question 5

List the documentation requirements of an auditor for a compliance audit.

Answer 5

1. )The risk assessment procedures performed
2. )The responses to the assessed risks of material noncompliance
3. )The basis for materiality levels
4. )The compliance with applicable “supplementary audit requirements”

Question 6

What are the objectives of the “compliance audit”?

Answer 6

1. )To express an opinion on whether the entity complied with applicable compliance requirements, at the level specified in the governmental audit requirements
2. )To identify audit/reporting requirements in the governmental audit requirement that are supplementary to GAAS and Generally Accepted Government Auditing Standards (GAGAS) and to evaluate those requirements.

Question 7

What types of reports can an auditor issue when the focus of the report is on compliance?

Answer 7

The auditor may issue:

1. )A separate report on compliance only;
2. )A combined report on compliance and on internal control over compliance; or
3. )A separate report on internal control over compliance