Auditing Governments and Not-for-Profit OrganizationsLearning ObjectivesLearning Objectives (continued)Slide 4Auditing definedPlayers in the audit processAuditeeAuditorUserAudit ClassificationsFinancial AuditsOther objectives of financial auditsAttestation EngagementsAttestation engagements report onPerformance AuditsObjectives of Performance AuditsManagement’s RepresentationsExternal Auditor ClassificationsElements of audit contractElements (continued)Slide 21Auditing StandardsAICPA Auditing StandardsGeneral StandardsStandards of Field WorkStandards of ReportingGAO Auditing StandardsFederal requirementsSignificant Aspects of GAGASFinancial AuditAudit ProceduresAudit ReportManagement LetterThe Single AuditDisadvantage of Single AuditPurposes of Single AuditObjectives of Single AuditObjectives (continued)Single Audit RelationshipsGAAS vs. GAGAS vs. Single AuditApplicability of Single Audit & OMB Circular A-133Auditee ResponsibilitiesAuditee Responsibilities (continued)Auditor Responsibilities – OverviewAuditing GuidanceMajor Program Determinations xQuestioned Cost criteria (808)SLG actions for subrecipients (809)Auditor Reports – Single Audit (810)Auditee Single Audit “Reporting Package” (811 – 813)Auditing Governments andAuditing Governments andNot-for-Profit OrganizationsNot-for-Profit OrganizationsChapter 20Chapter 20Learning ObjectivesLearning Objectives•Understand the different types of government and Understand the different types of government and NFP auditsNFP audits•Understand the sources of standards for Understand the sources of standards for governments and NFP auditing – and the governments and NFP auditing – and the relationships between and among GAAS, relationships between and among GAAS, GAGAS, and single audit standardsGAGAS, and single audit standards•Understand the basic aspects of an audit of Understand the basic aspects of an audit of government or NFP organization financial government or NFP organization financial statements under GAAS and GAGASstatements under GAAS and GAGASLearning Objectives Learning Objectives (continued)(continued)•Understand single audit: purposes, when required, Understand single audit: purposes, when required, and key componentsand key components•Determine which federal programs should be Determine which federal programs should be treated as major programs in a single audittreated as major programs in a single audit•Explain the responsibilities of both the auditor and Explain the responsibilities of both the auditor and auditee under single audit requirementsauditee under single audit requirementsLearning Objectives Learning Objectives (continued)(continued)•Identify and understand audit reports required by a Identify and understand audit reports required by a single audit and who is to receive the audit reportssingle audit and who is to receive the audit reports•Be better acquainted with the SLG “reporting Be better acquainted with the SLG “reporting units” and “major program” approaches to judging units” and “major program” approaches to judging materiality materiality quantitativelyquantitatively as well as major G&NP as well as major G&NP audit related Internet sitesaudit related Internet sitesAuditing definedAuditing definedThe process of collecting and evaluating The process of collecting and evaluating evidence to formulate an independent, evidence to formulate an independent, professional opinion or other judgment about professional opinion or other judgment about assertions made by management.assertions made by management.Players in the audit processPlayers in the audit process•AuditeeAuditee•AuditorAuditor•UserUserAuditeeAuditeeConsidered accountable for certain events, activities, Considered accountable for certain events, activities, & transactions – and makes assertions, either & transactions – and makes assertions, either directly or indirectly, about such accountability – directly or indirectly, about such accountability – such as whether its financial statements are such as whether its financial statements are presented fairly and it has complied with presented fairly and it has complied with applicable regulations and grant provisionsapplicable regulations and grant provisionsAuditorAuditorCompares the auditee’s assertions against established Compares the auditee’s assertions against established criteria – following an appropriate audit process criteria – following an appropriate audit process and standards – and reports an opinion or other and standards – and reports an opinion or other judgment based on the result of the audit.judgment based on the result of the audit.UserUserReceives information from both the auditee Receives information from both the auditee (assertions) and the auditor (opinion or other (assertions) and the auditor (opinion or other judgment) to use in making their evaluations and judgment) to use in making their evaluations and decisions about the auditee’s accountability.decisions about the auditee’s accountability.Audit ClassificationsAudit Classifications•Internal auditsInternal audits•Done by employees of companyDone by employees of company•Review operations of entity, including employee Review operations of entity, including employee compliance with managerial policies and report results compliance with managerial policies and report results to managementto management•External auditsExternal audits•Financial AuditsFinancial Audits•Attestation engagementsAttestation engagements•Performance auditsPerformance auditsFinancial AuditsFinancial AuditsConcerned with whether financial statements are Concerned with whether financial statements are presented fairly in conformity withpresented fairly in conformity with•Generally accepted accounting principles Generally accepted accounting principles (GAAP), (GAAP), oror•Other comprehensive basis of accounting Other comprehensive basis of accounting (OCBOA)(OCBOA)Other objectives of financial auditsOther objectives of financial audits•Special reports for specified elements of Special reports for specified elements of statementsstatements•Reviewing interim financial informationReviewing interim financial information•Issuing letters for underwriters and certain other Issuing letters for underwriters and certain other requesting partiesrequesting parties•Reporting on the processing of transactions by Reporting on the processing of transactions by