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1 Single Audit Quality Update IIA Washington DC Chapter November 16, 2012.

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1 1 Single Audit Quality Update IIA Washington DC Chapter November 16, 2012

2 2Governmental Audit Quality Center Presenter Rafael Roman, CPA Rafael is a Technical Manager at the American Institute of Certified Public Accountants in Washington, DC, where his primary responsibility is to assist with governmental auditing and accounting matters. He manages the activities of the AICPA Governmental Audit Quality Center and helps staff both the AICPA Governmental Audit Quality Center Executive Committee and the State and Local Government Expert Panel. Rafael joined the AICPA on March Prior to joining the AICPA, Rafael was a manager at a large national firm working on Federal financial audits. However, the majority of his governmental audit experience was obtained as an internal auditor for the U.S. Marine Corps. Rafael is a graduate of Mary Washington College and is a CPA, CGMA, CIA, CGAP, and CCSA.

3 3Governmental Audit Quality Center What Will Cover The history of Single Audit Quality The latest on the auditing standards that apply to compliance audits The 2012 Compliance Supplement The status of the federal government’s efforts to revise the single audit rules Activity of federal agencies that have compliance audit requirements outside of the single audit GAQC update and available audit tools

4 4Governmental Audit Quality Center Brief History of Single Audit Quality

5 5Governmental Audit Quality Center History of Single Audit Quality Issues History of quality issues: Federal Single Audit Quality Study Results The Project issued a report titled, Report on National Single Audit Sampling Project (the PCIE report), that was issued by the President’s Council on Integrity and Efficiency (PCIE) and can be accessed in its entirety at : Category# of Audits$$$ Audited Acceptable48.60%92.9% Limited Reliability16.00%2.30% Unacceptable35.50%4.80%

6 6Governmental Audit Quality Center History of Single Audit Quality Issues Improvements needed in many areas including: Internal Control: Lack of Understanding and Testing Documentation Issues Lack of Due Professional Care Sampling Compliance Testing Problems Lack of Testing of SEFA Unreported Findings Material Reporting Errors

7 7Governmental Audit Quality Center 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 History of Single Audit Quality Issues

8 8Governmental Audit Quality Center GAQC Mission and History Overall mission to improve governmental audit quality and to be a resource to members Why Center launched? Indicators of problems with these audits from federal agencies (e.g., PCIE study), peer reviews, and ethics referrals Proactive launch in light of expected federal study on single audit quality which began in 2005 (report issued in 2007) Milestones Council approved concept in 2003 Board approved GAQC membership requirements in 2004 Center launched September 2004 Board approved state audit organization membership in 2009

9 9Governmental Audit Quality Center Latest on the Auditing Standards that Apply to Compliance Audits

10 10Governmental Audit Quality Center Technical Matters Impacting Single Audits AICPA SAS No. 119 Clarity, including SAS No. 125 AICPA GAS-A133 and other relevant Guides 2011 Government Auditing Standards Office of Management and Budget 2012 Compliance Supplement -Changes to various parts and sections Potential revisions to single audit related regulations Federal Audit Clearinghouse

11 11Governmental Audit Quality Center Technical Update – AICPA SAS No. 119, Supplementary Information in Relation to the Financial Statements as a Whole Effective for audits of financial statements for periods beginning on or after 12/15/10. Scope When the auditor is engaged to report on whether SI is fairly stated, in all material respects, in relation to the f/s as a whole Affects SEFA in-relation-to opinion (related GAQC Practice Aids have been updated for SAS 119) Requires the auditor to determine certain conditions are met Provides for specific management representation

12 12Governmental Audit Quality Center Technical Update – AICPA SAS No. 119, Supplementary Information in Relation to the Financial Statements as a Whole Specific procedures using the materiality level used in the audit of the F/S However, keep in mind that auditor has to perform procedures beyond SAS No. 119 due to the compliance audit Consideration of subsequent events not required for SI, however still have to consider any information related to the F/S Reporting requirements under various scenarios (some changes in report language) Dating – not earlier than the date on which the auditor completed procedures on SI

13 13Governmental Audit Quality Center Technical Update – AICPA Clarity Standards Issued SAS No. 122, Statements on Auditing Standards: Clarification and Recodification SAS No. 123, Omnibus Statement on Auditing Standards–2011 SAS No. 124, Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country SAS No. 125, Alert That Restricts the Use of the Auditor’s Written Communication Effective for audits of periods ending on or after December 15, 2012; no early implementation Includes revisions to SAS 117 Appendix regarding what auditing standards do NOT apply to compliance audit to be revised Reporting changes

14 14Governmental Audit Quality Center Technical Update – AICPA Clarity Keep in mind that many of the clarity standards have “governmental consideration” paragraphs that are specific to the public sector May cover Yellow Book/compliance audit considerations May cover financial statement audit considerations Group audits will be more challenging in financial statement arena Still looking at impact of group audits on compliance audits

15 15Governmental Audit Quality Center Technical Update – AICPA Clarity SAS No Government Auditing Standards reports (including A-133 reports) will contain purpose alert instead of restriction alert Pay particular attention to effective date Effective for the auditor’s written communications related to audits of financial statements for periods ending on or after 12/15/12 For all other engagements conducted in accordance with GAAS, this SAS is effective for the auditor’s written communications issued on or after 12/15/12 There has been a lot of discussion on how this effective date affects single audit reports issued after 12/15/12 (e.g., relating to 6/30/12 or 9/30/12) ASB currently looking at issuing a question and answer addressing this

16 16Governmental Audit Quality Center Getting to Know the AICPA Clarity Standards Clarity section of AICPA.org Standards Videos Mapping from extant to new standards More Listen to archived GAQC member web events Implementing the Clarified SASs in a Governmental and Not-For Profit Audit Environment: What, When, and How?Implementing the Clarified SASs in a Governmental and Not-For Profit Audit Environment: What, When, and How? Understanding the Potential Impacts of the New Group Audits SAS on Your Governmental and NPO Audit EngagementsUnderstanding the Potential Impacts of the New Group Audits SAS on Your Governmental and NPO Audit Engagements

17 17Governmental Audit Quality Center Technical Update – AICPA A&A Guides Primary Focus Government Auditing Standards & Circular A-133 Audits Other Industries Include State and Local Governments Not for Profit Entities Health Care Entities Gaming Sampling Audit Risk Alerts Checklists & Illustrative Statements

18 18Governmental Audit Quality Center Technical Update – AICPA A&A Guides AICPA Audit Guide, Government Auditing Standards and Circular A-133 Audits 2012 edition issued in May SAS No 119 is fully incorporated into guide (including the illustrative reports and SEFA practice aids in chapter 7) Appendix added with a summary of 2011 Yellow Book revisions Two new “clarity” Appendixes -Information on AU-C sections with substantive changes or significant clarifying changes resulting from clarity -Table that maps current AU sections to the new AU-C section numbers 2012 GAS-A133 Audit Risk Alert also issued Guide - Looking forward Clarity and new Yellow Book

19 19Governmental Audit Quality Center Technical Update – AICPA A&A Guides AICPA A&A Guide, State and Local Governments 2012 Edition issued in July 2012 Incorporated GASB 62 (earlier than normal) but did so with appropriate footnotes to assist those that have not early implemented. Also updated for SAS Nos. 118, 119 & 120; illustrative reports updated for these statements and will also be posted on GAQC Web site Plans for 2013 and 2014 SLG Audit Risk Alert Other SLG Publications Updated SLG Practice Aid for Other Comprehensive Basis of Accounting

20 20Governmental Audit Quality Center Technical Update – Not-for-Profit AICPA A&A Guide, Not-for-Profit Entities AICPA A&A Guide, Not-for-Profit Entities – Overhaul Overhaul in process; exposure draft posted for comment Some of the main areas being addressed -Reporting relationships with other entities -Reporting and measuring noncash gifts -A new chapter on program-related investments and microfinance loans -Reporting the expiration of donor-imposed restrictions -Suggestions for audit procedures an auditor might consider as a supplement to the risk assessment procedures AICPA A&A Guide, Not-for-Profit Entities AICPA A&A Guide, Not-for-Profit Entities – Conforming Changes 2012 edition issued in May 2012 Normal update changes for new standards

21 21Governmental Audit Quality Center Technical Update – Health Care A&A Guide Covers governmental, not-for-profit, and for-profit health care entities 2012 edition expected in November 2012 Clarity standards to be incorporated

22 22Governmental Audit Quality Center Technical Update – Government Auditing Standards Final 2011 edition issued Main change relates to independence, especially when performing nonaudit services Very few changes made from interim version previously posted Effective date same as AICPA clarity For financial audits for periods ending on or after 12/15/12 No early implementation However, auditors need to be independent for entire audit period New Yellow Book independence requirements for nonaudit services may need to be considered as early as 1/1/12

23 23Governmental Audit Quality Center Technical Update – Government Auditing Standards Resources for 2011 Yellow Book (should be referred to in other AICPA offerings – all open to the public) Archived GAQC Web event, The New 2011 Yellow Book: What You Need to Know Now, provides a more in-depth discussion on 2011 Yellow BookThe New 2011 Yellow Book: What You Need to Know Now GAQC practice aid titled, 2011 Yellow Book Independence—Nonaudit Services Documentation Practice Aid2011 Yellow Book Independence—Nonaudit Services Documentation Practice Aid Archived GAQC Web event, Understanding the AICPA's Yellow Book Independence Practice Aid for Performing Nonaudit ServicesUnderstanding the AICPA's Yellow Book Independence Practice Aid for Performing Nonaudit Services Ethics comparison of AICPA standards versus GAO

24 24Governmental Audit Quality Center Technical Update – Government Auditing Standards New! Yellow Book Independence Practice Aid New practice aid developed by GAQC, working with the AICPA ethics and peer review teams, to assist auditors in meeting the Yellow Book requirements Federal agency representatives reviewed the practice aid and provided feedback Includes documentation template to illustrate one way to prepare required documentation in this area and many informative appendices Issued free to AICPA members in flat PDF version and also a for-sale version that permits input responses to the documentation template

25 25Governmental Audit Quality Center Technical Update – Government Auditing Standards Purpose of GAQC YB Practice Aid To assist auditors in: -Applying the independence conceptual framework -Identifying and evaluating threats to independence for nonaudit services -Identifying safeguards where necessary -Assessing management’s Skills, Knowledge, or Experience (SKE) -Complying with YB documentation requirements Practice Aid highlights nonaudit services frequently performed for smaller entities: -Preparing financial statements (F/S) -Preparing journal entries other than proposed audit entries -Preparing reconciliations

26 26Governmental Audit Quality Center Section II: Example Documentation

27 27Governmental Audit Quality Center Section III: Example Documentation

28 28Governmental Audit Quality Center Government Auditing Standards Practice Aid Become familiar with the Practice Aid and its Appendixes:

29 29Governmental Audit Quality Center Technical Update – GAO – 2011 Yellow Book How to Obtain the Practice Aid Flat PDF Version. Free to AICPA members, including GAQC members. Access the free pdf version of the Practice Aid on the GAQC Web siteAccess the free pdf version of the Practice Aid For Sale Version. Practice Aid Version Designed for Auditor Documentation Input (Supplement) available for a small fee to AICPA members, GAQC members, and non-members; order the for-sale Supplementorder the for-sale Supplement -Can be saved and included as part of auditor’s documentation

30 30Governmental Audit Quality Center The 2012 Compliance Supplement

31 31Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Final issuance Supplement issued in July 2012 Accessing the Final Supplement Upon issuance, go to OMB's Web site at "Grant Management Circulars" link: (scroll down to the "Audit Requirements" section) Both current and prior Supplements available (use the correct version!) OMB previously provided a draft Supplement for Audit “Planning” Purposes Previously posted on GAQC Web page Do not use the draft now that the final is issued

32 32Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Program changes by the numbers Review Appendix V for changes made Don’t overlook Appendix VII Effect of Recovery Act Awards on major program determination Guidance List of Recovery Act programs not covered by Parts 4 or 5 but that could be subject to a single audit and list of Recovery Act programs not subject to single audit Late Filings and Low-Risk Auditee Status Treatment of Large Loan and Loan Guarantee Programs

33 33Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Part 3, Requirement I, “Procurement and Suspension and Debarment” Addressed relationship between procurement requirements of A-102 common rule and change in federal simplified acquisition threshold Part 3, Requirements L, "Reporting" Clarified subaward reporting under the Federal Funding Accountability and Transparency Act of 2006 (FFATA) Removed timeliness as an element of financial reporting compliance requirement (change from draft Supplement) Part 3, Requirement M, "Subrecipient Monitoring“ Modified to add “subrecipient risk” as another factor for pass-through entities to consider when determining the nature, timing, and extent of during-the-award monitoring

34 34Governmental Audit Quality Center Technical Update – OMB Compliance Supplement What is FFATA? It is the federal award reporting requirements for direct recipients of non-Recovery Act federal awards Direct recipients required to report certain first-tier subawards Public view Web site: Input version of Web site: Some similarities to section 1512 reporting for Recovery Act awards but also several differences

35 35Governmental Audit Quality Center Technical Update – OMB Compliance Supplement When Does FFATA Apply? For grants and cooperative agreements, the effective date was October 1, 2010, for all discretionary and mandatory awards equal to or exceeding $25,000 made with a new FAIN on or after that date. Once the requirement applies, the recipient must report, for any subaward under that award with a value of $25,000 or more, each obligating action of $25,000 or more in federal funds. For contracts, implementation was phased-in based on their total dollar value (Supplement describes staggered phase-in)

36 36Governmental Audit Quality Center Technical Update – OMB Compliance Supplement State makes subawards of federal funds to local governments FFATA may apply to state (but not to local governments unless they receive other direct awards and make subawards) Local government expends direct federal funds but makes no subawards FFATA does not apply to local government (makes no subawards) Not-for-profit expends federal funds received from local government and makes no subawards FFATA does not apply to not-for- profit (not a direct recipient)

37 37Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Clarifying FFATA Guidance How to understand if there is a new FAIN Obligating actions versus funding Incorporation in Supplement of Q&A issued on in February If direct recipient made best effort to comply and has documented evidence, no finding needs to be reported (assuming no other issues) -Guidance on how prior year findings in this area affect current year major program determination -Access the 2011 Q&A: https://www.fsrs.gov/#a-faqshttps://www.fsrs.gov/#a-faqs

38 38Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Part 5, Clusters of Programs, Student Financial Assistance (SFA) cluster has been modified -Changed references to requirements associated with Federal Family Education Loans, -Numerous updates and deletions to various compliance requirements and procedures specific to SFA Research and Development (R&D) cluster -Modified to reflect an update to the "Indirect Cost Limitation" based on the elimination of the requirement in No change to NSF R&D (draft Supplement had indicated there would be a change but it was removed in final) The Other Clusters have been revised for: -Program changes to certain clusters

39 39Governmental Audit Quality Center Recovery Act Recovery Act funds dwindling but will still will affect many auditees Compliance Supplement guidance -Clusters of programs with new Recovery Act CFDA number would fail 2-year lookback and have to be audited (excludes R&D and SFA clusters) -Type A programs having Recovery Act expenditures generally would not be low-risk unless meet defined exception (2012 Supplement revised exception – next slide) -Type B programs still considered higher risk Technical Update – OMB Compliance Supplement

40 40Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Exception for Type A Recovery Act programs slightly revised An auditor may consider a Type A program or cluster to be low-risk if all of the following conditions exist: Program or cluster had Recovery Act expenditures in the prior audit period; Program or cluster was audited as a major program in EITHER OF THE TWO PRIOR AUDIT PERIODS; Recovery Act expenditures in the current audit period are less than 20% of the total program or cluster expenditures; and Auditor has followed Section 520(c) and 525 of OMB Circular A- 133 and determined that the program or cluster is otherwise low- risk

41 41Governmental Audit Quality Center Technical Update – OMB Compliance Supplement Other Tools GAQC issued GAQC Alert 198 to alert members of the release of the Supplement and how differed from the draftGAQC Alert 198 GAQC issued GAQC Alert 195 to alert members of the release of the draft Supplement and what it containedGAQC Alert 195 -Caution! If you began planning or performing interim work using the draft Supplement, you need to check the final Supplement GAQC member-only Web event on draft version of the 2012 Supplement held with two additional rebroadcasts – still usefulGAQC member-only Web event

42 42Governmental Audit Quality Center Using the Compliance Supplement Correctly Use all parts for a correct Single Audit -2: Matrix of Compliance Requirements -3: Compliance Requirements -4: Agency Program Requirements -5: Clusters of Programs -6: Internal Control -7: Guidance for Auditing Programs not Included in the Supplement Don’t forget Appendices – especially Appendix 7 if auditee has Recovery Act funds Use the correct year’s Supplement

43 43Governmental Audit Quality Center Technical Update – OMB – Continued Single Audit Quality Issues Major Program Determination, including improper clustering Risk Assessment Documentation Internal Control Understanding and Testing Sampling Schedule of Expenditures of Federal Awards Summary of Prior Year Findings Exception and deviation disposition Finding Detail

44 44Governmental Audit Quality Center The Status of the Federal Government’s Efforts to Revise the Single Audit Rules

45 45Governmental Audit Quality Center Technical Update – OMB – Single Audit Revisions Various Executive Orders and Memorandums over last several years has partially led to the revisions being considered today. OMB issued Memorandum on October 27, 2011, creating Council on Financial Assistance Reform (COFAR): Charged with creating a more streamlined and accountable structure to coordinate financial assistance COFAR is co-chaired by the Office of Federal Financial Management at OMB and includes the eight largest grant making agencies as well as one rotating member This group is leading the charge on single audit and other related revisions

46 46Governmental Audit Quality Center OMB issued Advance Notice on potential reform “ideas” on February 24, 2012 (http://www.whitehouse.gov/sites/default/files/omb/fi nancial/fr-notice-grant-reform-2012.pdf)http://www.whitehouse.gov/sites/default/files/omb/fi nancial/fr-notice-grant-reform-2012.pdf Comments were due April 30 (access the AICPA comment letter)access the AICPA comment letter Specific regulatory proposed revisions next step The reforms proposed are intended to improve the performance of federal grants and cooperative agreements,while targeting waste, fraud, and abuse to ensure accountability in the use of funds Technical Update – OMB – Advance Notice

47 47Governmental Audit Quality Center Technical Update – OMB – Advance Notice Increase audit threshold from $500K to $1M Establish “limited scope” single audit for entities with expenditures between $1M and $3M: Test only two compliance requirements for a major program -Allowable costs always tested -Second requirement selected by federal agencies -Target risk of improper payments, waste, fraud, and abuse Require “full” single audit (with modifications) for entities with expenditures more than $3M Streamlined compliance requirements

48 48Governmental Audit Quality Center Technical Update – OMB – Advance Notice Full single audit modifications Target subset of compliance requirements for increased testing, larger samples, and/or lower levels of materiality (e.g., Allowable or unallowable activities and costs, Eligibility, Period of availability, Reporting, Subrecipients) Reduce testing of other requirements by making them optional, smaller samples, and/or higher levels of materiality (e.g., Cash management, Davis-Bacon Act, Program income)

49 49Governmental Audit Quality Center Technical Update – OMB – Advance Notice Other Ideas for Change in Advance Notice Strengthening audit follow-up More cross-agency coordination Combining and clarifying cost principles Modifications to administrative requirements

50 50Governmental Audit Quality Center Technical Update Circular A-133 – Status of Changes Federal Register notice of proposed changes expected before year-end with revisions to: OMB Circular A-133 Cost principles and administrative requirements GAQC has heard: Financial statement audit for entities expending between $500K and $1M with in-relation to reporting on the SEFA Abandoned “limited scope single audit” between $1M and $3M A streamlined single audit for all above $1M (fewer compliance requirements) Other changes likely (e.g., change in major program and finding threshold. percentage of coverage, etc.) No word on proposed effective date No plans to amend Single Audit Act that we are aware of

51 51 Potential Changes to Single Audit – Impact of Tiered Approach 39% 24% 1% 2% 97%

52 52Governmental Audit Quality Center Potential Changes to Single Audit – by Agency Single Audits by Agency As Cognizant As Oversight > $3 million$1 – 3 million< $1 million Agriculture147771, HUD2704,2114,8812,848 Labor Transportation NSF Energy Education4804,7914,4012,894 HHS2403,1142,7211,880 Homeland Security

53 53Governmental Audit Quality Center Impact on Firms of Raising Threshold to $1 million Total firms in Federal Audit Clearinghouse doing single audits is 5,425 3,256 firms perform the 10,724 single audits that cover less than $1 million There are 711 firms that do only 1 single audit and it is less than $1 million Another 200 do more than 1 single audit but none are over $1 million The remainder also have single audits that fall above $1 million

54 54Governmental Audit Quality Center Technical Update – 2013 Data Collection Form (Federal Audit Clearinghouse) Federal Register Notice with proposed changes likely before end of 2012 Significant increase in findings information on the DCF FAC planning to require unlocked pdf audit reporting to be uploaded in future Unencrypted, unlocked, and at least 85% text searchable FAC working towards making all reporting packages transparent to the public Financial statements, SEFA Auditor reporting Schedule of Findings and Questioned Costs

55 55Governmental Audit Quality Center Use the Federal Audit Clearinghouse as a Tool to Identify Audit Quality Issues Consider using the database to perform a few quality checks Check type A program thresholds for your audits (if you find $500,000 you probably have a problem) See if doing any program-specific audits; if so, look at the data collection form (DCF) to determine if only one program or cluster noted Randomly drill down into some of your organization’s DCFs to see if any other trends noted

56 56Governmental Audit Quality Center Technical Update – A Word of Caution Be Cautious…. Watch out for federal agency “interpretations” that conflict with requirements of Circular A-133 or Compliance Supplement CPA certifications without following professional standards should not be signed

57 57Governmental Audit Quality Center QCR and Desk Review Checklists Inspector General community has issued the following checklists for use by federal agencies Guide for Quality Control Reviews of OMB Circular A-133 Audits Guide for Desk Reviews of OMB Circular A-133 Audit Reports Both can be found at: (look under Single Audit Guides) Consider using these checklists as an additional QC tool

58 58Governmental Audit Quality Center Peer Review Review both Parts A and B of the peer review single audit checklists Use the peer review checklists as a quality control tool (before, during, and at the completion of your engagements) GAQC members can listen to an archived GAQC Web event on the latest on peer review

59 59Governmental Audit Quality Center Activity of Federal Agencies that have Compliance Audit Requirements Outside of the Single Audit

60 60Governmental Audit Quality Center Technical Update – HUD Audits HUD Consolidated Audit Guide Covers for-profits (e.g., housing partnerships) Different types of entities covered by each chapter History has been for HUD to update on chapter-by-chapter basis Chapters 1 (applicable to all audits) and 6 (GNMA) updated over course of last year and effective HUD staff attempting to advance Guide revisions Chapter 2 (may move to report formats similar to Circular A-133 reports in future) Chapter 4 (hospitals with HUD-insured mortgages) Chapter 7 and 8 (supervised/nonsupervised mortgages to be combined and updated) GAQC HUD Information Page: esources/HUDInformation/Pages/default.aspxhttp://www.aicpa.org/InterestAreas/GovernmentalAuditQuality/R esources/HUDInformation/Pages/default.aspx

61 61Governmental Audit Quality Center Technical Update – Other For-Profit Compliance Audits Trend is for federal government to issue audit requirements similar to Circular A-133 for for-profit entities receiving federal funds Examples of for-profit guides: Dept. of Energy Audit Guide Dept. of Commerce Broadband Technology Opportunities Program Dept. of Education (lenders, lender servicers, proprietary schools, etc.) Department of Agriculture (Broadband) GAQC recently issued a summary of “other” federal guides which includes current status on the GAQC Web sitesummary of “other” federal guides

62 62Governmental Audit Quality Center Technical Update – Other For-Profit Compliance Audits Recent Activity During Past Year Department of Energy Audit Guide (2011 edition) issued in 2012Department of Energy Audit Guide (2011 edition) Confusion over updated 2011 Energy Guide resulted in issuance of FAQ documentFAQ document Department of Commerce Broadband Technology Opportunities Program Audit Guide to identify changes made in 2011 editionDepartment of Commerce Broadband Technology Opportunities Program Audit Guide -Change document available that identifies what was revisedChange document

63 63Governmental Audit Quality Center GAQC Update and Available Audit Tools

64 64Governmental Audit Quality Center GAQC Update Approximately 1,734 member firms representing 50 states, Puerto Rico, and US Virgin Islands 19 State Audit Organizations (SAO) have joined to date AR, CA, DE, FL, GA, IA, IL, LA, MI, MN, ND, NH, OH, RI, SD, TX, UT, VA, WV Member Coverage in the FAC 2010 Database 91% of federal dollars 61% of number of audits Hear from current GAQC membersHear from current GAQC members on value of the GAQC (click on AICPA TV link)

65 65Governmental Audit Quality Center GAQC Update Advocacy Regular interaction with federal regulators and other stakeholders OMB Advance Notice on single audit revisions 2012 Compliance Supplement and for-profit federal audit guides New 2011 Yellow Book Communication with members (GAQC Alerts) Offerings of GAQC Web events Technical guidance (e.g., publications, conferences) Resources and practice aids Yellow Book Independence practice aid SEFA practice aids (updated for SAS 119) Internal control practice aids Illustrative reports GAQC Web site

66 66Governmental Audit Quality Center GAQC Resources GAQC Web site (www.aicpa.org/GAQC)www.aicpa.org/GAQC

67 67Governmental Audit Quality Center Just Released! Auditee Resource Center – Open to the Public Why quality audit important? Auditee resources – some existing resources for auditors and some new (single audit, Yellow Book, other compliance audits, and financial statements audits) -Archived Web events -Practice aids -Articles -Access to GAQC Alerts Links to Publications Link to Conferences and other training available Access the Auditee Resource CenterAuditee Resource Center

68 68Governmental Audit Quality Center GAQC SEFA Practice Aids SEFA Practice Aids (both for the auditor and auditee) issued and available on the GAQC Web site (auditor tools also incorporated in the GAS/A133 Guide) Audit Program and Disclosure Checklist for Auditors Document for auditees to accumulate important information on federal awards and a Disclosure Checklist for Auditees Updated in past year to reflect changes needed due to SAS 119 New auditor’s report checklist for in-relation-to reporting added GAQC held a recent member event that has been archived on the GAQC Web site (to further help you understand SEFA responsibilities and the Practice Aids)

69 69Governmental Audit Quality Center GAQC Internal Control Practice Aids Practice aids illustrate: Documenting direct and material compliance requirements Documenting internal control Dual-purpose testing of IC and Compliance How to Access GAQC members – free access to word and excel versions on GAQC Web site GAQC members and non-members – small fee ($39.99) for purchase of electronic PDF product where responses can be input into form (order through CPA2BIZ at Product number: PDF

70 70Governmental Audit Quality Center Major Program Determination & Risk Assessment Tools Utilize major program risk assessment software, if your firm has it Utilize the AICPA Audit Guide, “Government Auditing Standards and Circular A-133 Audits” Document thoroughly the risk analysis and the basis for assessing risk (they should be consistent!) At the end of the audit – recheck the coverage achieved Listen to archived GAQC Web events for more tips

71 71Governmental Audit Quality Center Sampling Separate AICPA Audit Guide for Sampling in a F/S audit environment Separate chapter in GAS/A-133 Audit Guide to address single audit sampling Chapter includes suggested minimum sample sizes and more Executive summary of chapter available on GAQC Web site under Resources tab HUD Consolidated Audit Guide contains sampling guidance for audits covered by that Guide

72 72Governmental Audit Quality Center HUD Audits GAQC HUD Resource Center (much of this page is open to the public) Latest news Archived member events (HUD multifamily housing audits) Background Status of each chapter of HUD Guide RESOURCES/HUDINFORMATION/Pages/default.aspx

73 73Governmental Audit Quality Center GAQC Resources – Archived GAQC Web Events from Past Year OCBOA Practice Aids* Understanding Indirect Costs* The HHS Head Start Program* GASB and FASB Updates Challenges with Fair Value Measurements for NPOs* New 2011 Yellow Book* New Group Audit Standards Impact on Governmental and NPO Audits New HUD Rules for Banks* * Open to the Public

74 74Governmental Audit Quality Center GAQC Resources – Archived GAQC Web Events from Past Year Understanding the Effect of the Clarified Auditing Standards on Governmental and NPO Audits Updated SEFA Practice Aids (for SAS 119) Subrecipient Monitoring: An Auditee and Auditor Perspective* Understanding the New AICPA Yellow Book Independence Practice Aid* Annual GAQC Webcast on Planning for 2012 Governmental and NPO Audits 2012 Compliance Supplement and Related Best Practices * Open to the Public

75 75Governmental Audit Quality Center GAQC Resources – GAQC Alerts  Archived Alerts from Past Year Final 2012 Compliance Supplement Issued Advance Notice of Changes Being Considered for A-133 and Cost Principles New Yellow Book Independence Nonaudit Services Practice Aid Issued Access Updated SEFA Practice Aids and Report Wording; SAS 119 Information HUD Issues Compliance Audit Waiver for Small Supervised Lenders News on the Governmental Accounting and Auditing Front Draft 2012 OMB Compliance Supplement Available for Review and Comment New 2011 Yellow Book Issued by GAO Important News and Information for GAQC Members Audit Resources, Annual Webcast; and Upcoming Events

76 76Governmental Audit Quality Center General Inquiries - Best way to reach GAQC staff is to send an to: Mary Foelster, Director or Teresa Bordeaux, Technical Manager or Laura Hyland, Technical Manager or Rafael Roman, Technical Manager or GAQC Team

77 77Governmental Audit Quality Center Looking Forward Implementation of Clarity and New Yellow Book Changes to single audit rules? Continued effects from Recovery Act? Continued audit quality concerns Continued look at how peer review can be enhanced Continued advocacy Continued GAQC support to members

78 78Governmental Audit Quality Center Questions???


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