Improving Single Audits to Protect Taxpayers

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Improving Single Audits to Protect Taxpayers

• 2008 Federal Financial Management Conference
• Mary M. Foelster, CPA
• American Institute of CPAs
• March 11, 2008

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What I Will Cover

• AICPA Viewpoints Expressed in Senate Testimony
• AICPA Initiatives in Response to PCIE Study
• Governmental Audit Quality Center Update and
  Other AICPA Resources

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AICPA Viewpoints Expressed in Senate Testimony
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AICPA Viewpoint

• Single audits are important in helping safeguard
  taxpayer dollars
• Poorly performed audits are always unacceptable
• AICPA will continue its ongoing efforts to
  enhance the quality of governmental audits

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AICPA Viewpoint

• The profession has taken many steps since the
  reviewed audits took place, including the
  establishment of its Governmental Audit Quality
  Center
• Significant improvement in the quality of
  governmental audits will only occur when all the
  key single audit stakeholder groupsthe auditing
  profession, the procurers of single audit
  services, and the federal agenciesare involved
  in the solution

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AICPA Initiatives in Response to PCIE Study
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AICPA Task Forces

• Seven task forces to examine the study's detailed
  findings and recommendations for the AICPA as
  follows
• Sampling/Materiality Issues In A Single Audit
  Environment
• Internal Control And Compliance Responsibilities
  In A Single Audit Environment
• Schedule Of Expenditures Federal Awards Reporting
  Issues
• Reporting Audit Findings In A Single Audit
• Single Audit Training Needs And Continuing
  Professional Education Evaluation
• Practice Monitoring In A Single Audit Environment
• Compliance Auditing Considerations In Audits Of
  Governmental Entities And Recipients Of
  Governmental Financial Assistance
• Will be interacting with related federal Task
  Forces

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Sampling/Materiality Issues in a Single Audit

• Areas of focus
• Provide clarifying guidance for implementing SAS
  No. 111 revisions in the context of single audits
  (e.g. tables or formulas)
• Explain how sample universes and transactions
  tested should be documented
• Provide specific guidance on, and examples of,
  the kind of documentation that auditors should
  create, as a minimum, to document risk
  assessments of individual federal programs
• Provide specific guidance and/or illustrative
  examples to properly document materiality in
  single audits

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Sampling/Materiality Issues in a Single Audit

• Task Force Activities
• Assessing current sampling guidance to the single
  audit environment
• Controls testing
• Compliance testing

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Internal Control Compliance Responsibilities in
a Single Audit

• Areas of Focus
• Better describe the minimum audit documentation
  required to document the auditors understanding
  of, and testing of, internal controls related to
  compliance by developing examples of such
  documentation
• Assist auditors in documenting their performance
  of compliance testing for all applicable
  compliance requirements identified in the OMB
  Compliance Supplement, unless the auditor
  concludes that a compliance requirement is not
  direct and material to his or her specific client
  situation

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Internal Control Compliance Responsibilities in
a Single Audit

• Task Force Activities
• Development of practice aids to assist auditors
  in applying COSO to single audits and documenting
  compliance testing
• Development of practice aids to assist auditors
  in making and documenting risk assessments at the
  appropriate level

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Schedule of Expenditures of Federal Awards (SEFA)
Reporting Issues

• Areas of Focus
• Assist practitioners in understanding procedures
  an auditor should perform to provide
  in-relation-to reporting on the SEFA
• Emphasize the importance of reviewing the SEFA to
  determine that its content and presentation meets
  the minimum requirements set forth in A-133
  .310(b)
• Emphasize that correct SEFA content (including
  clusters) CFDA numbers are critical for
  properly executing a single audit
• Emphasize that a lack of or ineffective internal
  controls over SEFA preparation may be a
  significant deficiency, and potentially a
  material weakness

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Schedule of Expenditures of Federal Awards
Reporting Issues

• Task Force Activities
• Development of improved guidance for providing
  the in-relation-to opinion on the SEFA
• Development of a disclosure checklist practice
  aid to highlight the minimum requirements set
  forth in A-133 .310(b)

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Reporting Audit Findings in a Single Audit

• Areas of Focus
• Clarify when audit findings must be reported
• Clarify likely questioned costs, including
  example approaches for calculating them
• Develop illustrative examples of properly
  presented audit findings

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Reporting Audit Findings in a Single Audit

• Task Force Activities
• Development of a practice aid to help auditors
  develop and evaluate findings for single audits
  and Yellow Book financial statement audits
• Development of illustrative audit finding samples
  using the new worksheet
• Clarifying updates to AICPA Audit Guide,
  Government Auditing Standards and Circular A-133
  Audits
• Development of guidance for determining and
  documenting likely questioned costs

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Single Audit Training CPE Evaluation

• Areas of Focus
• Considering whether there are best practices when
  it comes to training for auditors performing
  single audits
• Evaluate the AICPA current course offerings that
  relate to single audits to determine the
  following
• Appropriateness (in light of the study results)
• Effectiveness and whether they address quality
  issues cited in the PCIE study
• Identification of potential gaps in the AICPA
  offerings based on study results and training
  best practices determined by the task force

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Single Audit Training CPE Evaluation

• Task Force Activities
• Drafting a proposed best practice single audit
  training curriculum that is structured for 3
  staff levels (basic, intermediate, advanced) that
  includes specific topics and suggestions for
  annual updates

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Other AICPA Task Forces

• Peer review
• SAS No. 74

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Governmental Audit Quality Center Update and
Other AICPA Assistance
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GAQC Milestones

• Council authorized in October 2003
• BOD approved membership requirements in July 2004
• Center launched at end of September 2004
• February 2008 approximately 975 member firms

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Who Should Consider Joining

• Audit firms that perform not-for-profit
  organization or governmental audits (under the
  Yellow Book and/or single audit rules)
• Audit firms that perform audits under federal
  audit guides (for example, HUD, Department of
  Education, etc.)
• Peer review firms that review these audits

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AICPA Governmental Audit Quality Center

• AICPA helps firms achieve the highest standards
  in performing quality governmental audits
• Firm demonstrates its commitment to governmental
  audit quality (must adhere to membership
  requirementssee the GAQC Web site at
  http//gaqc.aicpa.org/Memberships/ for additional
  questions and answers about the requirements)

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GAQC Members By Firm Size ( of CPAs)
51 of members have less than 10 CPAS 39 have
between 10 to 49 CPAs
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Other Interesting Facts

• 42 of member firms perform 1-10 audits under the
  Yellow Book and another 25 perform 11-25
• Member firms cover over 83 of the federal
  expenditures covered in single audits performed
  by CPA firms
• Member firms audit almost 40 of the total number
  of single audits performed by CPA firms

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GAQC Web site www.aicpa.org/GAQC
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GAQC Member Value

• Member Communications
• E-Alerts
• Update Newsletters
• Conference Calls
• Webcasts

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GAQC Goals

• Improve quality statistics
• Represent members that practice in the
  governmental audit quality arena, particularly as
  it relates to issuance of federal quality results
• Grow membership and single audit coverage
• Regulator and stakeholder outreach and education

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AICPA Audit Resources

• AICPA Conferences
• NPO Conference June
• Government Accounting and Auditing Update
  Conference August (east) and September (west)
• Government and NPO Training Program - October
• National Healthcare Industry Conference -
  November
• Archived AICPA Webcasts
• NPO Strategic Briefing
• SLG Strategic Briefing
• AICPA Infobytes
• Other CPE courses, including State Society
  courses

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AICPA Audit Resources

• AA Guides
• GAS/A133
• SLG
• NPO
• HC
• Audit Risk Alerts
• GAS/A133
• SLG
• NPO
• HC
• Practice Aid, Auditing Recipients of Federal
  Awards Practical Guidance for Applying OMB
  Circular A-133 (product number 006621)

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GAQC Team

• General Inquiries gaqc_at_aicpa.org
• Mary Foelster, Director
• 202-434-9259 or mfoelster_at_aicpa.org
• Laura Hyland, Technical Manager
• 202-434-9233 or lhyland_at_aicpa.org
• Rafael Roman, Technical Manager
• 202-434-9272 or rroman_at_aicpa.org

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Questions ?????