Chapter 1 & 2 Flashcards
What is the purpose of a Performance Audit and to what standards are the audits performed?
To provide an opinion about whether an entity’s F/S are presented fairly
Performance audits performed in accordance with GAGAS also include reports on internal control over financial reporting and on compliance with laws, contracts,etc.
What is the purpose of a Financial Audit and to what standards are the audits performed?
To provide an opinion about whether an entity’s F/S are presented fairly
Financial audits performed in accordance with GAGAS also include reports on internal control over financial reporting and on compliance with laws, contracts,etc.
What is the purpose of a Single Audit and to what standards are the audits performed?
- Requires state and local governmental units that receive certain amounts of federal financial assistance to obtain an independent single audit of all federal funds received under various federal programs.
- Replaces separate audits of individual grants
- OMB A-133 provides guidelines and standards for conducting single audits
Audit objectives are to:
- Determine whether the F/S are presented fairly in conformity with GAAP
- Determine whether the Schedule of Expenditures if Federal Awards is presented fairly
- Perform procedures to obtain understanding of internal control over federal programs
- Determine whether the auditee has complied with laws, regulations, contracts
What is the purpose of a Non-audit Services and to what standards are the services performed?
Not covered under governmental auditing standards
Differ from financial audits, attestation engagements, and performance audits in that auditors may perform tasks requested by management that directly support the entity’s operations such as:
- Developing or implementing accounting systems
- Determining account balances
- Developing internal control systems
- Processing payroll
- Posting transactions
What is the purpose of a review and to what standards is the review performed?
- Limited in the application of procedures and scope
- Provides for a limited auditor assurance regarding the subject matter under review
- Subject matter may involve financial transactions and data, operation processes, or informational systems
- Results published in a report of letter
What is the purpose of a survey and to what standards is it performed?
- Used as a method for collecting quantitative information about a subject matter
- Usually quick and require limited or no fieldwork in compiling the information
- In some instances, surveys can lead to a review or audit
- Results may not result in a report or letter
What is SCO’s audit authority and why is it important?
- The SCO is responsible for conducting audits of claims against the State and disbursements of State funds.
- The SCO’s authority and responsibility are stated in the State Constitution and the Government Code.
- The SCO performs most audits under the statutory authority of GC Section 12410, which states:
- The Controller shall superintend the fiscal concerns of the state.
- The Controller shall audit all claims against the state, and may audit the disbursement of any state money for correctness, legality, and for sufficient provisions of law for payment.
What is GAAS and what are the three main categories?
GAAS stands for Generally Accepted Auditing Standards.
Issued by the American Institute of Certified Public Accountants, or AICPA.
Encompass the broadest application of auditing standards available
These standards ensure that auditors maintain competence, integrity, independence, and objectivity in planning, conducting, and reporting their work.
The three main categories are:
- general standards
- fieldwork standards
- reporting standards
There are three categories of standards which are identified as Generally Accepted Auditing Standards by the American Institute of Certified Public Accountants. Please briefly describe each standard and identify the category that each standard is included. Do not include standards imposed by the U.S. General Accounting Office.
General Standards
Training – adequate technical training
Independence—in mental attitude
Professional—due professional care
Fieldwork Standards
Planning—work to be adequately planned/supervised
Internal Control—a sufficient understanding of IC is to be obtained
Competent—sufficient competent evidential matter is to be obtained
Reporting Standards
- *A**ccordance w/ GAAP—the report shall state “in accordance with GAAP”
- *N**o new principles—the report shall state whether principles were consistently observed
Omitted Disclosures-none—disclosures are to be adequate
Express an opinion—the report shall contain an opinion or that an opinion can’t be expressed
What are GAAP and GAAS and what are their differences?
Generally Accepted Accounting Principles **(GAAP) **encompass the conventions, rules, and procedures that define accepted accounting practice.
The Governmental Accounting Standards Board (GASB) establishes accounting standards for government entities.
The Financial Accounting Standards Board (FASB) establishes standards for all other entities.
Generally Accepted Auditing Standards is issued by the AICPA and encompass the broadest application of auditing standards available.
These standards ensure that auditors maintain competence, integrity, independence, and objectivity in planning, conducting, and reporting their work.
GAAP relates to accounting principles while GAAS relates to auditing standards.
Auditing standards differ from auditing procedures in that procedures relate to acts to be performed, whereas standards deal with measures of the quality of the auditor’s performance of those acts.
What are some of examples of threats to independence?
- Self (financial) interest – a potential benefit derived for the auditor resulting from a direct or indirect final relationship with the entity
- Self review – The auditor reviewing evidence that resulted from a non-audit service performed by the auditor
- Bias – The auditor taking a position that is not objective
- Familiarity – The auditor maintains a close relationship with the entity’s management (i.e. family member)
- Undue influence – Attempts made by the entity’s management to coerce or use excessive influence upon the auditor (i.e. offering gifts, placing unreasonable time constraints)
- Management participation—the auditor takes on the role of performing management functions on behalf of the entity.
- Structural—the audit organization’s placement within the state or federal government structure where such placement would impact the audit organizations’ ability to perform work are report results objectively.
