Internal and Governmental Financial Auditing and

Transcript:Internal and Governmental Financial Auditing and:
Internal and Governmental Financial Auditing and Operational Auditing Chapter 25 Learning Objective 1 Explain the role of internal auditors in financial auditing. Internal Auditing It is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Institute of Internal Auditors Ethical Principles Integrity Objectivity Confidentiality Competency Relationship of Internal and External Auditors The external auditor is responsible to financial statement users. The internal auditor is responsible to management. Differences Relationship of Internal and External Auditors Competency Objectivity Methodology Audit risk model Similarities Learning Objective 2 Describe the auditing and reporting requirements under Government Auditing Standards and the Single Audit Act. Governmental Financial Auditing The primary source of authoritative literature for performance of government audits is Government Auditing Standards, which is issued by the GAO. Because of the color of the cover, it is usually referred to as the “Yellow Book.” Governmental Financial Auditing The Yellow Book standards are often called generally accepted government auditing standards (GAGAS or GAS). Financial Audit and Reporting Requirements – Yellow Book Materiality and significance Quality control Compliance auditing Reporting Working papers Audit and Reporting – Single Audit Act and OMB Circular A-133 The threshold for requiring a single audit was raised from $100,000 to $300,000 to exempt many smaller entities from single audit requirements. Audit and Reporting – Single Audit Act and OMB Circular A-133 A risk-based approach is to be used in selecting programs for testing. Statutory coverage of the single audit was extended to not-for-profit organizations as well as to state and local governments. Audit Requirements The audit should be in accordance with generally accepted government auditing standards (GAGAS). The auditor must obtain an understanding of internal control over federal programs sufficient to support a low assessed level of control risk for major programs. Audit Requirements The auditor should determine whether the client had complied with laws, regulations, and the provisions of contracts or grant agreements that may have a direct and material effect on each of its major programs. Reporting Requirements an opinion on whether the financial statements are in accordance with GAAP, and an opinion as to whether the schedule of federal awards is presented fairly in all material respects in relation to the financial statements as a whole