Question

List and discuss the purpose and requirements of a “single audit”. Include in your discussion definitions for cognizant and oversight agencies, major programs, and the risk-based approach to single audits:

Answer 1

Objectives of a single audit

To determine if the entity has complied with direct and material compliance requirements for each major program Single audits:

• Are used as a report card by federal funding agencies and passthrough entities
• Are used as a tool for federal agencies to address problems at the grantee level or to make broad changes/improvements to federal programs
• Provide assurance to users regarding compliance and information about a non-federal entity’s internal control over compliance

Scope of the single audit

• Conducted in accordance with both GAAS and GAGAS
• Covers entire operations of the entity
• Auditor provides an opinion on whether financial statements are presented fairly
• Auditor gains understanding of and tests internal control over compliance
• Auditor opines on compliance with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each of its major programs
• Auditor responsible for following up on prior audit findings

Risk assessment and major program determination

• Major programs are programs auditor is required to audit
• In general, major programs are those that are large, risky, and/or new (Part 2 of series will go into detail)
• Major program determination process is defined in the UG; basically is a “prescription” for assessing the size and risk of programs
• Process is complex, involving some judgment, that historically has resulted in audit quality problems
• Must be done accurately and early in the process; and reviewed again before the end
• Must clearly document program risk assessment