The Latest on Audit Quality:
Governmental and NPO Audits
What We Will Cover
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Common Audit Quality Issues
Federal Statistical Sample Project on Audit
Quality
Firm Audit Tools and Resources
The AICPA’s Governmental Audit Quality
Center
Common Audit Quality Issues
Quality Continues to be a Concern
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AICPA peer reviews and ethics
investigations continue to show
problems
Federal quality control reviews reaffirm
that problems exist
Governmental audits have a strong
public interest component
Common Audit Quality Issues – F/S Audit
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Engagement team did not meet Yellow
Book CPE requirements
Auditor used inadequate or outdated
reference material
Audit documentation does not evidence
the work performed in many areas
Engagement and representation letter
problems
Common Audit Quality Issues – F/S Audit
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Auditor did not update legal inquiries to the
date of the audit report
Auditor did not modify report appropriately
when should have
Audit report did not appropriately reference
applicable auditing standards, financial
statements, or opinion units
Auditor did not issue Yellow Book report when
required
Common Audit Quality Issues – Single Audits
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Not auditing major programs covered by
auditor’s report
Not adequately addressing internal control
• 5 elements of COSO
• Identifying tests of controls versus tests of
compliance
Lack of information in findings
Lack of separate audit program for SEFA
Common Audit Quality Issues – Single Audits
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Client only listing prior year’s finding on the
Summary Schedule of Prior Audit Findings
• See A-133 section .315 (b)
Type A Program Determination
Two—year lookback
Clusters
Percentage of Coverage Rule
Common Audit Quality Issues – Single Audits
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The audit documentation does not
evidence the work performed
Sampling
Required findings should not be put in
management letter
Data collection form problems
Single Audit Data Collection Form (SF-SAC) Problems
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Signatures Lacking
Part III, Item 10b, "Research and Development" is invalid
(either blank or more than one box is checked).
Part III, Item 10e, "Direct award", is invalid (either blank or
more than one box is checked).
Part III, Item 8, "Was a Summary Schedule of Prior Audit
Findings prepared?" is invalid (either blank or both checked).
Part III, Item 2, Multiple EINs in Financial Statements, none or
both checked.
Federal Statistical Sample
Project on Audit Quality
What is this project?
A project to accurately assess the quality
of Single Audits government-wide, and
provide a baseline for monitoring Single
Audit quality in the future by performing
quality control reviews (QCRs) of a
statistical sample of single audits.
Sampling Project
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Objectives
• To determine quality of single audits being
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performed
Provide baseline for monitoring quality
Recommend changes where needed
Generally using 2002/2003 engagements
Using a standard checklist
Contractors will do about 50% of the reviews
Status
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Sample of 208 audits has been drawn
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About 30% of reviews completed by April
2005
Timetable
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Award of Contracts / Task Orders
September 30, 2004
QCR Teams Trained in October 2004
Conduct QCRs – November 2004 - October
2005
Compile Results/ Draft Report
November 2005-February 2006
Issue Final Report by May 2006
Firm Audit Tools and Resources
Firm Audit Tools and Resources
 There are a number of mechanisms to assist practitioners in
enhancing audit quality:
• AICPA Audit Guide Government Auditing Standards and
Circular A-133 Audits (product no. 012745)
• AICPA Audit Risk Alert, Government Auditing Standards
and Circular A-133 Audits (product no. 022454)
• AICPA A&A Guides for SLGs, NPOs, and Healthcare
(HC) Organizations
• AICPA Audit Risk Alerts for SLG, NPOs and HC
Organizations
Firm Audit Tools and Resources
 There are a number of mechanisms to assist practitioners
in enhancing audit quality:
• Practice Aid, Auditing Recipients of Federal Awards:
Practical Guidance for Applying OMB Circular A-133
(product no. 006621)
• Practice Aid, Auditing Governmental Financial
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Statements: Programs and Other Practice Aids
(product no. 006602)
Practice Aid: Applying OCBOA in State and Local
Government Financial Statements (product no.
006614)
Firm Audit Tools and Resources
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Disclosure checklists
Audit programs
Governmental or NPO conferences/CPE
AICPA Governmental Audit Quality Center Web
site (www.aicpa.org/GAQC)
FASB, GASB, and/or FASAB Standards
AICPA
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Technical Practice Aids
Statements on Auditing Standards
Statements of Position
New Quality Center
AICPA Governmental Audit Quality Center
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Council authorized in October 2003 (also
established EBP Audit Quality Center)
Governmental audit practice is pervasive
• > 6,300 AICPA firms involved
• Thousands of single audits and other
governmental audits annually
Public interest high - federal $$$
What is a Governmental Audit for Purposes of the
Center?
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All audits and attestation engagements performed under
Government Auditing Standards
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Yellow Book-only audits (for example, audit of local
government that gets no federal funds but state requires
Yellow Book audit)
Single and program-specific audits
Audits and attestation engagements performed under
various federal audit guides (for example, HUD
Consolidated Audit Guide, Education SFA Guide, etc.)
Audit may be of a federal, state, or local government, notfor-profit organization, or certain for-profit organizations
AICPA and Firm Commitment
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AICPA helps firms achieve the highest
standards in performing quality
governmental audits
Firm demonstrates its commitment to
governmental audit quality (must adhere
to membership requirements which can
be found in detail on the GAQC Web
site)
GAQC Status
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Center launched at end of September 2004 and
membership is growing
Executive committee oversees Center and
establishes membership requirements
Center provides members with Web site, tools
(including monthly newsletters, regular news alerts,
best practices) and ability to interact with other
members)
Center undertaking outreach activities with
stakeholder organizations to increase public
awareness of the Center among members of the
governmental audit community
GAQC Web Site: www.aicpa.org/GAQC
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Comprehensive resource to Center members which
includes:
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The latest news and spotlight items regarding governmental
audits
Resources regarding the performance of audits under
Government Auditing Standards, Circular A-133, and other
compliance audit rules
A listing of firms that belong to the Center sorted by firm
name and state
Member forum so that firm members can interact with other
members
Some portions of the site are available to the general
public and provide useful information
Membership Requirements - Highlights
Effective at admission date:
 Designate audit partner to have firm-wide responsibility
for quality of firm’s governmental audit practice
 Require designated government audit quality partner to:
• Meet GAS CPE requirements
• Participate in an annual Center-sponsored webcast on
recent developments in governmental auditing
 Make publicly available information about most recently
accepted peer review
Membership Requirements - Highlights
Other Membership Requirements:
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Establish annual internal inspection procedures within 3
months of admission date
Establish policies and procedures specific to the firm’s
governmental audit practice to comply with professional
standards and GAQC membership requirements (within
6 months of admission date)
Have governmental audits selected as part of firm’s peer
review reviewed by a peer review team member who is
employed by a Center member firm (Effective for 2006
peer reviews)
For More Information or to Join
 Check
out the Center
Web Site at:
www.aicpa.org/GAQC
or E-Mail:
GAQC@aicpa.org
Questions ?????