Governmental Audits II

Question 1

What is an auditor’s primary objective in a compliance audit?

Answer 1

To obtain sufficient appropriate evidence to form an opinion on compliance

E.g. To report at the level specified in the governmental audit requirement on whether the entity complied, in all material respects;

• with the applicable compliance requirements

Question 2

What is a requirement of an auditor who is auditing a nonfederal entity’s administration of a federal award pursuant to a major program under the Single Audit Act?

Answer 2

The auditor should;

• Obtain evidence related to compliance
• Express or Disclaim an Opinion on Compliance

Question 3

What are some examples of expressions of opinion on the fairness of financial presentation under Government Auditing Standards (GAS)?

Answer 3

• Program Audits
• Attestation Audits
• Economy and Efficiency Audits

Question 4

Under Government Auditing Standards (GAS), WHEN would a material weakness in internal control over compliance come up?

Answer 4

WHEN - a reasonable possibility exists that material noncompliance will not be prevented or timely detected and corrected

E.g. This is a deficiency, or combination of deficiencies, in internal control over compliance that;

• results in a reasonable possibility exists that material noncompliance will not be prevented or timely detected and corrected

Question 5

Under Government Auditing Standards (GAS), WHEN would a deficiency in internal control over compliance come up?

Answer 5

WHEN - the design or operation of a control does not allow management or employees to detect noncompliance in the normal course of their duties

Question 6

What is included in an Attestation engagement under Government Auditing Standards (GAS)?

Answer 6

Reporting on the reliability of performance measures

NOTE: These engagements involve examining, reviewing, or performing agreed-upon procedures on a subject matter or an assertion about a subject matter that is the responsibility of another party

E.g. accuracy or reliability of performance measures

Question 7

What type of schedule would an CPA prepare under the Single Audit Act?

Answer 7

The CPA WOULD prepare a schedule of audit findings and questioned costs

E.g. This includes any instances of known questioned costs greater than $25,000; or

• known questioned costs when likely questioned costs exceed $25,000 for compliance requirements

Question 8

What should be included in the auditor’s report WHEN reporting on compliance with laws and regulations during a financial statement audit in accordance with Government Auditing Standards?

Answer 8

The CPA should report Material instances of fraud and noncompliance that were discovered

Question 9

What is a general standards in Government Auditing Standards related to Independence?

Answer 9

Auditors must be independent in mind and appearance

Hence, an audit organization must be free of the appearance of an impairment to independence

Question 10

What are the CPE Hour requirements under the Government Auditing Standards?

Answer 10

Under GAGAS standards

• Auditors are required to obtain 80 hours of continuing education in related topics every 2 years

NOTE: at least 24 hours of CPE should directly relate to governmental auditing

Question 11

What type of assurance should be provided by a CPA in relation to their tests of the entity’s compliance with applicable laws and regulations under Government Auditing Standards?

Answer 11

The CPA provides “Reasonable assurance” of detecting misstatements that are material to the financial statements

Question 12

How are GAS and GAAS related for a financial statement audit?

Answer 12

For financial statement audits, Government Auditing Standards incorporates GAAS

NOTE: GAS also state additional standards

Question 13

What are Materiality levels as a whole based on for a government program?

Answer 13

Materiality levels, generally for a government program as a whole, are based on;

• GAR or governmental audit requirements

Question 14

What should be submitted by the “auditee” in a government audit?

Answer 14

A data collection form providing information about the auditee, its federal programs, and the results of the audit

NOTE: This should be submitted to the designated clearinghouse

Question 15

Under the Single Audit Act, how much is a nonfederal entity required to spend in a fiscal year?

Answer 15

The nonfederal entity needs to spend $750,000 or more in a fiscal year

NOTE: GAGAS incorporates GAAS but is broader in scope

Question 16

Who prescribes the policies and procedures for the Single Audit Act?

Answer 16

The Office of Management and Budget (OMB) prescribes policies and procedures for the single audit

E.g. This “Act” was passed in 1984 AND amended in 1996

NOTE: A single audit is required if the entity expends federal awards under more than one federal program

Question 17

What would be considered an example of an Financial Audit Activity?

Answer 17

• Issuing Letters to Underwriters

- Reporting on the fairness of a balance sheet

Question 18

What would be considered an example of an Attestation Engagement Activity?

Answer 18

• Performing agreed-upon procedures on MD&A
• Reviewing allowable, reasonable and final contract costs
• Examining the accuracy or reliability of performance measures
• Reporting on the quality or condition of inventory assets

Question 19

What would be considered an example of an Performance Audit Activity?

Answer 19

• Assessing economy and efficiency

- Assessing compliance with Legal and Regulatory requirements