Governmental Auditing Flashcards
are issued by the comptroller general of the United States, Government Accountability Office (GAO).
Government Auditing Standards
Another name for the Government Auditing Standards is…
the “Yellow Book” - Generally Accepted Government Auditing Standards (GAGAS)
These are audit standards that must be followed for audits of federal organizations, programs, activities, functions, and funds received by contractors, nonprofit organizations, and other external organizations.
Government Auditing Standards
GAO standards incorporate AICPA GAAS but go further, requiring:
- a review for compliance w/ applicable laws & regulations,
- external reporting of instances or indication of fraud, and
- reports on the entity’s internal control structure.
Government Auditing Standards contain guidelines for:
economy, efficiency, and program results audits.
GAGAS. Audits for Federal Financial Assistance include:
- Expanded Internal Control documentation & testing
- Expanded Reporting Requirements
What are the expanded reporting requirements for audits of Federal Assistance under GAGAS?
- Formal written report on the consideration of I/C & assessment of Control Risk
- Whether assistance was administered according to applicable laws & regulations
What is the purpose of a F/S audit under GAGAS & what reports are included?
- to determine whether F/S are presented fairly in accordance w/ GAAP
- Includes report on internal control & compliance w/ laws & regulations, contractual requirements, & grant requirements
Types of Governmental Audits:
Financial Statement Audit
Compliance Audit
Performance Audit
What does the Yellow Book require for ALL audits?
- Written report on the auditor’s understanding of internal control & the audit’s assessment of control risk
What are the auditor’s requirements?
- Obtain an understanding of design of internal control & determine if controls have been implemented
- Communicate to those in charge of governance ALL significant deficiencies (even if not material)
- Report all illegal acts to the entity’s top official (regardless of materiality level)
- Report fraud & illegal acts to the federal inspector general
Abuse is defined as a misuse of authority for gain. What are the auditor’s responsibilities in regards to abuse?
Auditor is not required to search for abuse, but if detected it requires further testing
When should fraud or illegal acts be reported to the inspector general?
If management fails to disclose them or take remedial action
Management Representation Letter should state:
- no violations or possible violations of laws and regulations
- management is responsible for compliance
- management disclosed to auditor all laws & regulations that have a material effect on the F/S
Usually done in conjunction w/ financial statement audits.
Compliance Audits
Auditor’s opinion on compliance is at the _________ level.
Program
For a Compliance Audit, the required management representation letter must state…
that management has disclosed all instances of noncompliance or there were no instances of noncompliance
For a Compliance Audit, the auditor must document…
the assessment of the risk on noncompliance. Which includes the procedures performed, the tests of controls, and the results
For a Compliance Audit, the auditor must document the basis for…
materiality level
What are the attestation engagements under Governmental Auditing?
- Examinations
- Reviews
- Agreed-Upon Procedures
What is the purpose of a Performance Audit?
Provide findings or conclusions based on evaluating sufficient appropriate evidence against particular criteria.
What is the objective of a Performance Audit?
Used to assist management and those in charge of governance with improving program performance & operation to achieve the organization’s goals both effectively & efficiently
is federal legislation that establishes uniform requirements for the audits of federal financial assistance provided to state and local governments. It requires state and local governments and not-for-profit organizations that expend total federal financial assistance equal to or in excess of a specified amount in a fiscal year to have an audit performed in accordance with the Act (as implemented by OMB Circular A-133).
Single Audit Act Amendment of 2013
According to the Single Audit Act, an annual audit is required for an entity that expends $_______ or more of federal assistance for any fiscal year.
$750,000
What are the primary objectives of the Single Audit Act?
- Audit the entity’s F/S & report on a separate schedule the expenditures of federal funds in relation to the F/S
- Provide a Compliance Audit of federal funds expended during the year for EACH PROGRAM
The Single Audit Act requires additional audit procedures for specific programs, including…
a separate evaluation of materiality for each program
What kind of approach is used when determining materiality levels for each program under the Single Audit Act?
Risk-Based Approach
Single Audit Act. The auditor must express a(n) _________ or __________, on the F/S & the separate schedule of expenditure of federal funds.
If noncompliance with requirements:
If material - _______ opinion
If pervasive - _________ opinion
Opinion or Disclaimer of Opinion
Material = Qualified Opinion
Pervasive = Adverse
