Term
| Government Auditing Standards (GAS) (publication) |
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Definition
| the GAO publication (the Yellow book) that is fundamental to governmental auditing and is the basis for most of the related questions on recent CPA exams. |
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Term
| Government Accountability Office (GAO) |
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Definition
| establishes GAGAS and issues GAS (the Yellow book) |
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Term
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Definition
| generally accepted govt. auditing standards. GAGAS pertain to auditor's professional qualifications and the quality of their work, the performance of field work, and the characteristics of meaningful reporting. |
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Term
| Government Auditing Standards (GAS) (components of GAS) |
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Definition
| contains standards for audits and attestation engagements of government entities, programs, activities, and functions and of govt. assistance administered by contractors, nonprofits, and other nongovt. entities. |
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Term
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Definition
| These audits are primarily concerned w/whether F/S are presented fairly in all materials respects w/GAAP or w/a comprehensive basis of accounting other than GAAP. |
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Term
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Definition
GAGAS require related reporting on:
1. IC,
2. Compliance w/laws, regulations, and contract provisions, and
3. Fraud and illegal acts. |
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Term
| governmental audit vs. F/S audit of business entity. |
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Definition
| The auditor conducting a govt. audit accepts a greater scope and assumes more responsibility than in an audit of a business entity. |
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Term
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Definition
| These engagements provide for different levels of assurance and involve various scopes of work. |
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Term
| Other objectives include... |
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Definition
a. Special reports for specified elements, accounts, or items of an F/S.
b. Reviewing interim fin. info.
c. Issuing letters for underwriters and certain other requesting parties.
d. Reporting on the processing of transactions by service organizations.
e. Auditing compliance w/regulations relating to federal award expenditures and other govt. fin. assistance in conjunction w/or as a by-product of a F/S audit. |
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Term
| attestation engagements for govt. audits |
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Definition
| These engagements involve examining, reviewing, or performing agreed-upon procedures on a subject matter or an assertion about a subject matter and reporting on the results. |
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Term
| examples of attestation engagements for govt. audits |
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Definition
a. An entity's IC over F/R or other reporting.
b. An entity's compliance w/requirements of specified laws, regulations, rules, contracts, or grants.
c. MD&A
d. Prospective F/S or performance info.
e. Accuracy or reliability of performance info.
f. Allowable, reasonable, or final contract cost.
g. The quantity, condition, or valuation of inventory or assets.
h. Results of agreed-upon procedures. |
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Term
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Definition
1. Address many objectives.
2. They also may provide prospective analyses, guidance, or summary info. |
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Term
| objectives of performance govt. audits |
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Definition
Assessing:
a. Program effectiveness and results,
b. Economy and efficiency,
c. IC, and
d. Compliance w/legal requirements. |
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Term
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Definition
| In standards for fin. audits, GAS incorporates AICPA standards of field work and reporting. However, it states different general standards and prescribes additional field work and reporting standards. |
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Term
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Definition
a. Independence.
b. Professional judgment.
c. Competence.
d. Quality control and assurance. |
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Term
| GAS: field work standards |
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Definition
a. Auditor communication.
b. Considering results of previous engagements.
c. Detecting material misstatements resulting from contract or grant violations or from abuse.
d. Developing elements of a finding.
e. Audit documentation. |
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Term
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Definition
a. Compliance w/GAGAS.
b. IC and compliance w/laws, reulations, and contract or grant provisions.
c. Deficiencies in IC, fraud, illegal acts, violations of contracts or grant agreements, and abuse.
d. Communicating significant matters in the auditor's report.
e. Reporting on restatement of previously-issued F/S.
f. Reporting views of responsible officials.
g. Reporting confidential or sensitive info.
h. Distributing reports. |
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Term
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Definition
Independence in mind/fact and in appearance.
In all matters relating to the audit work, the audit organization and the individual auditor, whether govt. or public, must be free from personal, external, and org. impairments to independence, and must avoid the appearance of such impairments of independence. |
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Term
| rules on personal impairments of GAS independence |
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Definition
similar to AICPA rules.
An auditor may not:
a. have a direct fin. interest or material indirect fin. interest in client,
b. audit the work of a close family member,
c. seek employment w/audited entity, or
d. be biased. |
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Term
| nonaudit services and GAS independence |
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Definition
When assessing whether nonaudit services impair independence, the audit org. applies two overarching principles:
a. No nonaudit services that involve performing mgmt. functions or making mgmt. decisions.
b. No auditing your own work or providing nonaudit services significant or material to the subject matter of audits. |
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Term
external impairments
(to GAS independence) |
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Definition
| occur when auditors are deterred from acting objectively and exercising professional skepticism by pressures, actual or perceived, from management or employees of the audited entity or oversight orgs. |
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Term
organizational impairments
(to GAS independence) |
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Definition
| may be created by the audit org.'s place within govt. or the structure of the audited entity. |
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Term
| When are govt. auditors free from org. impairments to independence when reporting externally to third parties? |
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Definition
| If their audit org. is organizationally independent from the audited entity. |
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Term
| When is a govt. IA org. free from org. impairments to independence when reporting internally to mgmt.? |
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Definition
If the head of the audit org.:
a. Accountant to the head or deputy head of govt. entity.
b. Required to report the results of the audit org.'s work to the head or deputy head of the govt. entity, and
c. Located organizationally outside the staff or line mgmt. function of the unit under audit. |
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Term
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Definition
| Auditors must use professional judgment in planning and performing audits and attestation engagements and in reporting the results. |
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Term
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Definition
| The staff assigned to perform the audit or attestation engagement must collectively possess adequate professional competence for the tasks required. |
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Term
| CPE requirements under GAGAS (competence standard) |
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Definition
| Every 2 years, each auditor performing work under GAGAS must earn at least 24 hours of CPE directly related to govt. auditing. |
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Term
| quality control and assurance |
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Definition
Each audit org. performing audits or attestation engagements in accordance w/GAGAS must:
a. Establish system of quality control designed to provide audit org. w/reasonable assurance that the org. and its personnel comply.
b. Have an external peer review every 3 years. |
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Term
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Definition
| Under AICPA standards and GAGAS, auditors should communicate w/audited entity their understanding of services to be performed for each engagement and document that understanding through written communication. |
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Term
| considering results of previous engagements |
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Definition
| Auditors should evaluate whether audited entity has taken appropriate corrective action to address findings and recommendations from previous engagements that could have a material effect on F/S. |
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Term
| detecting material misstatements resulting from contract or grant violations or from abuse. |
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Definition
| Auditors should design audit to provide reasonable assurance of detecting misstatements that result from violations and could have a direct and material effect on F/S. |
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Term
| developing elements of a finding |
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Definition
| Audit findings may involve deficiencies in IC, fraud, illegal acts, violations of contract provisions, and abuse. |
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Term
| elements needed for a finding include |
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Definition
a. Criteria- required state or expectation
b. Condition- situation that exists.
c. Cause- identifies reason or explanation for condition.
d. (Potential) Effect- clear, logical like to establish the impact or potential impact of the difference between the conditions and criteria. |
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Term
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Definition
Under AICPA standards and GAGAS, auditors should prepare audit documentation that enables an experienced auditor, having no previous connection to the audit, to understand:
a. nature, timing, and extent of audit procedures.
b. results of audit procedures performed and evidence obtained.
c. conclusions.
d. that the accounting records reconcile w/audited F/S |
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Term
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Definition
| Audit reports should state that the audit was performed in accordance w/GAAS. |
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Term
| IC and compliance w/laws, regulations, and contract or grant provisions |
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Definition
| F/S report should describe the scope of the auditor's testing of ICFR and compliance. Opinion/results of tests should be included. |
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Term
| Deficiencies in IC, fraud, illegal acts, violations, and abuse |
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Definition
| Auditors should report significant deficiencies and material weaknesses in IC. Fraud/violations that can have a material effect on F/S should also be reported. |
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Term
| communicating significant matters in the auditor's report |
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Definition
| Under AICPA standards, auditors may emphasize in the auditor's report significant matters regarding the F/S. |
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Term
| reporting on restatement of previously-issued F/S |
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Definition
| Auditors should follow AU 561. |
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Term
| reporting views of responsible officials |
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Definition
| If audit report discloses deficiencies, auditors should obtain and report the views of responsible officials concerning the findings, conclusions, recommendations, and corrective actions. |
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Term
| reporting confidential or sensitive info |
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Definition
| Auditors should disclose in the report that certain info has been omitted and the reason or other circumstances that make the omission necessary. |
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Term
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Definition
| Audit orgs. in govt. entities should distribute audit reports to those charged w/governance, to the appropriate officials of the audited entity, and to the appropriate oversight bodies or orgs. requiring or arranging for audits. |
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Term
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Definition
| program-specific or org-wide audit of compliance w/requirements that apply to govt. programs. |
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Term
| When is a compliance audit generally performed? |
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Definition
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Term
| A compliance audit is performed in accordance with... |
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Definition
1. GAAS
2. Fin. audit standards in GAS, and
3. GAR that requires an opinion at the program level |
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Term
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Definition
| governmental audit requirement |
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Term
| management's responsibilities under compliance audit |
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Definition
a. Identifying the entity's govt. programs and understanding and complying w/compliance requirements.
b. Establishing and maintaining effective controls over compliance.
c. Evaluating and monitoring compliance.
d. Taking necessary corrective action. |
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Term
| objectives of compliance audit |
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Definition
Obtain sufficient appropriate audit evidence to form an opinion and report at the level specified in the GAR on whether the entity complied in all material respects w/compliance requirements.
Also, identify audit and reporting requirements in the GAR that supplement GAAS and GAS and perform and report on related procedures. |
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Term
| Are GAAS part of a compliance audit? |
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Definition
| The auditor, based on professional judgment, adapts GAAS for compliance audit, but not all GAAS apply. |
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Term
| On what are materiality levels based for a compliance audit? |
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Definition
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Term
| acceptable compliance requirements (ACRs) |
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Definition
| Based on the GAR, the auditor determines which govt. programs and compliance requirements identified by mgmt. to test. |
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Term
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Definition
1. Performing risk assessment procedures.
2. Assessing RMNs
3. Performing further audit procedures in response to assessed risks.
4. Addressing supplementary audit requirements in the GAR.
5. Obtaining written mgmt. reps.
6. Performing subsequent events procedures.
7. Evaluating evidence and forming an opinion.
8. Reporting on compliance.
9. Documenting the audit. |
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Term
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Definition
| risks of material noncompliance, which consist of the inherent risks and control risks of noncompliance |
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Term
| risk assessment procedures for compliance audit |
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Definition
Obtain sufficient understanding of ACRs and entity's IC over compliance to plan the audit.
This includes inquiring of management about whether findings and recommendations in reports or other communications resulting from previous audits or other monitoring relate to compliance. |
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Term
| Based on results of risk assessment procedures... |
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Definition
| the auditor should assess the RMN, whether due to fraud or error, for each ACR. |
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Term
| If the auditor identifies RMNs that have a pervasive effect on compliance... |
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Definition
| the auditor should develop an overall response to such risks. |
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Term
| What level of assurance is provided by a compliance audit? |
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Definition
Reasonable assurance, duh.
Because of:
1. Sampling procedures.
2. Professional judgment.
3. Persuasive, not conclusive, evidence.
4. Inherent limitations of IC including the potential for collusion of entity employees. |
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Term
| Are other procedures needed to obtain sufficient appropriate evidence of compliance? |
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Definition
| Tests of details (substantive tests). Risk assessment procedures, tests of controls, and analytical procedures alone are not sufficient to address RMNs. |
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Term
| written mgmt. representations |
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Definition
The auditor should request written reps. specific to the entity and the GAR.
Such reps. should include:
1. Acknowledgement of mgmt.'s responsibility for compliance
2. Acknowledgement of mgmt.'s responsibility for controls over compliance
3. Declarations that all evidence has been made available and all instances of noncompliance have been provided to the auditor. |
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Term
| subsequent events procedures |
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Definition
The auditor should perform procedures up to the date of the auditor's report.
1. Considering the risk assessment and examples of noncompliance during subsequent period.
2. Inquiring of mgmt. |
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Term
| evaluating evidence and forming an opinion |
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Definition
| The auditor should evaluate the sufficiency and appropriateness of audit evidence obtained and form an opinion at appropriate level on whether the entity complied in all material respects w/ACRs. |
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Term
| How should you report on compliance? |
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Definition
| Either in a separate report, or included w/a report on IC over compliance required by the GAR. |
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Term
| When should a compliance report be modified? |
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Definition
| Given material noncompliance w/ACRs or a restriction on the scope of the audit, the report should be modified according to GAAS. |
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Term
| compliance audit documentation |
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Definition
1. Risk assessment procedures performed, including IC consideration.
2. Materiality levels and how they were determined.
3. Responses to assessed risks.
4. Results of procedures and conclusions formed.
5. Performance of supplementary procedures. |
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Term
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Definition
| passed in 1984 (amended in 1996). Requires one audit or a program-specific audit of a nonfederal entity that expends a certain total amount of federal awards. |
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Term
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Definition
| required if the entity expends federal awards under more than one federal program |
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Term
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Definition
| Each federal agency must, w/regard to awards provided by that agency, monitor the use of such awards. |
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Term
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Definition
| Each nonfederal agency must be assigned a single federal agency to assess the quality of audits and provide technical assistance. |
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Term
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Definition
| Includes F/S, audit reports, schedule of expenditures of federal awards, corrective action plans; delivered to a federal clearinghouse. |
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Term
| Office of Management and Budget (OMB) |
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Definition
| prescribes policies and procedures for the single audit as issued in OMB Circulars and compliance supplements. |
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Term
| Major programs are selected to be audited based on... |
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Definition
| risk-based criteria subject to certain limitations based on $ expenditures. |
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Term
| According to the Single Audit Act, the audit must be conducted in accordance with... |
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Definition
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Term
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Definition
a. Expressing or disclaiming an opinion on whether F/S are presented fairly in all material respects in conformity w/GAAP.
b. Expressing or disclaiming an opinion on whether the schedule of expenditures of federal awards is presented fairly in all material respects for the F/S taken as a whole.
c. Obtaining an understanding of IC sufficient to plan the audit to support a low assessed level of control risk for major programs, planning tests of controls to support that assessment for the assertions relevant to compliance requirements for each major program, and performing tests of controls.
1. Report on IC should refer to, among other things, the schedule of findings and questioned costs.
d. Expressing or disclaiming an opinion on whether the auditee has complied w/laws, regulations, and provisions of contracts or grants that may have a direct and material effect on each major program.
e. Following up.
f. Reporting a schedule of findings and questioned costs. |
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Term
| Compliance Supplement to OMB Circular A-133 |
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Definition
| covers compliance requirements applicable to awards made by many federal programs, particularly on compliance requirements that could have direct and material effect on a major program. |
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Term
| Single Audit Act requires nonfederal entities that expend $500,000+ in federal awards in a fiscal year to have a... |
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Definition
single audit or program-specific audit.
Single audit- replaces fin. audit and covers operations of the entire entity. |
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Term
| Auditee management is responsible for... |
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Definition
| identifying federal awards and the related programs and preparing a schedule of the expenditures of federal awards. |
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Term
| Auditee must submit to the designated clearinghouse... |
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Definition
a data collection from providing info about the auditee, its federal programs, and results of audit.
Also, auditee must submit a reporting package with F/S, summary schedule of audit findings, audit reports, and corrective action plan. |
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Term
| criteria considered in risk-based approach for determining which federal programs are major programs |
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Definition
a. Current and prior audit experience.
b. Oversight by fed. agencies and pass- through entities.
c. Inherent risk, and
d. Amounts of federal awards expended. |
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Term
| Can a federal agency or pass-through entity request that the auditee have a program audited as a major program? |
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Definition
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Term
| schedule of audit findings and questioned costs (included in IC report) |
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Definition
Includes instances of:
a. known questioned costs over $10,000 or
b. known questioned costs when likely questioned costs exceed $10,000. |
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Term
| Should known questioned costs for a nonmajor program also be included? |
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Definition
| If they exceed $10,000, yes. |
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Term
| Audit findings should be sufficiently detailed to... |
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Definition
| permit the auditee to prepare a corrective action plan and to take such action. |
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Term
| Under the Single Audit Act, a federal agency or the U.S. Comptroller General may, upon request, obtain access to the auditor's working papers to: |
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Definition
a. provide info for a quality review,
b. resolve audit findings,
c. carry out oversight responsibilities.
Access includes the right to obtain copies. |
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