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Audit > Chapter 20 -- Governmental Audits > Flashcards

Chapter 20 -- Governmental Audits Flashcards

1
Q

Section 20.1: Government Auditing Standards

What are the ethical principles under GAGAS?

A
  • The public interest
  • Integrity
  • Objectivity
  • Proper user of government information
  • Professional behavior
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2
Q

Section 20.1: Government Auditing Standards

What is a performance audit under GAGAS?

A

Performance audits include economy and efficiency audits.

Groups included in performance audits consist of:
* Government entities, programs, activities and functions
* Government assistance administered by contractors, not-for-profit entities and other nongovernmental activities.

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3
Q

Section 20.1: Government Auditing Standards

What are the objectives of a performance audit under GAGAS?

A
  • Whether the entity is acquiring, protecting and using its resources economically and efficiently.
  • The causes of any inefficiencies
  • Whether the entity has complied with laws and regulations concerning matters of economy and efficiency
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4
Q

Section 20.1: Government Auditing Standards

What is reported in a performance audit under GAGAS?

A
  • The audit objectives and the audit scope and methodology
  • The views of the audited program’s responsible officials concerning the auditor’s findings
  • All significant instances of noncompliance
  • Instances of abuse
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5
Q

Section 20.1: Government Auditing Standards

What are the components of a performance audit under GAGAS?

A
  • Program effectiveness and results
  • Economy and efficiency
  • Internal control
  • Compliance with legal requirements
  • Providing prospective analysis, guidance and summary information.
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6
Q

Section 20.1: Government Auditing Standards

What type of reports are issued under GAGAS?

A
  • Financial statement audit
  • Written report on internal control over financial reporting
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7
Q

Section 20.1: Government Auditing Standards

What is included in a report of internal control in GAGAS?

A
  • A description of the scope of the auditor’s testing of compliance with laws and regulations.
  • Whether tests provided sufficienct evidence to support an opinion on compliance or internal control over financial reporting
  • Such opinions are provided
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8
Q

Section 20.1: Government Auditing Standards

What are types of significant deficiencies that would be reported in the report of the auditor’s testing of internal control under GAGAS?

A
  • Significant deficiencies and material weakness in internal control
  • Instances of fraud and noncompliance with provisions of laws and regulations that have a material effect on the audit, as well as cause attention to those charged with governance.
  • Noncompliance with provisions of contracts and grant agreements that has a material effect on the audit.
  • Abuse that has a material effect on the audit.
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9
Q

Section 20.1: Government Auditing Standards

What type of engagements can be performed under GAGAS?

A
  • Financial audits
  • Performance audits
  • Attestation engagements
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10
Q

Section 20.1: Government Auditing Standards

How is the report on internal controls over financial reporting presented under GAGAS?

A

The report on internal control may be reported either in:
* A separate report. A note should be made in the scope paragraph of the audit report stating that a separate report was made.
* Included in the report on the financial statements.

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11
Q

Section 20.1: Government Auditing Standards

What are the elements of a finding in a financial audit under GAGAS?

A
  • Criteria
  • Condition that a situation exists
  • Cause reason for the explanation for the condition
  • Effect or potential effect
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12
Q

Section 20.1: Government Auditing Standards

What are examples of attestation engagements under GAGAS?

A
  • An entity’s internal control over financial reporting
  • An entity’s compliance with requirements of specified laws, regulations, policies, grants, or contracts.
  • MD&A
  • Prospective financial and performance information
  • The accuracy and reliability of performance measures
  • Allowable, reasonable, or final contract costs
  • The quantity, condition or valuation of inventory or assets.
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13
Q

Section 20.1: Government Auditing Standards

What is included in an auditor’s documentation under GAGAS?

A
  • The supervisory review of the evidence that supports the findings, conclusions and recommendations.
  • Departures due to law
  • Departures due to regulations
  • Any scope limitations
  • Restrictions on access to records
  • Any other issues
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14
Q

Section 20.1: Government Auditing Standards

What is presumptively manadatory in GAGAS?

A

Presumptively mandatory is a professional requirement to comply with a standard. If the auditor chooses not to comply, then they must provide an explanation for not doing so.

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15
Q

Section 20.1: Government Auditing Standards

What causes a departure from a presumptively mandatory requirement?

A
  • A specific procedure must be performed
  • The procedure would be ineffective in achieving the intent of the requirement.
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16
Q

Section 20.1: Government Auditing Standards

What government management function would cause the CPA to be impaired?

A

Developing entity program policies

17
Q

Section 20.2: Compliance Audits

What is the auditor’s objective in a compliance audit of a Governmental entity?

A
  • To obtain sufficient appropriate evidence to form an opinion
  • Report at the level specified by the government audit requirement on whether the entity complied, in all material respects, with the applicable compliance requirements.
  • Identify audit and reporting requirements in the governmental audit requirements that supplement GAAS and GAGAS.
  • Perform and report on related procedures
18
Q

Section 20.2: Compliance Audits

What are the steps in performing a compliance audit of a governmental entity?

A
  • Obtain written representation from management
  • Document the audit process and conclusions
  • Consider subsequent events through the date of the report
19
Q

Section 20.2: Compliance Audits

What standards should an auditor follow when performing a compliance audit of a government entity?

A

GAAS is adapted to meet the circumstances of the compliance audit

20
Q

Section 20.2: Compliance Audits

What are management’s responsibilities in a compliance audit of a governmental entity?

A
  • Identify the entity’s government programs and understanding and complying with the compliance requirements.
  • Designing, implementing and maintaining effective controls over compliance
  • Evaluating and monitoring compliance
  • Taking necessary corrective action to ensure compliance
21
Q

Section 20.2: Compliance Audits

When should test of controls be performed when reporting on a compliance audit of a governmental entity?

A
  • The auditor’s risk assessment includes an expectation of the operating effectiveness of controls related to the applicable compliance requirement (ACR)
  • Substantive procedures alone do not provide sufficience audit evidence.
  • Tests of controls are required by the governmental audit requirements (GAR)
22
Q

Section 20.2: Compliance Audits

What is a material weakness in internal control over compliance?

A

It occurs when a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis

23
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What is the single audit act?

A
  • The emphasis of the audit is on major programs related to federal awards administered by nonfederal entities that expends $750,000 or more in federal awards in one fiscal year.
  • Audit is in accordance with GAO and OMB Requirements.
  • The auditor determines on whether a deficiency in internal control is a signficiant deficiency or a material weakness in relation to the type of compliance.
  • The auditor should identify all significant deficiences and material weaknesses.
24
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What are examples of types of OMB audit requirements under the Single Audit Act?

A
  • Activities allowed or unallowed
  • Allowable costs/cost principles
  • Cash management
  • Eligibility
  • Matching, level of effort, and earmarking
  • Reporting
25
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What are the auditor’s responsibilities under the Single Audit Act?

A
  • Determine whether the financial statements are presented fairly, in all material respects, in conformity with GAAP.
  • Determine whether the schedule of expenditures of federal awards is presented fairly, in all material respects, in relation to the financial statements as a whole.
  • With respect to controls over compliance, obtain an understanding of those controls, assess control risk, and perform tests of controls unless the controls are ineffective.
  • Determine whether the nonfederal entity has complied with the provisions of laws, regulations, and contracts or grants that have a direct and material effect on each major program.
  • Report audit findings in a schedule of findings and questioned costs.
26
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

When is the schedule of audit findings created under the single audit act?

A

The auditor must report a schedule of findings and questioned costs.
Questioned costs result from an audit finding of:
* A violation or possible violation of a law, regulation, contract, grant, or agreement or document governing the use of federal funds, including matching funds
* Inadequate documentation of costs at the time of the audit.
* Costs that appear unreasonable and do not reflect the actions a prudent person would take in the circumstances.

27
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What is the threshhold in creating the schedule of audit findings created under the single audit act?

A
  • Known questioned costs greater than $25,000
  • Known questioned costs when likely questioned costs exceed $25,000 for compliance requirements for a major program.
28
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What is a subsrecipient?

A

A subrecipient is a nonfederal entity that expends federal awards received from another entity to carry out a federal program.

29
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

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

A
  • Obtain evidence related to compliance
  • Express or disclaim an opinion on compliance
30
Q

Section 20.3: Federal Audit Requirements and the Single Audit Act

What are the components of the Single Audit Act?

A
  • Single audit concept changes the focus from individual grants to grant recipients
  • Audit report or reports should cover the financial statements, internal control, and compliance with grant requirements
  • Act requires federal auditors to rely on single audit findings, to base any supplemental auditing on them, and to pay any additional auditing costs
  • Requires that audits of such entities be in accordance with Government Auditing Standards issued by the GAO.
  • OMB Audit Requirements for Federal Awards (2 CFR 200) Compliance Supplement and related GAAS also apply

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