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Administrative Notes

AICPA Governmental Audit Quality Center Member Event Single Audit Fundamentals Part IV: Overview of Single Audit Reporting Requirements and Available Resources March 18, 2010. Administrative Notes.

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Administrative Notes

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  1. AICPAGovernmental Audit Quality CenterMember EventSingle Audit Fundamentals Part IV: Overview of Single Audit Reporting Requirements and Available Resources March 18, 2010

  2. Administrative Notes • If you encounter any technical difficulties (e.g., audio issues) during this event please take the following steps: • Press the F5 key on your computer • Re-start your browser • Check your speakers, ensure they are not on mute • Turn off your pop-up blocker • Re-start you computer • Call Genesys Tech support 866.814.1918, Conf ID# 1439282 • If none of the above work, submit a request for help on the “Send a Question Box” located on the left hand side of your screen. • If are unable to get assistance from Genesys for some reason, e-mail gaqc@aicpa.org or call 202-434-9207

  3. Administrative Notes • We encourage you to submit your technical questions – please limit your questions to the content of today’s program • To submit a question, type it into the “Send a Question” box on left side of your screen; we will answer as many as possible • You can also submit questions to the GAQC member forum for consideration by other members • This event is being recorded and will be posted in an archive format to the GAQC Web site

  4. Continuing Professional Education • Must have registered for CPE credit prior to this event; the CPE Credit Approval Form was e-mailed to you • Listen for announcement of 4 CPE codes (7 digit codes: ALL_ _ _ _ ) and 4 polling questions during the event • Record CPE Codes on CPE Credit Approval Form and return completed form (by fax or mail) to AICPA Service Center for record of attendance; keep a copy for your records • If you are not receiving CPE for this call, ignore the CPE codes that we announce, but please answer the polling questions

  5. Single Audit Fundamentals Series Sponsored by the GAQC • What is GAQC? • Voluntary membership Center for CPA firms and State Audit Organizations (SAOs), with approximately 1,400 members • Designed to help CPAs meet the challenges of performing quality governmental audits, including single audits • Member benefits/membership requirements • For more information, please visit the membership section at www.aicpa.org/GAQC or call Cynthia Dillon at 202-434-9207

  6. A Note on the Recovery Act • In February 2009, the American Recovery and Reinvestment Act of 2009 (ARRA) was passed • Approximately $300 billion additional federal funds being passed down; much of which is subject to single audits • Recovery Act does have implications on reporting for single audits • Today’s call is focusing on the reporting requirements of a single audit and the resources available to auditors • A future GAQC event (not yet scheduled) will provide additional information on the Recovery Act, including its impact on the reporting requirements of a single audit • Review the GAQC Recovery Act Resource Center (www.aicpa.org/GAQC) for previous calls and guidance issued

  7. Today’s Presenters Barbara Cevallos, CPA PricewaterhouseCoopers LLP ___ Scott Simpson, CPA Moss Adams LLP ___ Moderator Corey Arvizu, CPA Heinfeld, Meech Co., PC Chair, GAQC Executive Committee 7

  8. Fundamentals Courses • Part I – Basic Background & Overview of the Single Audit • Scope of the Single Audit • Auditee & Auditor Responsibilities • Unique Requirements & Provisions of OMB Circular A-133 • Description & Characteristics of Federal Awards • Pass-through Awards and Subrecipients • Part II – Understanding Major Program Determination • Applying the Risk-Based Approach for Determining Major Programs • Low-Risk Auditee Determination and Distinguishing from Other Risk Assessments Performed in a Single Audit • Communications with Cognizant or Oversight Agency

  9. Fundamentals Courses • Part III - Understanding Compliance Testing & IC over Compliance Requirements • Description & Characteristics of the 14 Compliance Requirements • Description & Characteristics of Internal Control over Compliance • Substantive Tests of Applicable Compliance Requirements • Tests of Internal Control over Compliance • Documentation Requirements • Introduction to and Using the Annual OMB Compliance Supplement

  10. Fundamentals Courses • Part IV - Reporting Requirements and an Overview of Available Circular A-133 Resources • Reporting Requirements of the Single Audit  • Overview and Use of the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits and Audit Risk Alert • Understanding the OMB Cost Circulars and their Applicability to Audit Procedures • Use of www.cfda.gov and other Web Sites to Facilitate a Single Audit

  11. TOPICS to be COVERED • Reporting Requirements • Overview and use of the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits and Audit Risk Alert • OMB Cost Circulars • Use of www.cfda.gov and other Web Sites

  12. Reporting Requirements Reporting Package Financial Statement Related: Opinion on Financial Statements (in accordance with GAGAS) Report on I/C over Financial Reporting & on Compliance and Other Matters (Yellow Book) Schedule of Expenditures of Federal Awards – in relation to opinion Compliance Related Report on Compliance with Requirements Applicable to Each Major Program & on Internal Control over Compliance in Accordance with OMB Circular A-133 Schedule of Findings and Questioned Costs Data Collection Form

  13. Reporting RequirementsFinancial Statement Related Opinion on Financial Statements Required by A-133 §.310 In accordance with Government Auditing Standards Same organizational unit as the compliance audit Same fiscal year as the compliance audit Report on Compliance and Internal Control (Yellow Book Report) Carries the same date as financial statement opinion Reports significant deficiencies & material weaknesses Reports material non-compliance (at the financial statement level).

  14. Reporting RequirementsSchedule of Expenditures of Federal Awards (SEFA) Determine whether presented fairly in all material respects in relation to the auditee’s financial statements taken as a whole SEFA is a client-prepared schedule Reports the total expenditures of federal awards and serves as the primary basis for the auditor’s major program determination Circular A-133 §.310(b) includes the requirements Practice aids available on the GAQC Web site: www.aicpa.org/GAQC

  15. Reporting RequirementsSchedule of Expenditures of Federal Awards (SEFA)

  16. Note that footnotes have been excluded.

  17. Reporting RequirementsSchedule of Findings & Questioned Costs Part 1: Summary of the Auditor’s Results Part 2: Financial Statement Findings Part 3: Federal Award Findings & Questioned Costs

  18. Reporting RequirementsSchedule of Findings & Questioned Costs Part 1: Summary of the Auditor’s Results Financial Statements Type of auditor’s report issued [unqualified, qualified, adverse or disclaimer] Internal Control over Financial Reporting Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted?

  19. Reporting RequirementsSchedule of Findings & Questioned Costs Part 1: Summary of the Auditor’s Results Federal Awards Internal Control over Major Programs Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditor’s report issued on compliance for major programs [unqualified, qualified, adverse, or disclaimer] Any audit findings disclosed that are required to be reported in accordance with §510(a)

  20. Reporting RequirementsSchedule of Findings & Questioned Costs Part 1: Summary of the Auditor’s Results Federal Awards Identification of major programs including CFDA number and name of federal program or cluster Dollar threshold used to distinguish between type A and type B programs Auditee qualified as low-risk auditee?

  21. Reporting RequirementsSchedule of Findings & Questioned Costs Part 2: Financial Statement Findings Findings to include: Criteria or specific requirement Condition Context Effect Cause Recommendation Views of responsible officials and planned corrective action

  22. Reporting RequirementsSchedule of Findings & Questioned Costs Part 3: Federal Award Findings & Questioned Costs Findings to include: Information on the federal program Criteria or specific requirement Condition Questioned costs Context Effect Cause Recommendation Views of responsible officials and planned corrective action

  23. Reporting RequirementsReport on Internal Control & Compliance Compliance Express an opinion on compliance for EACH major program Identify instances of noncompliance Internal Control over Compliance No opinion on the effectiveness of internal control over compliance Report significant deficiencies and material weaknesses

  24. Reporting RequirementsData Collection Form Completed by auditee & auditor Not technically part of the reporting package – rather a summary of the information contained in the reporting package Reporting package and data collection form are submitted electronically to the Federal Audit Clearinghouse

  25. TOPICS to be COVERED • Reporting Requirements • Overview and use of the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits and Audit Risk Alert • OMB Cost Circulars • Use of www.cfda.gov and other Web Sites

  26. AICPA Audit Guide: GAS/A-133 Audits Two main sections of the guide Chapters 2-4: Yellow Book audits Chapters 5-13: A-133 audits Chapter 14: Program-specific audits Appendices Single Audit Act Circular A-133 Risk Assessment Standards Schedule of changes from prior edition

  27. AICPA Audit Guide: GAS/A-133 Audits Chapter 1: Introduction Purpose and applicability Adherence to professional standards and requirements

  28. AICPA Audit Guide: GAS/A-133 Audits Chapter 2: Planning Considerations of Government Auditing Standards Discusses ethics chapter of Yellow Book General standards Fieldwork standards Other planning considerations

  29. AICPA Audit Guide: GAS/A-133 Audits Chapter 3: Financial Statement Audit Considerations of Government Auditing Standards Internal control over financial reporting Consideration of financial statement misstatements, including compliance Abuse Representation letters Reasonable assurance

  30. AICPA Audit Guide: GAS/A-133 Audits Chapter 4: Auditor Reporting Requirements and Other Communication Considerations of Government Auditing Standards GAAS and GAGAS requirements Reporting requirements Internal control over financial reporting Fraud, illegal acts, violations of provisions of contracts or grant agreements, abuse Report on the financial statements “Yellow Book” report Appendix contains sample reports

  31. AICPA Audit Guide: GAS/A-133 Audits Chapter 5: Overview of the Single Audit Act, Circular A-133 and the Compliance Supplement Single Audit Act and Circular A-133 requirements General audit requirements Determining when federal awards are expended Major program determination (high level) Auditee responsibilities Responsibilities of other parties (fed agency, pass thru, cognizant agency) Compliance Supplement

  32. AICPA Audit Guide: GAS/A-133 Audits Chapter 6: Planning Considerations of Circular A-133 Audit risk considerations Audit materiality considerations Efficiency Joint audits and reliance on others State and local compliance requirements Desk reviews and on-site reviews

  33. AICPA Audit Guide: GAS/A-133 Audits Chapter 7: Schedule of Expenditures of Federal Awards Auditor requirements Presentation requirements Pass through awards Non-cash assistance Example SEFAs for university/nfp entity

  34. AICPA Audit Guide: GAS/A-133 Audits Chapter 8: Determination of Major Programs Applying the risk based approach Determine type A/B Risk assessment of programs Determine major programs Percentage of coverage/low risk auditee criteria Criteria for program risk

  35. AICPA Audit Guide: GAS/A-133 Audits Chapter 9: Considerations of Internal Control over Compliance for Major Programs Overview of requirements, definition of IC over financial reporting COSO elements of internal control Each major program Direct and material compliance requirements Test of operating effectiveness for each major program Significant deficiencies and material weaknesses

  36. AICPA Audit Guide: GAS/A-133 Audits Chapter 10: Compliance Auditing Applicable to Major Programs Identifying direct and material compliance requirements Performing compliance testing Touches on sampling Evaluating and reporting noncompliance Follow-up procedures Management representations

  37. AICPA Audit Guide: GAS/A-133 Audits Chapter 11: Sampling Considerations in a Single Audit Statistical vs. nonstatistical approach Attribute vs. monetary sampling Procedures that do not involve sampling Population considerations Sample sizes Sample selection and evaluation Projecting deviations and exceptions Dual purpose testing

  38. AICPA Audit Guide: GAS/A-133 Audits Chapter 12: Audit Considerations of Federal Pass-Through Awards Characteristics of subrecipients vs vendors Single audit considerations of pass-through entities Pass-through entity responsibilities Audit planning Internal control over compliance Subrecipient monitoring considerations Reporting considerations

  39. AICPA Audit Guide: GAS/A-133 Audits Chapter 13: Auditor Reporting Requirements and Other Communication Considerations in a Single Audit Recommended reporting FS and SEFA Yellow Book Major programs Schedule of findings and questioned costs Summary schedule of prior audit findings and corrective action plan Data collection form Appendix contains example reports

  40. AICPA Audit Guide: GAS/A-133 Audits Chapter 14: Program-Specific Audits Most applicable to for-profit entities that receive federal awards Auditor’s responsibilities with/without program specific audit guide Submission of report Appendix contains example reports

  41. AICPA Audit Risk Alert: GAS/A-133 Audits Discusses: Emerging practice issues Auditing developments Recovery Act Updates on various standard setters OMB GAO HUD Federal Audit Clearinghouse

  42. AICPA Publications To purchase AICPA products call AICPA Order Department at 888-777-7077 visit www.cpa2biz.com

  43. TOPICS to be COVERED • Reporting Requirements • Overview and use of the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits and Audit Risk Alert • OMB Cost Circulars • Use of www.cfda.gov and other Web Sites

  44. OMB Circulars States, local governments, and Indian Tribes follow: • A-87 for cost principles, Relocated to 2CFR, Part 225 • A-102 for administrative requirements (common rule), • A-133 for audit requirements Educational Institutions (even if part of a State or local government) follow: • A-21 for cost principles, Relocated to 2CFR, Part 200 • A-110 for administrative requirements, Relocated to 2 CFR, Part 215, • A-133 for audit requirements Non-Profit Organizations follow: • A-122 for cost principles, Relocated to 2 CFR, Part 230 • A-110 for administrative requirements, Relocated to 2 CFR, Part 215 • A-133 for audit requirements

  45. OMB Cost Circulars Cost circulars directly affect our testing Allowability of costs Referenced in grant agreements A-21, A-122 and A-87 were updated in 2004 with conforming language. But, differences exist. Differences in the elements of cost and in the treatment of certain key compliance requirements Example: effort reporting

  46. OMB Circular A-110Uniform Administrative Requirements for Grants & Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations General Pre-Award Requirements Post-Award Requirements Financial & program management Property standards Reports & records Termination & enforcement After-Award Requirements

  47. The Common Rule – Circular 102Uniform Administrative Requirements to State & Local Governments Common Rule establishes uniform administrative rules for federal grants & cooperative agreements and sub-awards to state, local, and Indian tribal governments Same format as Circular A-110

  48. OMB Circular A-122Cost Principles for Nonprofit Organizations Attachment A – General Principles Allowable Costs Allocable Cost Applicable Credits Direct Costs Indirect Costs Indirect Cost Rates Negotiation & Approval of Rates

  49. Attachment B – Selected Items of Costs Provides over 50 examples for establishing allowability Attachment C – Nonprofit Organizations Not Subject to Circular OMB Circular A-122Cost Principles for Nonprofit Organizations

  50. Circular A-21Cost Principles for Educational Institutions Allowability of Costs Direct Costs Facility & Administrative Costs Selected Items of Cost Certificate of F&A Costs Certification of Charges

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