Question

1. List and discuss the four categories of professional engagements identified by the Generally Accepted Government Auditing Standards.  
2. List and describe the four types of audit opinions which may be expressed on government financial statements:

Answer 1

Categories of professional engagements

1.Financial audits:

• A financial audit is an independent, objective evaluation of an organization's financial reports and financial reporting processes
• The primary purpose for financial audits is to give regulators,investors,directors,and managers reasonable assurance that financial statements are accurate and complete Financial audits provide reasonable assurance, but not absolute guarantees.
• Through a variety of different audit procedures such as interviews, observation, and test work, financial auditors can determine if controls and processes needed to produce accurate financial statements are in place.
• If the controls and processes are in place, then they can conclude that the financial statements are accurate and reasonable,but they still can't guarantee that there were no human errors or miscommunications that may lead to a mistake.

2.Attestation engagements:

An attestation engagement is an arrangement with a client where an independent third party investigates and reports on subject matter created by a client. Examples of attestation engagements are:

• Reporting on financial projections made by a client
• Reporting on pro forma financial information formulated by a client
• Reporting on how well the internal controls in a client process function

The resulting report gives users a higher level of confidence regarding the subject of the engagement

3.Performance audits:

Performance audit refers to an independent examination of a program, function, operation or the management systems and procedures of a governmental or non-profit entity to assess whether the entity is achieving economy, efficiency and effectiveness in the employment of available resources

4.Nonaudit services.

Non-audit services are any professional services provided by a qualified public accountant during the period of an audit engagement which are not connected to an audit or review of an institution's financial statements.

Non-audit services provided by auditors to their clients fall into three categories:

1.Services required by legislation or contract to be undertaken by the auditors of the business. These include:

• Regulatory returns e.g. to the Prudential Regulation Authority
• legal requirements to report on matters such as share issues for non-cash consideration, expenditure for grant application purposes, etc
• Contractual requirements, for example to report to lenders or vendors on net assets, covenant requirements, etc.

2. Services that it is most efficient for the auditors to provide because of their existing knowledge of the business, or because the information required is a by-product of the audit process. These include:

• Services such as those listed in category (1) above that the auditors are not required by law to undertake, but where the information largely derives from the audited financial records
• Tax compliance, where much of the information derives from the audited financial records
• 'short form' or other reports in acquisition or reorganisation situations where completion is necessary in a very short time.

3. Services that could be provided by a number of firms. In this case, the fact that the firm is the auditor is incidental and it would generally only be chosen because, for example, it had won a tender process. Examples of such services include:

• Management consultancy
• Tax advice
• Human resources consultancy

Types of Audit opinions

There are four types of audit opinions which may be expressed for any type of companies

• Unqualified opinion
• Qualified opinion
• Adverse opinion
• Disclaimer of opinion.