Peer Review ChangesRevisions Related to A133 Engagements

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Peer Review Changes/Revisions Related to
A-133 Engagements
Peer Review Changes/Revisions Related to A-133
Engagements
Jim Brackens, CPA, AICPA, VP - Firm Quality and
Practice Monitoring David Jentho, CPA, Chair,
AICPA Practice Monitoring Task Force Nancy
Miller, CPA, Chair, AICPA Technical Standards
Subcommittee Governmental Group (Ethics)
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Topics for Todays Conference Call

• Single Audit Quality Concerns (PCIE Report)
• AICPA Response
• Revisions to Peer Review Standards Interpretation
  63-1a
• Revisions to Single Audit Checklist and
  Engagement Profiles for Not-for-Profit and
  Governmental Engagements
• Additional Changes under Consideration by PRB

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Questions during the call

• Email any questions or comments during the call
  to the Peer Review Technical mail box
• prptechnical_at_aicpa.org
• Include your name and phone number if you are
  willing to discuss your question on the call

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Single Audit Quality Concerns (PCIE Report)

• Scope June 2007 PCIE Report covered 208 out of
  38,000 single audits performed in 2002/2003
• Report Results/Concerns
• Acceptable 49
• Unacceptable/Limited reliability 51
• FindingsPCIE Reports Areas of Improvements
  Needed
• Internal control, compliance, documentation,
  sampling, due professional care

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Single Audit Quality Concerns (PCIE Report)

• Frequent Single Audit Violations
• Major program determination (missed major
  programlook back rule)
• Percent of coverage
• Incorrect threshold for major program
  determination
• Improper identification of clusters (missing
  programs)
• Failure to test all major programs within
  clusters
• Not including all grants within a CFDA
• Internal control documentation and compliance
  testing

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PCIE Recommendations

• OMB commitment to work with AICPA, NASBA and
  other similar organizations to address PCIE
  recommendations
• Revise and improve Single Audit Standards,
  criteria, and guidance
• Enhance documentation requirements, including
  sample sizes for compliance testing (SAS 39)
• Pre-requisite and continuing training for staff
  conducting single audits

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Impact on AICPA and Peer Review

• Specific mention of AICPA responsibility in PCIE
  report
• Congressional testimony by AICPA
• Potential repercussions for continued
  unacceptable single audits
• Governmental Audit Quality Center
• Recent GAQC Call The Recovery Act A
  Practitioner's Perspective (will be archived on
  the GAQC website within 2 weeks)

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AICPA Response

• AICPA developed seven task forces to examine the
  PCIE study's detailed findings and make
  recommendations as follows
• Sampling/Materiality Issues In A Single Audit
  Environment
• Internal Control And Compliance Responsibilities
  In A Single Audit Environment
• Schedule Of Expenditures of 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

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Practice Monitoring Task Force (PMTF)

• Areas of Focus
• Establish consistent measures of A-133
  deficiencies
• Develop guidance and training materials for peer
  reviewers
• Task Force Activities
• Meeting with OIGs to discuss Peer Review process
  and comparing to QCR process
• Brainstorming session to consider comments and
  recommendations received from IGs

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PMTF Actions Taken

• Interpretation 63-1a revised to require selection
  of an A-133 engagement
• Revision to Interpretation 63-1a (June 2009 Peer
  Review Alert)
• Effective for peer reviews commencing on or after
  September 1, 2009
• Must-selects must include A-133 engagements
• No further modification to System Report
  must-select paragraph

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Revised Interpretation 63-1a

• Peer Review Standards Interpretation 63-1a has
  been updated.  The Peer Review Board (PRB) has
  revised this interpretation to require that
  additionally, if the engagement selected is of an
  entity subject to GAS but not subject to the
  Single Audit Act/OMB Circular A-133 and the firm
  performs engagements of entities subject to OMB
  Circular A-133, at least one such engagement
  should also be selected for review.

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Revised Governmental and Not-For-Profit Audit
Engagement Checklist(and Engagement Profiles)

• PRP Manual Section 20, 500 and 20,600
• Enhanced key A-133 Single Audit Data
• Single Audit Major Program Determination
  worksheet

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Part A B Single Audit/A-133 Supplemental
Checklists

• (Mandatory use effective for peer reviews
  commencing
• November 1, 2009 and after)
• Part A Supplemental Checklist for Review of
  Single Audit Act/A-133 Engagements PRP Manual
  Section 22100A
• Begin with Part A Checklist
• Addresses most problematic concerns
• Determination of major programs
• Audit of major programs
• Audit findings
• Schedule of Expenditures of Federal Awards

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Part A B Single Audit/A-133 Supplemental
Checklists

• Complete Part A until a question answered No --
  confirms engagement not performed in conformity
  with applicable professional standards in all
  material respects (Inspectors General consider
  these failures make engagement unacceptable)
• Not required to further complete Part A nor Part
  B once reviewer reaches conclusion of failed
  engagement
• Document decision
• Consider expanding scope of peer review as
  applicable (PRP Standards Section 1000 par. 68)

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Part A B Single Audit/A-133 Supplemental
Checklists

• Part B Supplemental Checklist for Review of
  Single Audit Act/A-133 Engagements PRP Manual
  Section 22100B
• Report on Compliance
• Schedule of Findings and Questioned Costs
• Other Audit Issues and Program Specific Audits
• Failure in one of these areas does not
  necessarily result in an engagement that has not
  been performed in accordance with GAGAS in all
  material respects

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Failure to Meet Coverage Percent for High Risk
Auditee
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Example of a Missed Major Program
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Potential Concerns About New Engagement Profile
and Supplemental Checklists

• Reviewed firm completes Engagement Profile and
  Major Program Determination - minimal data
  requested that should be easily ascertained and
  documented.
• Major Program Determination Worksheet - template
  provided or use auditors determination worksheet
  IF it provides all of the same information,
  including lookback information.
• Part AB Checklists include minimal (5) new
  questions otherwise just split out of existing
  Single Audit/A-133 Supplemental Checklist.
• Part AB Checklist format should save peer
  reviewers time.

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PMTF Direction and Considerations

• Recommended Enhanced Peer Review Report
  Acceptance and Oversight Procedure Changes
• Engagement Profile and Part A Supplemental A-133
  Checklist evaluated by Technical Reviewer and/or
  RAB as part of report acceptance procedure
• Timeline
• Concerns about the new process
• Required subject matter expertise and experience
  by Technical Reviewers and Report Acceptance
  Bodies
• Consideration of national pool of A-133 subject
  matter experts for consultations and to provide
  technical advice
• Enhanced RAB responsibilities

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• Questions, Comments or Suggestions?

Email any questions or comments during the call
to the Peer Review Technical mail
box prptechnical_at_aicpa.org Include your name
and phone number if you are willing to discuss
your question on the call
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• Thank you!

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