Government Audits M7 Flashcards
What is GAGAS?
- Government Audit Standards define three types of engagements: financial audits, attest engagements, and performance audits.
- Single audits and program specific audits are defined by 2 CFR 200 and the Single Audit Act.
- GAGAS is GAAS in conjunction with single audits.
What are the reports required for GAAS, GAGAS, and Single Audit?
GAAS f/s audit only:
* Opinion on fairness of f/s.
* No opinion on internal control unless (Integrated Audit Optional or PCAOB Mandatory).
**Report on internal control if notice significant deficiency or material weakness
GAGAS audit
* Opinion on fairness of f/s.
* Report on internal control over financial reporting (no opinion).
* Report on compliance (no opinion).
* FS audits, performance audits, and attest engagements.
Single audit act:
* Opinion on fairness of f/s.
* Report on internal control over financial reporting (but still no opinion).
* Report on compliance (but still no opinion).
* Report on internal control over compliance for MAJOR PROGRAMS (but still no opinion).
* Report on compliance for MAJOR PROGRAMS (opinion rendered)<—This falls under SAS and is linked below.
* Schedule of findings.
* Single audits and program specific audits
What are the additional procedures in a GAGAS audit vs. GAAS audit?
- More restrictive requirements on auditor independence, limiting consulting from Auditing CPA firms.
- Government Auditing Standards require that the report on financial statements be expanded to include: a statement that the audit was performed in accordance with Government Auditing Standards, a description of the scope of the testing of internal controls, instances of fraud noted, etc.
- Government Auditing Standards require a written report on the auditor’s understanding of internal control and the assessment of control risk in all audits. This is different from GAAS, which requires written communication only when significant deficiencies are noted.
- GAGAS requires the auditor to describe the scope of the auditors test on compliance with laws and regulations.
What is a standard applicable to a financial statement audit with Governmental Audit Standards (GAS)?
- Auditors should report on the scope of their testing of compliance with laws and regulations and of internal controls.
- GAO standards require that the auditor communicate information regarding the nature, timing and extent of planned testing to officials of the audited entity and to individuals contracting for the audit.
- The report should disclose the nature of the information omitted and the requirement that makes an opinion necessary.
- Material indications of illegal acts are reported to the members of the governing body of the audited entity, their senior staff officials, and directly to external parties
(such as the grantor agency) in some instances.
What should be in managements representation letter to the auditor per Government Audit Standards (GAS)?
- The management letter will include identification of management’s interpretation of compliance requirements that are subject to different interpretations.
- The representation letter should include a statement that management has disclosed all governmental programs to the auditor.
- Management will assert that they have disclosed all known noncompliance or state that there was no such noncompliance.
- The representation letter should include a statement that management believes that the entity has complied with compliance requirements.
- The management letter will include a statement that management has disclosed any communications from grantors concerning possible
noncompliance.
What will compliance audit workpapers contain?
- Documentation should include the risk assessment over internal control over compliance.
- Responses to control assessments including both tests and test results should be documented.
- Materiality levels should be documented
Why does the auditor establish materiality for compliance audits?
- To plan audit timing, procedures and volume of testing.
- Materiality is significant in allowing the auditor to formulate an opinion on compliance.
- Materiality limits are used in conjunction with planning risk assessment procedures.
Which engagements does Government Audit Standards define?
- Financial audits
- Attest engagements
- Performance audits.
Which engagements does 2 CFR 200 and Single Audit Act define?
- Single audits
- Program specific audits
Which engagements does GAGAS define?
Single audits
Which engagements does GAAS define?
- Audits
- Reviews
- Compilations
What are the procedures if the auditor finds fraud within a government contract?
- The auditor has a responsibility to communicate fraud to those charged with governance. Because this entity has an audit committee, the auditor should report fraud directly to the audit committee. If Governance does noting than…
- Under Government Auditing Standards (GAS), the auditor has an additional responsibility to communicate fraud to individuals contracting for or requesting the audit.
What are the terms used to describe standards to follow?
-
Presumptively mandatory indicates that the requirement must be followed in all cases where the requirement is relevant, except in rare circumstances in which auditors and audit organizations determine it is necessary to depart from the
presumptively mandatory requirement. If they do depart, they must
provide a special explanation, which includes their justification for the departure and how the alternative procedures performed in the circumstances were sufficient to achieve the intent of that requirement. Generally accepted government auditing standards uses the term “should” to describe presumptively mandatory items. - Generally accepted government auditing standards use the terms “may,” “might,” and “could” to describe explanatory material that describes optional standards to follow.
- An unconditional requirement indicates that the requirement must be followed in all cases where the requirement is relevant. Generally accepted government auditing standards use the word “must” to indicate an unconditional requirement.
