4E5 - Reports Required by Government Auditing Standards

docx

School

University of Illinois, Chicago *

*We aren’t endorsed by this school

Course

435

Subject

Accounting

Date

Nov 24, 2024

Type

docx

Pages

Uploaded by JusticeCapybaraMaster1521

4E5 – Reports Required by Government Auditing Standards Government Auditing Standards - Also called “Yellow Book” or Generally Accepted Government Auditing Standards (GAGAS) - Issued by the Comptroller General of the United States of the U.S. Government Accountability Office (GAO) - Typically impacts entities with public accountability as required by law, regulation, contract, or agreement Relationship of GAGAS to F/S Audit - Supplements the SASs when performing a F/S audit o Auditor MUST reference that audit performed in accordance with both sets of standards - GAGAS REQUIRES report on internal control over financial reporting and on compliance with laws, regulations, and provisions of contracts or grant agreements - Entity MAY or MAY NOT also REQUIRE a compliance audit of federal awards (i.e., Single Audit) Varying Audit Objectives - F/S Audit = Risk of Material Misstatement - Internal Controls = Operating Effectiveness o May be performed in accordance with Statements on Standards for Attestation Engagements (SSAEs) o May be performed in accordance with PCAOB AS No. 5 Compliance Audit Objective - Compliance Audit = Risk of Material Noncompliance o Laws, regulations, and provisions of contracts or grant agreements that could have a direct material effect o F/S as a whole or each major federal program, depending on scope of audit Internal Control Responsibilities – SAS Requirements - F/S audit in conformance with SASs o Understand design and implementation to assess risk and design nature, timing, and extent of further audit procedures o Consider need to test operating effectiveness o Communicate significant deficiencies and material weaknesses in writing to management and those charged with governance Internal Control Responsibilities – GAGAS Requirements - F/S audit in conformance with Yellow Book o Same basic requirements as SAS audit o Communicate significant deficiencies and material weaknesses in Report on Internal Control

Compliance – SAS Responsibilities - F/S audit in conformance with SASs o Assess risk that noncompliance with laws, regulations, contracts, or agreements could have a direct and material effect on the F/S, and design further audit procedures as deemed necessary o Communicate material noncompliance matters to those charged with governance, orally or in writing Compliance – GAGAS Responsibilities - F/S audit in conformance with Yellow Book o Same basic requirements of the SASs o Communicate material noncompliance in Report on Compliance and Other Matters Fraud, Abuse, and Illegal Acts – SAS Responsibilities - F/S audit in conformance with SASs o Reasonable assurance that NO material misstatement due to fraud o NO responsibility to plan audit to detect illegal acts or abuse o Communicate to those charged with governance, orally or in writing, all known and potential fraud and other than trivial illegal acts o Consider impact on internal control communications Fraud, Abuse, and Illegal Acts – GAGAS Responsibilities - F/S audit in conformance with Yellow Book o Same as basic requirements of the SASs o Communicate material fraud and material abuse in Report on Compliance, and Other Matters o Report any other instances that warrant attention of those charged with governance Abuse – GAGAS Definition - Behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances o MAY be quantitatively or qualitatively material Key GAGAS Reporting Considerations - MAY issue a single Report on Internal Control, Compliance and Other Matters - MAY or MAY NOT opine on controls and/or compliance - MUST include written views of responsibilities officials within report o Including corrective action plan Audit Results Matter of Public Interest - Categorize severity of deficiencies and other findings based on a prudent official test - Audit reports are a matter of public record - MAY REQUIRE direct communication with third parties o E.g., material fraud or noncompliance where appropriate action NOT taken by management or governance - Disclose in report if certain confidential or sensitive information is omitted and reason therefore

Question #1 Generally accepted government auditing standards use which of the following terms to describe a professional requirement to comply with a standard or provide a special explanation for NOT doing so? a) Explanatory requirement b) Conditional requirement c) Unconditional requirement d) Presumptively mandatory requirement Question #2 Government Auditing Standards ____________ generally accepted auditing standards in a financial statement audit for an entity that is REQUIRED to have a compliance audit. a) Supplement b) Supplant c) Are replaced by d) Do NOT consider Question #3 When reporting on an entity’s internal control structure under Government Auditing Standards, an auditor SHOULD issue a written report that includes a: a) Statement of negative assurance that nothing came to the auditor’s attention that caused the auditor to believe significant deficiencies were present b) Statement of positive assurance that the results of tests indicate that the internal control structure either can, or cannot, be relied on to reduce control risk to an acceptable level c) Description of the weaknesses considered to be significant deficiencies and the strengths that the auditor can rely on in an reducing the extent of substantive testing d) Description of the scope of the auditor’s work in obtaining an understanding of the internal control structure and in assessing control risk Question #4 Hill, CPA, is auditing the financial statements of Helping Hand, a not-for-profit organization that receives financial assistance from governmental agencies. To detect misstatements in Helping Hand’s financial statements resulting from violations of laws and regulations, Hill SHOULD focus on violations that: a) Could result in criminal prosecution against the organization b) Involve significant deficiencies to be communicated to the organization’s trustees and the funding agencies c) Have a direct and material effect on the amounts in the organization’s financial statements d) Demonstrate the existence of material weaknesses in the organization’s internal control structure Question #5 In reporting on compliance with laws and regulations during a financial statement audit in accordance with Government Auditing Standards, an auditor SHOULD include in the auditor’s report: a) A statement of assurance that all controls over fraud and illegal acts were tested b) Material instances of fraud and abuse acts that were discovered c) The materiality criteria used by the auditor in considering whether instances of noncompliance were significant d) An opinion on whether compliance with laws and regulations affected the entity’s goals and objectives

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Question #6 Which of the following is correct about reporting on compliance with laws and regulations in a financial audit under Government Audit Standards (the Yellow Book)? a) Auditors are NOT required to report fraud, illegal acts, and other material noncompliance in the audit report b) In some circumstances, auditors are REQUIRED to report fraud and illegal acts directly to parties external to the audited entity c) The auditor’s key findings of the audit of the financial statements SHOULD be communicated in a separate report d) The reporting standards in a governmental audit modify the auditor’s responsibilities under generally accepted auditing standards