Governmental Auditing Flashcards
Governmental Auditing Standards
US GAAS apply to all audits
Generally accepted government auditing standards (GAGAS) - aka the Yellow Book includes all GAAS
Yellow Book
Provides standards for audits of:
governmental organizations and their programs, activities, and functions
also applies to those receiving government financial assistance
contains a few points of emphasis and requirements other than GAAS
Federal Financial Assistance
Audit requirements include:
-expanded internal control documentation and testing
-expanded reporting requirements:
formal written report on consdieration of IC and assessment of control risk
whether assitance was administered according to laws and regulations
Financial Statement Audits in Governmental
Financial Statement Audits
- performed according to the Yellow Book
- purpose is to determine wheather financial statements are presented fairly in accordance with GAAP
- includes report on internal control and compliance with laws and regulations, contractual requirements, and grant requirements
Yellow Book requirement
written report on the auditor’s understanding of internal control and the auditor’s assessment of control risk on ALL audits
-important and different than the less stringent GAAS requirement on internal control
Auditor Requirements
Obtain understanding of design of internal control and determine if controls have been implemented
Communicate to those in charge of governance all significant deficiencies:
- even if not material weaknesses
- also reported to appropriate legislative and regulatory bodies
any written response is included in audit report
must report all illegal acts to the top official of the entity and any oversight (legislative or regulatory) bodies - even if not material weaknesses
Must report fraud and illegal acts to the federal inspector general if management fails to dislcose them or take remedial action
Yellow Book: Fraud and Abuse
Additional attention given to fraud and abuse
abuse - a misuse of authority for gain
auditor not required to search for abuse, but if detected it requires further testing
Yellow book: management rep letter
Required at end of every audit, it should state the following:
- there have been no violations or possible violations of laws and regulations
- that management is responsible for compliance with all laws and regulations
- that management has disclosed to the auditor all laws and regulations that have a material effect on FS
Compliance Audit
Usually done in conjuction with FS audits
Auditor must design audit to provide reasonable assurance of detecting material misstatements that result from noncompliance with laws and regulations
Auditor’s opinion is at program level
Management Rep letter - must state that mgmt has disclosed all instances of noncompliance or there were no instances of noncompliance
must document the assessment of the risk of noncompliance - the procedures performed, the tests of controls, and the results as well as the materiality level
Risk of Noncompliance
Also consists of inherent risk and control risk
If inherent risk and control risk are higher, auditor must set detection risk lower to control overall audit risk of noncompliance
Governmental Auditing: Attestation Engagement
Examinations, reviews, and agreed upon procedures
Performed according to Yellow Book, which includes SSAEs (standards on attestation engagements)
Examinations - expanded requirements on reporting on the effectiveness of internal control and identifying any deficiencies in internal control. Expanded requirements on reporting on laws and regulations, and contractual requirements and grant requirements
Governmental Auditing: Performance Audits
Provide findings or conclusions based on evaluating sufficient appropriate evidence against particular criteria
Used to assist management and those charged with governance with improving program performance and operation to achieve the organization’s goals both effectively and efficiently
Single Audit Act
Required an audit be performed for entities that expend $750,000 or more of federal assistance for any fiscal year
Two primary objectives
- Audit the entitiy’s FS and report on a separate schedule the expenditures of federal funds in relation to the FS
- Provide a compliance audit of federal funds expended during the fiscal year for each program
Requires additional audit procedures for each program including a separate evaluation of materiality for each program
Materiality is determined for each program using a risk-based approach - inherent risk, control risk, and detectin risk used to determine a major program
Auditor must express an opinion , or a disclaimer, on the FS and the separate schedule of expenditure of federal funds
If noncompliance with requirements, material =qualified; very material = adverse
Auditor required to report on a major program’s internal control and their compliance with laws and regs
