Question

A local government has four federal programs. Expenditures during the year ended June 30, 2020, are below:

HHS1; new this year and never audited                                   $ 880,000

HHS2; audited last year, no major findings                                        770,000

Department of Transportation 65,000

Department of Agriculture                          485,000

Total Expenditure of Federal Funds                                                    $2,200,000

Which Programs would the auditor be required to audit, assuming that all the programs are low risk, explain your reasoning and show your computations?

Answer 1

An audit of a governmental entity may be conducted under four different

groups of auditing standards or requirements:

a. Generally accepted auditing standards (GAAS)

b. The standards contained in Government Auditing Standards (also

referred to as the Yellow Book), issued by the Comptroller General

of the United States

c. The requirements of the Single Audit Act of 1984 and the Single

Audit Act Amendments of 1996 (the Single Audit Act) and Title 2

U.S. Code of Federal Regulations Part 200, Uniform Administrative

Requirements, Cost Principles, and Audit Requirements for Federal

Awards (the Uniform Guidance)

d. Other auditing requirements, such as those required by a state

oversight agency for audits of local governments

so while consider the the programs of the local government, all the program must be audited . because All the funds expended by the local or state or federal government should be audited and checked whether all the requirements are met properly or not.

as mentioned in the question that all the program are low risk, it does not mean that these programs are audit exempted . So the program HHS1, which is new this year must be audited meeting all the requirements of GAAP. first of all while performing the audit of a new program, it should be noted that whether this program has been included in the previous year budget or not? if included how much expenses allocated for this program like should be thoroughly considered.

the Program HHS2, which has been audited last year, but no major findings. it does not mean that it is error free in this year. so it should also be audited as per the guidance of GAAP. The amount of which is not a small amount to ignore it.

The department of transportation: the department of transportation expenses also should be audited . if not , that may lead to corruption and out of control.

Department agriculture:

The department of agriculture must also be subjected to audition as per the GAAP rules and regulations. first of all the auditor should check the budgeted amount for the current year. then check the local government spent the entire amount or not and whether they spent more money in excess of budgeted amount is as per the rule or not.

totally speaking, while a local government is audited, all the expenses by them should be subjected to audit . otherwise they may be out of control and not properly functioning. normally the local governments are not spending the entire amount as earmarked in the budget. this may be due to the correction or fault of officials. some program may not be reached to the real beneficiaries. so an auditor must check all these. all the expenses by them properly accounted and all supporting documents are there not like matters should be subjected to auditiing.