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Single Audit Guidelines

Single Audit Guidelines

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Single Audit Guidelines

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  1. Single Audit Guidelines Florida GFOA Annual Conference June 25, 2013 Presented by

  2. Presented by: Stephen W. Blann,CPA, CGFM, CGMA Director of Governmental Audit Quality Rehmann

  3. Agenda • Single Audit Overview • Single Audit Updates • SAS 117: Compliance Audits • SAS 119: Supplementary Information • Audit Guide: GAS/A-133 Audits • A-133 Compliance Supplement • OMB’s proposed changes

  4. Agenda • Yellow Book Overview • Yellow Book Updates • 2011 Revision • CPE Requirements • Independence Conceptual Framework

  5. Components of a Single Audit • Financial statement audit (GAAS) • Conducted in accordance with Government Auditing Standards (GAGAS or the “Yellow Book”) • Compliance audit of federal awards expended (A-133)

  6. Components of a Single AuditFinancial Statement Audit • Results in an opinion on whether the financial statements are fairly presented in accordance with generally accepted accounting principles

  7. Components of a Single AuditGovernment Auditing Standards • Builds on the foundation of generally accepting auditing standards • Adds additional requirements for auditor independence and continuing professional education • Results in a report (not an opinion) on matters related to internal control over financial reporting that came to the auditors’ attention during the audit

  8. Components of a Single AuditCompliance Audit of Federal Awards • Builds on the foundation of GAAS and GAGAS • Adds compliance testing for “major programs” • Results in: • an opinion on major program compliance • a report (not an opinion) on matters related to internal control over compliance that came to the auditors’ attention during the audit • an opinion on the Schedule of Expenditures of Federal Awards (SEFA) in-relation-to the financial statements

  9. Single Audit Overview

  10. Single Audit Overview • Obtain Schedule of Expenditures of Federal Awards (SEFA) from client • Threshold for single audit is $500,000 in current year • Test SEFA in accordance with SAS 119 sufficient to render an in-relation-to opinion

  11. Single Audit Overview • Consider by CFDA number or cluster • Divide programs into Type A and B • Cut-off starts at $300,000 and goes up to $3,000,000 as federal expenditures range from $10M-$100M • Assess risk of Type A programs • Type A programs that are not low-risk are major • Type A programs that are low-risk are temporarily set aside, but may still be major • May only be low-risk if previously audited with no findings

  12. Single Audit Overview • If necessary, assess risk of larger Type B programs • Only required if there is a low-risk Type A program • “Larger” Type B programs are $100,000 or more (threshold starts to increase at $33M) • High-risk programs may be selected as major • Risk assessment is based on auditor judgment • Select one high-risk Type B program for each low-risk Type A program (limited to half of the high-risk Type B programs)

  13. Single Audit Overview • Determine if percentage of coverage is met • Required to test 50% of SEFA • For low-risk auditees, only test 25% of SEFA • Clean single audit for two years (no material findings) • Filed on time with the Clearinghouse • Select additional programs (auditor’s choice) until coverage is met

  14. Single Audit Overview • For each major program, determine which compliance areas to test • Applicable per the A-133 Compliance Supplement • Applicable to the auditee • Have a direct and material effect on compliance

  15. Single Audit Overview • Compliance areas A. Activities allowed or unallowed B. Allowable costs/cost principles C. Cash management D. Davis-Bacon Act E. Eligibility F. Equipment and real property management G. Matching, level of effort, and earmarking H. Period of availability of federal funds I. Procurement/suspension and debarment J. Program income K. Real property acquisition and relocation assistance L. Reporting M. Subrecipient monitoring N. Special tests and provisions

  16. Single Audit Overview • Testing memos • Compliance requirement • Tests of compliance • Internal controls over compliance • Tests of internal controls over compliance • Conclusions • Identify and test “individually important items” before sampling

  17. Single Audit Overview • In-relation-to opinion on the SEFA • Yellow Book report • Internal control over financial reporting • Compliance with laws, regulations, and grant agreements • A-133 report • Compliance for each major program • Internal control over compliance

  18. Single Audit Overview • Schedule of Findings and Questioned Costs • Summary of Auditors Results • Financial statement findings • Federal awards findings • Summary Schedule of Prior Audit Findings • Status of prior federal award findings • Data Collection Form and reporting package • Submitted online

  19. Single Audit Overview • Contentsof a Single Audit • Independent Auditor’s Report on the SEFA • Schedule of Expenditures of Federal Awards • Notes to the SEFA • Yellow Book report • A-133 report • Schedule of Findings and Questioned Costs • Summary Schedule of Prior Audit Findings

  20. Single Audit Overview • SEFA requirements • List of federal programs by agency • List programs within a cluster • Name of pass-through entity and identifying number assigned by the pass-through entity • CFDA number or other identifying number when CFDA not available

  21. Single Audit Overview • SEFA requirements • Total federal awards expended for each program (CFDA number or cluster) • Significant accounting policies used in preparation of the SEFA • Amounts passed-through to subrecipients • Value of any non-cash assistance received and loans or loan guarantees outstanding at year end

  22. Single Audit Overview • Optional SEFA elements • Grant period • Total award amount • Beginning accrued (deferred) revenue • Current year cash receipts • Ending accrued (deferred) revenue • Amounts expended in prior periods on multi-year grants

  23. Single Audit Overview • Notes to SEFA • Basis of presentation • SEFA presents only federal grant activity • Presented in accordance with A-133 • Summary of significant accounting policies • Basis of accounting (reference to Note 1) • Expenditures recognized in accordance with Federal Cost Principles (A-87, A-122, or A-21) • Pass-through agencies

  24. Single Audit Overview • Schedule of Findings and Questioned Costs Section I - Summary of Auditors’ Results Section II - Financial Statement Findings • Numbered as 2013-FS-1, etc. Section III - Federal Award Findings • Numbered as 2013-SA-1, etc.

  25. Single Audit Overview • Summary Schedule of Prior Audit Findings • Brief description and status

  26. Single Audit Overview Elements of a finding Cause Effect Questioned costs Recommendation View of Responsible Officials • Finding number/short name • Finding type (compliance/controls) • Federal program(s) • Criteria • Condition

  27. Single Audit Updates SAS 117: Compliance Audits

  28. SAS 117: Compliance Audits Applicability • Establishes applicability of financial auditing guidance in compliance audits • Applicable for compliance audits subject to: • Generally accepted auditing standards, and • Government Auditing Standards, and • A governmental audit requirement that requires an auditor to express an opinion on compliance

  29. SAS 117: Compliance Audits Applicability • Commonly applicable to: • Single audits (OMB Circular A-133) • HUD audits (Consolidated Audit Guide) • Not applicable to: • Examinations (follow SSAEs not SASs) • Agreed-Upon Procedures engagements

  30. SAS 117: Compliance Audits Applicability • Compliance audits are usually performed in conjunction with a financial statement audit • SAS 117 does not apply to the financial statement audit component of such engagements

  31. SAS 117: Compliance Audits Applicability • In general, all AICPA Statements on Auditing Standards (AU Sections) and supplementary Yellow Book guidance should be adapted and applied to compliance audits • (e.g., replace “misstatement” with “noncompliance”)

  32. SAS 117: Compliance Audits Applicability • A detailed list of non-applicable AU Sections is provided in Appendix A • Auditors are not required to make a literal translation of each procedure that might be performed in a financial statement audit, but rather to obtain sufficient appropriate audit evidence to support the auditor’s opinion on compliance

  33. SAS 117: Compliance Audits Management’s Responsibilities • A compliance audit is based on the premise that management is responsible for the entity’s compliance, including: • Identifying programs and understanding compliance requirements • Establishing and maintaining effective internal controls over compliance continued…

  34. SAS 117: Compliance Audits Management’s Responsibilities • A compliance audit is based on the premise that management is responsible for the entity’s compliance, including: • Evaluating and monitoring the entity’s compliance • Taking corrective action when instances of noncompliance are identified

  35. SAS 117: Compliance Audits Objectives • The auditor’s objectives in a compliance audit are to: • Obtain sufficient appropriate audit evidence to form an opinion and report on whether the entity complied in all material respects with the applicable compliance requirements continued…

  36. SAS 117: Compliance Audits Objectives • The auditor’s objectives in a compliance audit are to: • Identify audit and reporting requirements that are supplementary to GAAS and Government Auditing Standards, if any, and perform additional procedures to address those requirements

  37. SAS 117: Compliance Audits Requirements • Adapt and apply AU Sections to the objectives of the compliance audit, using professional judgment • Establish materiality • Identify applicable compliance requirements • Perform risk assessment procedures

  38. SAS 117: Compliance Audits Requirements • Assess the risks of material noncompliance • Perform further audit procedures in response to assessed risks • Follow any supplementary audit requirements

  39. SAS 117: Compliance Audits Requirements • Obtain written representations from management • Consider subsequent events • Evaluate the sufficiency and appropriateness of audit evidence and form an opinion

  40. SAS 117: Compliance Audits Requirements • Report on compliance (and, if required, on internal control over compliance) • Document all procedures and conclusions

  41. SAS 117: Compliance Audits Reporting • SAS 117 added the phrase “direct and material” to report language • Report on Compliance With Requirements That Could Have a Direct and MaterialEffect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133

  42. SAS 117: Compliance Audits Reporting • Illustrative Auditor’s Reports http://www.aicpa.org/InterestAreas/ GovernmentalAuditQuality/Resources/ IllustrativeAuditorsReports/Pages/ IllustrativeAuditorReportsforClarity.aspx • Updated for Clarity Standards • New report sections and restricted use language

  43. Single Audit Updates SAS 119: Supplementary Information

  44. SAS 119: Supplementary Information in Relation to the Financial Statements as a Whole • Effective for periods ending on or after 12/31/2011 • Addresses the auditor’s responsibility when engaged to report on whether SI is fairly stated, in all material respects, in relation to the financial statements taken as a whole • Applies to SEFA

  45. SAS 119: Supplementary Information Objectives • The auditor’s objectives when reporting on SI in relation to the financial statements as a whole are to: • Evaluate the presentation of the SI in relation to the financial statements as a whole; and • Report on whether the SI is fairly stated, in all material respects, in relation to the financial statements as a whole

  46. SAS 119: Supplementary Information Requirements • Determine that SI was derived from and directly relates to the underlying accounting records used to prepare the F/S • SI must relate to the same period as the FS

  47. SAS 119: Supplementary Information Requirements • FS must have been audited by the same auditor (adverse opinion or disclaimer not permitted) • SI must accompany the audited FS, or else the audited FS must be readily available

  48. SAS 119: Supplementary Information Requirements • Auditor must perform procedures on the SI, such as: • Inquire of management about the purpose of the SI, and the methods used to prepare it • Compare SI to the audited FS for consistency continued…

  49. SAS 119: Supplementary Information Requirements • Auditor must perform procedures on the SI, such as: • Evaluate the appropriateness and completeness of the presentation • Obtain written representations from management • The date of the auditor’s report on SI should not be earlier than the date these procedures are completed

  50. SAS 119: Supplementary Information Reporting • Additional language in: • Auditors’ opinion • SAS 114 letter