Government Audting Flashcards
(42 cards)
What are GAAS (General Accepted Auditing Standards)?
- For audits of nonissuers
- Issued by AICPA’s ASB
- SAS - standards
What are GAGAS (Yellow Book)?
- Standards for government organizations, programs, activities, and functions; Government assistance
- GAGAS includes designing the audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance
What are the requirements of recipients of federal financial assistance?
Have to be in accordance with GAAS and GAGAS
1) Expanded internal control documentation & testing requirements
2) Include formal written reports on internal control and assessment of control risk
3) Reporting on federal financial assistance in compliance
4) Application of single audit standards
What the different types of government audits?
1) Financial
2) Attestation
3) Performance
What is the audit risk of noncompliance?
Audit risk of noncompliance = Risk of Material Noncompliance X Detection Risk
What are the different reports that can be prepared by an auditor for a compliance audit?
1) Opinion on compliance
2) Report on internal control over compliance
3) Combined report on compliance and internal control over compliance
Must restrict use
What are the required documentation in a compliance audit?
1) Assessed risk of material noncompliance
2) Responses to the risk assessment
3) The basis or rationale for materiality levels
4) Compliance with supplemental requirements
What are the ethics standards under GAGAS?
1) Serving the public interest
2) Integrity
3) Objectivity
4) Proper use of government information, resources, and positions
5) Professional behavior
What are the general standards under GAGAS?
1) Independence
2) Professional Judgment
3) Competence
4) Quality Control & Assurance (peer review once every 3 years)
What are the standards under GAGAS for PERFORMING financial audits?
1) Consider previous audits & attestation engagements
2) Fraud, noncompliance, and abuse
3) Developing a finding (criteria, condition, cause, effect or potential effect)
4) Audit documentation (supervisory review, departures from GAGAS)
What are the standards under GAGAS for REPORTING financial audits?
1) Auditor’s compliance with GAGAS
2) Report on Internal Control and Compliance with laws, regulations, contracts and grant agreements
3) Communicate deficiencies in internal control, fraud, and noncompliance
4) Report views of responsible officials (written responses included)
5) Reporting confidential or sensitive information
6) Distribute reports
What is difference between GAGAS and AICPA Standards for reporting on internal control?
1) GAGAS = only requires a report on internal control and compliance that describes the scope of the auditor’s testing
2) AICPA = examination - requires auditor to provide high level of assurance about internal control
How should an auditor report confidential or sensitive information?
By either disclosing the exclusion, issuing a separate report, and considering whether omission distorts audit results or conceals improper practices
Who should an auditor distribute reports to?
1) Governance
2) Audited entity officials
3) Oversight bodies
4) Officials with oversight authority
5) All others authorized
What written representations should be provided by management under GAGAS?
1) No violations or possible violations of laws or regulations
2) Management is responsible for the entity’s compliance with laws & regulations
3) Management has identified and disclosed in writing all laws with a direct and material effect on F/S
How should an auditor’s report be formatted?
1) Introductory paragraph (management is responsible)
2) Scope paragraph - audit performed in accordance with GAAS and GAGAS
3) Opinion (fair presentation)
4) Disclosure paragraph
5) Opinion on Other Schedules (Schedule of Expenditures of Federal Awards - not part of F/S, audited, and fairly stated)
Who should the auditor report illegal or possible illegal acts?
Auditor is required to report all illegal acts to:
1) Officials of the audited company
2) Governance
3) External regulators
How should a report on illegal acts be presented?
- Included in required audit report
- Separate report
When is the auditor required to directly report fraud and illegal activities to the federal inspector general?
1) Management fails to disclose such fraud or illegal acts to the grantor
2) Management fails to take appropriate remedial action
How should internal control be reported under GAGAS?
1) GAGAS (like GAAS) requires auditor to obtain an understanding of internal control and communicate significant deficiencies
2) GAGAS ALSO requires a written report on the auditor’s understanding and the assessment of control risk in ALL audits. This is different from GAAS’s requirement to only require written communication for significant deficiencies.
3) Significant deficiencies should be report to regulatory bodies
What is the content of the written report on internal control?
1) Assertion that evaluating compliance with laws, rules, and regulations with a direct and material effect on F/S is part of developing an opinion on F/S
2) Assertion that specific controls related to financial reporting are considered
3) Indication either no weaknesses were found or that significant deficiencies were found (and whether they were material).
What are the threats to independence under GAGAS?
1) Self-interest threat
2) Self-review threat
3) Bias threat
4) Familiarity threat
5) Undue Influence threat
6) Management participation threat
7) Structural threat
What is the self-interest threat?
Threat that a financial/other interest will influence auditor’s judgment
What is the self-review threat?
Threat that an auditor who has provided non-audit services will not appropriately evaluate the results of previous judgments made or services performed as part of the non-audit services when forming a judgment significant to an audit
Can be minimized if management oversees the services, assumes responsibility, evaluates the adequacy and results, and accepts responsibility.
