Governmental and Nonprofit Accounting
Quiz 20 :
Auditing Governments and Not-For-Profit Organizations
The concept underlying a single audit is that one audit should meet multiple objectives, including: Formulating an opinion on the fairness of presentation of an entity's financial statements. Determining whether the entity has complied with laws and regulations with which noncompliance may have a material effect on the financial statements of the entity. Studying and evaluating internal controls of the entity to determine the nature, extent, and timing of the auditing procedures necessary to express an opinion on the entity's financial statements. Determining whether the supplementary schedule of federal awards is fairly presented in relation to the financial statements as a whole. Determining whether the entity has established internal control systems to provide reasonable assurance that federal monies are managed in compliance with applicable laws and regulations. Determining whether the entity has complied with the laws and regulations that may have a material effect on each major federal assistance program.
A major federal program is essentially a federal program which has been selected using guidance established in the OMB Uniform Guidance for the most intensive level of audit coverage. The factors that the selections are based on are a combination of size of the program (in terms of amount of federal expenditures in the audit period) and risk. In addition, there is a minimum coverage provision requiring that programs containing at least 40% (or 20% for low-risk auditees) of federal expenditures for the year be designated as major programs in a single audit. Auditors must perform more work and take more responsibility for internal controls and compliance for major programs than for other programs.
A low-risk auditee is an entity that has had single audits performed for each of the preceding two years; received unmodified opinions on the financial statements and on the schedule of expenditures of federal awards; had no substantial doubt about the ability to continue as a going concern; had no material weaknesses in internal controls per government auditing standards guidance; and had no audit findings on Type A programs regarding material weaknesses in internal controls over the federal program, no modified opinions on Type A programs, or known or likely questioned costs that exceed 5% of the total federal awards expended for Type A programs during the year.