Becker AUD 6.4 - Government Auditing Flashcards Preview

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Flashcards in Becker AUD 6.4 - Government Auditing Deck (14):

What are the 2 sources for auditing standards on government?



What is the name of of supplementary requirements on government audits?

OMB Circular A-133


GAAS is issued by what board in the what name of the auditing standards?

AICPA's Auditing Standards Board (ASB) issues GAAS in the form of SASs (Statements on Auditing Standards).


What is the other name for GAGAS?

The Yellow book


The GAGA a.k.a. Yellow book are organized as what 4 things?

(1) Foundations and Ethical principals

(2) General Standards

(3) Standards for Financial Audits and Attestation engagements

(4) Fieldwork and Reporting Standards for Performance Audits


How are GAAS incorporated in GAGAS?

GAAS are referenced in GAGAS.

And: Additional standards applicable to Government expand the auditors' requirements.


GAGAS contain standards for audits of what 2 things?

(a) Government orgs, programs, activities, and functions

(b) Government assistance received by contractors, not-for-profit organizations, and other non-governmental organizations.


What are the 4 Audit requirements on auditing those that receive Federal Financial Assistance?

(1) EXPANDED internal control documentation and testing requirements.

- DO MORE work on testing internal controls and extensive documentation

(2) EXPANDED reporting to include formal written reports on consideration of internal control & assessment of control risk.

- DO MORE reporting on Testing Internal Controls to assess control risk

(3) EXPANDED reporting to include whether the contractor, NFP, Non-govt orgs, received Federal Assistance and administered per Applicable regs and laws.

(4) Application on SINGLE AUDIT standards to Federal Financial Assistance.


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CPA exam focus on Expanded Audit and Reporting Requirements related to those receiving Federal Financial Assistance.

Fact patterns in question focus on:
* Additional requirements associated with GAGAS and A-133 audits
* Differences between Government and Commercial accounting.


Name 4 types of Attestation engagements.

(1) Compliance with specified laws, regulations, rules, contracts, or grants

(2) Effectiveness on I/C over COMPLIANCE with specified requirements (e.g. bidding, etc.)

(3) Presentation of Management's Discussion and Analysis (MDA)

(4) Reliability of performance measures.


What are the 3 objectives of Performance Audits?

(1) Effectiveness, Economy, and Efficiency:

This means that Government achieves Organizational goals; Cost benefit or cost effectiveness, the validity or reliability of performance measures

(2) Internal control:

* Determine if Internal control achieves missions, goals, objectives efficiently and effectively
* Govt used resources that complies with laws, rules, and regulations
* Effective security over computerized systems
* Adequate disaster plans for computer systems

(3) Compliance:

* Met all compliance criteria est. under law, regulations, contract, etc.
* Served the appropriate target population


What is the format of the Auditor Report (opinion) on F/S and Supplementary schedule of expenditure of federal awards?

(1) Intro Paragraph:
* Name of government entity, non-for-profit, contractor
* Say its F/S audited, Balance sheet date, and period under audit

* Say: MGT is responsible for prepare F/S
* Say: Auditor responsible for auditing F/

(2) Scope Paragraph:
* Audit was done in accordance with GAAS and GAGAS
* Require tests to provide REASONABLE ASSURANCE the F/S are free from material misstatement,

AND describes the Character of Audit procedures and assertions

* Asserts audit provides a reasonable basis for opinion

(3) Opinion paragraph
* Express opinion: The fair presentation of F/S in conformity with GAAP

(4) Disclosure Paragraph Regarding Additional Reports for GAGAS

* Auditor complied with GAGAS
* Auditor Issued Report on I/C over Fincnial reporting & on Tests of audited entity's compliance with laws, regulations, contracts, and grants (CWLRCG)

(5) Opinion on Additional Schedules Required by Single Audit Act

* Say: Schedule of Expenditures of Federal Awards is presented as a requirement of OMB Circular A-133
* And it is NOT part of Basic F/S

* Say Information was audited as part of procedures applied to basic F/S

* Say: Schedule is fairly stated in relation to basic F/S taken as a whole.


(1) True or False:

GAAS requirements on compliance audits are used in connection with GAGAS compliance audits.

(2) What are the objectives of Compliance audits?

(3) What are the GAAS assumptions on MGT in compliance audits?

(1) True.
GAAS compliance audits requirements go hand-and-hand with GAGAS compliance audits.

(2) Objectives Compliance Audits:
Obtain sufficient evidence to form opinion on Entity complied in all material respects with COMPLIANCE REQUIREMENTS applicable to its programs.

Report @ Level specified in Governmental audit requirement (GAR)

Identify audit / reporting requirements supplementary to GAAS and GAGAS and address those requirements (e.g. Single Audit Act requirements)

(3) GAAS assumptions on MGT in compliance audits:
* MGT will Identify government programs, and understand and comply with Compliance requirements
* MGT maints effective controls - Provides reasonable assurance that entity will company compliance requirements
* MGT conducts ongoing evaluation and monitoring of compliance requirements
* MGT takes appropriate actions to correct issues based on audit findings.


Is there a similarity between the Risk of Material noncompliance and Detection of Noncompliance risk

with the F/S audits on Risk of material misstatements and detection risk?


Risk of Material Noncompliance consists of:
* Inherent risk of Non-compliance
= Susceptibility of compliance requirement to non-compliance that could be material
= It exists independent of audit
= Auditor cannot change this risk.
= But can change assesment of risk based on audit evidence

* control risk of noncompliance
= Entity's internal controls cannot prevent or detected on timely basis the noncompliance
= Exists independently of auditor
= Auditor cannot change this risk
= But can change assessment of risk based on audit evidence

Detection Risk
* Risk that auditor will not detect material noncompliance.
* Relates to audit procedures
* Audit can can be this risk by changing the Nature, Extent, Timing of audit procedures

UP risk of material noncompliance
= LESS detection risk

* This because more audit work needed to mitigate HIGH risk of material non-compliance therefore able to detect all sorts of non-compliance issues

LOW risk of material noncompliance
= LESS audit work (because rely more on Controls)

This because Low RMN (i.e. low control risk) means you rely more on internal controls. You do less audit work and therefore you have HIGH detection risk.