Question

You are an audit accountant and you boss asks you the following questions

answer For financial audits, generally accepted government auditing standards (GAGAS) incorporate AICPA standards. GAGAS prescribe additional requirements for reporting on Laws, Regulations, Reporting on Contracts, and Grants Internal Control

Yes No

No No

No Yes

Yes Yes

When reporting on an entity’s internal control over financial reporting in compliance with generally accepted government auditing standards, an auditor should issue a written report that includes a

Statement of positive assurance that the results of tests indicate that internal control either can, or cannot, be relied on to reduce control risk to an acceptable level.

Statement of negative assurance that nothing came to the auditor’s attention that caused the auditor to believe significant deficiencies were present.

Description of the scope of the auditor’s testing of internal control.

Description of the material weaknesses and the strengths that the auditor can rely on in reducing the extent of substantive testing.

Reporting standards for financial audits under Government Auditing Standards differ from reporting standards under generally accepted auditing standards in that Government Auditing Standards require the auditor to

Present the results of the auditor’s tests of economy and efficiency regarding the use of the entity’s resources.

Describe the scope of the auditor’s tests of compliance with laws and regulations.

Provide negative assurance that the auditor discovered no transactions that were indicative of illegal acts.

Provide positive assurance that the entity’s audit committee is adequately informed about the effects of any illegal acts.

An auditor determines that a client who received a federal grant fraudulently reported information to the federal government. The client’s management refuses to acknowledge the fraud. Which of the following parties should the auditor contact first?

The recipients of the client’s services.

The state attorney general’s office.

The agency that provided the grant.

The state accountancy board.

Answer 1

1. YES YES on reporting on internal control over financial reporting in compliance with generally accepted government auditing standards, an auditor should issue a written report that includes a statement of positive assurance that the results of tests indicate that internal control either can, or cannot, be relied on to reduce control risk to an acceptable level because by that satatement the company can find out that if they rely on their internal control or not if yes then to find is there any need to reduce their control risk or not.

2 NO NO if there is negative assurance by the auditor it means that for sure there is some misstatements in the accounts of the company and if still the auditor provide negative assurance that he found no defeciencies it means the auditor did not perform their duty in fair manner.

3 YES YES  Description of the scope of the auditor’s testing of internal control is necessary because the audit engagement letter which is sent to the company by the auditor contains all the rules regulations towards that audit.

4 YES YES Description of the material weaknesses and the strengths that the auditor can rely on in reducing the extent of substantive testing because if later any deficiency came out then auditor has the proff in the form of that description which he puts in front of the company that he provides a description on the material weaknesses and strengths.

5 YES NO Reporting standards for financial audits under Government Auditing Standards differ from reporting standards under generally accepted auditing standards in that Government Auditing Standards require the auditor to present the results of the auditor’s tests of economy and efficiency regarding the use of the entity’s resources because it depends on auditor to auditor and on their way of assuring or checking the things during an audit.

6 YES YES Describe the scope of the auditor’s tests of compliance with laws and regulations because in the audit engagement letter these all are mandatorily prescribed that what are the total testes that are to be used in their audit.

7 NO NO Provide negative assurance that the auditor discovered no transactions that were indicative of illegal acts because it is the positive assurance that states that the financials are free from all misstatements and gives true and fair view.

8 YES YES Provide positive assurance that the entity’s audit committee is adequately informed about the effects of any illegal acts because by doing so it is the help of audit committee by the entity it is helpful that now auditor can perform less procedures on it and focus on some other checks.

9 The auditor should contact the agency that provide the grant first to confirm the fraud and later on perform the futher procedures