Transcript 2008 Governmental Audit Quality Center Annual Update Webcast

2008
Governmental Audit
Quality Center
Annual Update Webcast
April 29, 2008
1
Program Objectives
This program is designed to help you:
 Get an update on Center activities and membership
 Learn about the latest technical matters relating to your
2008 audits
 Get the latest news on audit quality including an update
on the federal study on single audit quality (PCIE report)
and the GAQC and agency response
 Learn about resources to help you maintain or improve
audit quality
2
Today’s Speakers
Amanda Nelson, CPA
Partner
KPMG LLP
___
Bliss Jones, CPA
Shareholder
Jones and Kolb
___
Mary Foelster, CPA
Director
AICPA Governmental Auditing
and Accounting
John F. Hudson, CPA
Moderator & President
Hudson Consulting Group, LLC
3
What We Will Cover
Webcast Rules and Protocols
GAQC Update
Technical Update (including practice
tips)
• OMB, GAO, FAC, Single Audit Quality,
HUD, DOE, AICPA, FASAB, FASB, and
GASB
Resources Available to You
4
Webcast Rules and Protocol
 Membership requirement for GAQC designated audit quality partner
 Executive Committee believes that it is important to get leaders of
governmental audit practices together at least once a year
 Ask questions…even if we cannot address them all today, we will
summarize and post to GAQC Member Discussion Forum Web site
(http://gaqc.aicpa.org/Community/Member+Discussion+Forum.htm)
 Webcast will be archived – encourage staff to view
 CPE available for live viewing of Webcast only
5
GAQC Update
6
GAQC Update
Current Membership Statistics
• Over 980 member firms representing 50
states, Puerto Rico, and US Virgin Islands
• 81% of 2006 federal $$$ audited in
Clearinghouse by firms
• 42% of number of 2006 single audits
performed by firms in the Clearinghouse
• New stats will be generated using 2008
information when FAC database complete
7
GAQC Update
 Recap Activities Since the Last Webcast
• Significant increase in membership
• Increased recognition as a valuable resource by regulators
• Timely GAQC Alerts and GAQC Updates
• More conference calls and CPE available for the first time
• Member Discussion Forum growing
• Technical guidance
• Web site improvements (including resources such as dedicated HUD
Information page)
• Updated resources such as illustrative reports, peer review checklists,
links, etc.
• Continuing to market Center to non-member firms
• Interacting with regulators and other stakeholders (Single audit
Roundtable and PCIE Task Forces)
• Membership compliance verification questionnaire
8
GAQC Update
Future Initiatives
• Completion of Task Force activities relating to PCIE
report
• Continued advocacy efforts with federal agencies
• Tools to help members address deficiencies noted in
PCIE Report
• Additional member-only conference calls on audit
quality topics
• Continued CPE for member calls
• Improve audit quality!
9
GAQC Update –
Membership Requirements
For questions about or more details on the
GAQC membership requirements, check
the membership Q&A document at:
http://gaqc.aicpa.org/Memberships/Q+and
+A+Membership+Requirements.htm
10
GAQC Update - Providing
GAQC Web Site Access to Staff
Designated audit quality partner decides who to
give access to within firm
Welcome letter received at joining provides
instructions
GAQC membership Q&A document also
includes instructions at:
http://gaqc.aicpa.org/Memberships/Q+and+A+M
embership+Requirements.htm
Any questions? E-mail [email protected]
11
Technical Update
12
Technical Update
OMB
Federal Audit
Clearinghouse
GAO
Single Audit Quality
Update
HUD
Department of
Education
AICPA Update
FASAB
FASB
GASB
13
Technical Update - OMB
 2008 Compliance Supplement (CS) will be available at
http://www.omb.gov/grants
• Appendix V will list changes – You should review in detail
• Proposed changes include:
– 178 programs including 5 new programs
– 43 programs with significant changes
– 2 clusters with major changes
▪ Research & Development Programs
▪ Student Financial Assistance Programs
• Release of 2008 CS expected within next few weeks
• Watch for GAQC Alert when CS is released
 Bigger changes expected for 2009 CS
14
Technical Update - OMB
 2008 Compliance Supplement - Practice Tips
• Bookmark the OMB site that catalogs the various years’
Compliance Supplements
– http://www.whitehouse.gov/omb/circulars/index.html
• Understand your entity to make the proper modifications to the
generic steps presented within the CS
• Refrain from using the CS as a checklist
• Use Part 2, Matrix of Compliance Requirements, appropriately
• Understand the various federal programs to determine whether
modifications to the audit approach are necessary
• Part 4 cannot be used without Parts 2 and 3 and should not be
your defacto audit program
15
Technical Update - OMB
Transparency Act Update
• FFATA (Federal Funding Accountability and
Transparency Act)
• www.federalspending.gov
TF on Leveraging Single Audits
• Improper Payments
• Circular A-87
16
Technical Update –
Federal Audit Clearinghouse
 New Data Collection Form to be issued soon
• Intended to be used for audit periods ending in 2008, 2009, and 2010
• Comments were due February 4, 2008
• To view the AICPA comment letter on proposed form changes visit
GAQC Website
• Future GAQC communications will inform you when the revised DCF is
issued
• Required electronic submission of reporting package starting with 2008
• The current form is being used for audit periods ending in 2004, 2005,
2006 and 2007
• Reporting package submission change for 2007 (only 1 hard copy)
17
Technical Update –
Federal Audit Clearinghouse
 Data Collection Form – Practice Tips
• Obtain DUNS/EIN numbers early
• Cross reference to final reports and schedules
• GAQC member-call, Avoiding Data Collection Form Problems, in GAQC
archives on www.aicpa.org/GAQC under “Resource” tab
• Should be reviewed by manager or partner with the same scrutiny as
other single audit reporting
• Importance of correct CFDA for “cross cutting” issues
• DCF should have same level of detail as SEFA
• Importance of non-cash reconciling items from SEFA footnotes
• Independent review of findings detail
18
Technical Update - GAO
 July 2007 Revisions to Yellow Book
• July 2007 revision supersedes the Jan. 2007 and 2003 revisions
• For performance audits, the standards to become effective for
audits beginning on or after January 1, 2008
• For financial audits and attestation engagements, the standards
will become effective for audits of periods beginning on or after
January 1, 2008
• Adopted new terminology (e.g., SAS Nos. 102 and 112)
• AICPA Governmental Audit Quality Center (GAQC) has issued
updated illustrative Yellow Book audit reports that reflect the new
terminology on its Web site at: http://www.aicpa.org/GAQC
under the Resources tab
 Potential Future revisions relating to independence and
corresponding Q&A guidance
19
Technical Update – Single Audit Quality
 PCIE Report Update – Senate Hearing
• GAQC Testified on October 25, 2007
• Senate Homeland Security and Governmental Affairs
Committee's Subcommittee on Federal Financial
Management, Government Information, Federal Services,
and International Security
• Topic of hearing: Single Audits: Are They Helping to
Safeguard Federal Funds?
• Focus of hearing was on PCIE report
• Witnesses: PCIE, GAO, OMB, and AICPA
• Written testimony can be found at http://hsgac.senate.gov/
under hearings (scroll to October 25, 2007)
• Another follow-up hearing in 18 months a possibility
20
Technical Update – Single Audit Quality
 PCIE Report Update – AICPA Response
• Archived Center call, An Overview of the Results of the
National Single Audit Sampling Project, can be found on
GAQC Web site under the Resources tab
• Task Forces formed to examine the study's detailed findings
and recommendations for the AICPA as follows:
– Sampling/Materiality Issues In A Single Audit Environment
– Internal Control And Compliance Responsibilities In A Single
Audit Environment
– Schedule Of Expenditures Federal Awards Reporting Issues
– Reporting Audit Findings In A Single Audit
– Single Audit Training Needs And Continuing Professional
Education Evaluation
– Peer Review
– SAS 74
21
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Sampling/Materiality TF - Activities:
– Assessed members' sampling policies to determine the
diversity in sampling practices pertaining to testing internal
controls and compliance
– Assessment of sampling by compliance requirement
▪ Population definition; exceptions; risks; etc.
– Decision to pursue attribute sampling for internal control
testing and compliance testing
– Working to determine minimal sample sizes for low and
high risk populations
– Ultimate outcome a new chapter in AICPA Audit Guide,
Government Auditing Standards and Circular A-133
(GAS/A133 Guide) (perhaps in 2009)
22
Technical Update – Single Audit Quality
Sampling Materiality TF – Practice Tips
•
•
•
•
AICPA Sampling Guide
Document rationale
Properly identify the population
Sampling is NOT a default
23
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Internal Control & Compliance TF - Activities:
– Evaluated PCIE findings Reviewed risk assessment suite
of auditing standards in the context of compliance auditing
– Suggested revisions to the 2008 GAS/A133 Guide to
incorporate more discussion of auditor responsibility over
internal control
▪ Understand of each of the five elements of COSO for each
direct and material compliance requirement for each major
program
▪ Test controls noted as key (not required to test all elements
of COSO)
– Documentation for assessment and testing
– Working on workpaper templates to address the issues
noted in the PCIE report
24
Technical Update – Single Audit Quality
 Internal Control and Compliance TF – Practice Tips
– Testing compliance gives indirect evidence on controls, but
cannot serve as the basis for assessing controls as
operating effectively
▪ Controls: What did entity do to ensure compliance?
▪ Compliance: Did entity comply?
– Ensure dual-purpose testing is properly documented
▪ Properly identify compliance tests & controls tests
– Preliminary assessment of control risk
– Evaluate ineffective control
▪ Use SAS 112 criteria & evaluation guidance
– Internal control must be continually reevaluated
throughout the audit process
– Testing Internal Control
– Tickmark/Procedure Description for an Allowability Test
25
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Schedule of Expenditures of Federal Awards
(SEFA) TF - Activities:
– Evaluated the procedures required to issue an “in relation
to” report under AU 551
▪ Determined that while many of the matters cited in the PCIE
report were valid concerns, they could not be attributed to
the ‘in relation to’ procedures
▪ The procedures required to mitigate the findings noted in the
PCIE report would justified by the Circular A-133
requirements
– Reviewed the PCIE findings to determine the appropriate
practice aids to assist auditors in avoiding such findings
– Clarifying guidance in 2008 GAS/A133 Guide
26
Technical Update – Single Audit Quality
SEFA Practice Tips
– Communicate with the clients who have difficulty
in preparing the SEFA early in the planning
process to try to avoid control deficiencies
– Document any control deficiencies identified
during the audit and conclude whether they are
required to be reported
– Document your procedures
– Make sure SEFA includes required elements
– Listen to the recent Center call on the SEFA
which can be found on the GAQC Web site
under the Resources tab
27
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Findings TF - Activities:
– Discussed when audit findings must be reported
▪ Determined that an audit tool in the form of a findings
worksheet would help auditors document all elements of a
finding and help evaluate finding to determine what is
reportable
▪ Decided to include in the audit tool SAS 112 considerations
and to develop two worksheets (that is, one for single audit
findings and one for Yellow Book financial statement
findings)
▪ Determined that illustrative findings of common deficiencies
using the new audit tool would help auditors determine when
and how to report findings
– Discussed current guidance on how to determine "likely
questioned costs"
– Preparing illustrative findings
28
Technical Update – Single Audit Quality
Findings TF – Practice Tips
– Decision not to report documented exceptions
▪ Disclose reasons & basis for that decision
▪ Specifically address why it does not meet the reporting
requirements
– Emphasis on questioned costs
– Development of illustrative examples & tools for “how to”
– Educate staff and partners about the importance of the
Schedule of Findings and Questioned Costs (SFQC)
– Include a “cold” review as part of the reporting procedures
to review the SFQC and major program work
– Start with a blank “pro forma” of the SFQC
29
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Training & CPE TF - Activities:
– Discussed the PCIE recommendation for prerequisite
single audit training to determine best practice training
▪ Surveyed TF members about current firm single audit
training practices
▪ Surveyed TF members about what topics and hours the
ideal single audit curriculum should include
▪ Determined a proposed best practice Single Audit curriculum
structured for 3 staff levels (basic, intermediate, advanced)
that includes specific topics and suggestions for annual
updates was needed
▪ Obtained feedback from various AICPA committees, expert
panels, and senior leadership
– Developing a proposed "grandfathering" provision,
delivery guidance, Q&A implementation guidance, and
introductory narrative
30
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Training & CPE TF - Practice Tips
– Ensure your single audit staff gets appropriate level single
audit and Yellow Book training
– Review the PCIE report with special emphasis on the
deficiencies noted
– As a team, review the compliance supplement
– Review any archived events on the GAQC website that
are applicable to your audit engagements
– Ensure that Managers, Partners and “cold” reviewers on
single audit engagements view the 2008 Webcast
– Share the GAQC alerts and newsletters with single audit
staff
31
Technical Update – Single Audit Quality
PCIE Report Update – AICPA Response
• Peer Review TF
• SAS No. 74 TF
32
Technical Update – Single Audit Quality
Other Practice Tip
• GAQC Alert # 64 addresses material reporting
errors (MRE) noted in PCIE report
• MRE occurs when list wrong major programs
in the SFQC
• Alert provides ideas to avoid making MREs
• Can find GAQC Alerts on the GAQC Web site
under the Resources tab
33
Technical Update – Single Audit Quality
PCIE Report Update – OMB/Federal Update
• Formed 8 TFs
– Determining likely questioned costs (example approaches
for calculating them)
– Coverage of compliance requirements (clarification that
have to test if applicable)
– Sampling
– Developing CPE curriculum (planning to draft rules for
potential revisions to Circular A-133 – 6/30/08 is the OMB
deadline for drafting amendments)
34
Technical Update – Single Audit Quality
PCIE Report Update – OMB/Federal
Update
• Formed 8 TFs (Continued)
– Suspension and debarment
– Dialog with AICPA and NASBA (ethics and peer
review)
– Approach for Federal Quality Control Reviews
– Ideas for redesign of single audit
35
Technical Update – Single Audit Quality
PCIE Report Update – GAO Study
• Senate request for GAO to study single
audit issues
• Focus on single audit process
• Interviews with key stakeholders
• Single Audit Expert Panel with key
stakeholders this summer
• Report to Senate in the Fall
36
Technical Update - HUD
 Consolidated Audit Guide Revisions in Process
•
•
•
•
Chapter 1 – General Audit Guidance
Chapter 2 – Reporting requirements and sample reports
Chapter 3 – Multi-family Housing Programs
Chapter 4 –Nursing Homes
 Effective Dates?
 All other chapters revised, reissued, and effective
 See GAQC HUD Information page (under the Resources
tab on GAQC Web site) for details on previously revised
chapters, including effective dates
37
Technical Update - HUD
Proposed IPA Roster
• HUD proposal would create an Independent Public Accountant
(IPA) roster of auditors that are allowed to perform HUD audits
– Firms would have to register with HUD and agree to adhere to
eligibility requirements
– HUD would have the ability to remove auditors from the roster for
various reasons including failing to maintain compliance with
eligibility requirements
– Once removed, a firm would no longer be allowed to perform HUD
audits
• GAQC Comment Letter on the proposal can be accessed on the
GAQC Web site home page
• 70+ comment letters submitted to HUD
 New HUD page on GAQC Website
38
Technical Update - DOE
 Recent Dear CPA Letter 08-1
• Amends December 1996 Audit Guide, Compliance Audits
(Attestation Engagements) for Lenders and Lender Servicers
Participating in the FFEL Program (Lender Guide), to provide for
an agreed-upon procedures engagement relating to prohibited
inducements paid by lenders to postsecondary institutions or
other parties
 Recent Dear CPA Letter 07-03
• Amends January 2000 Audit Guide, Audits of Federal Student
Financial Assistance Programs at Participating Institutions and
Institution Servicers, to provide inducement guidance
 Status of Audit Guide Revisions (Lender and SFA)
• Delayed
39
Technical Update - AICPA
Auditing Standards
•
•
•
•
•
Clarity Project
Risk Assessment Standards
SAS No. 112
SLG and GAS/A-133 Guides
NPO Guide
40
Technical Update - AICPA
Auditing Standards
• Clarity Project
– Address concerns over length and complexity of
standards
– Make standards easier to read, understand and
implement
– Will lead to enhancements in audit quality
41
Technical Update - AICPA
Auditing Standards
• Risk Assessment Standards
– Objective is to guide auditors to areas of greatest risk
whether caused by error or fraud
– Issued in March 2006.
– Effective for periods beginning after 12/15/06
– Archived Center call, An Overview of the New AICPA Risk
Assessment Standards, providing general overall guidance
on the risk assessment standards can be accessed via the
GAQC Web site under the Resources tab
– Upcoming Center call on May 14, 2008, to be held on
implementing the risk assessment standards in a state and
local government financial statement audit; CPE to be offered
42
Technical Update - AICPA
 Auditing Standards
• The risk assessment standards consist of:
– SAS No. 104, Amendment to Statement on Auditing Standards No. 1
– SAS No. 105, Amendment to Statement on Auditing Standards No. 95,
Generally Accepted Auditing Standards
– SAS No. 106, Audit Evidence
– SAS No. 107, Audit Risk and Materiality in Conducting an Audit (Audit
Risk and Materiality)
– SAS, No. 108, Planning and Supervision
– SAS No. 109, Understanding the Entity and Its Environment and
Assessing the Risks of Material Misstatement (Assessing Risks)
– SAS No. 110, Performing Audit Procedures in Response to Assessed
Risks and Evaluating the Audit Evidence Obtained (Performing
Procedures)
– SAS No. 111, Amendment to Statement on Auditing Standards No. 39,
Audit Sampling
43
Gain an understanding
of the entity
Perform risk assessment
procedures
Assess the risks
of material misstatement
Overall financial
statement Level
Assertion
Level
Overall
Responses
Further audit
procedures
Evaluate
Sufficiency of Audit
Evidence
44
Technical Update - AICPA
 Auditing Standards
• SAS No. 112
– In June 2007, OMB issued a Notice in the Federal Register that
revises Circular A-133 to adopt internal control terminology
consistent with SAS No. 112
– Concurrently, Auditing Standards Board issued an auditing
interpretation which defines the terms control deficiency, significant
deficiency, and material weakness from the perspective of reporting
on internal control over compliance in a Circular A-133 audit
– At the same time, GAQC issued revised illustrative single audit
reports
– All illulstrative reports can be accessed at:
http://gaqc.aicpa.org/Resources/Illustrative+Auditors+Reports/
– Listen also to archived Center call, Application of SAS 112 in a
Single Audit, which can be found on the GAQC Web site under the
Resources tab
45
Technical Update - AICPA
Auditing Standards
• SAS No. 112
– PCAOB AS5 changed definitions
– Conforming changes to SAS 112 will also likely be
made
– Any definitional changes will be effective most likely in
2009 (early implementation may be allowed?)
– Other changes will be made through the clarity project
– Archived center call, Impact of SAS 112 on
Governmental Financial Audits, available on
GAQC Web site under the Resources tab
46
Technical Update - AICPA
Status of A&A Guides
• GAS/A133 Guide
– Being drafted
– July 2007 Yellow Book being incorporated
– Risk Assessment Standards
– SAS 102 “must and shoulds”
– Some guidance on avoiding PCIE Report
deficiencies
– Expected released date of summer 2008
47
Technical Update - AICPA
Status of A&A Guides
• State and Local A&A Guide
– In production and available in early Summer 2008
– SAS 102 “must and shoulds”
– Other new SAS guidance
– New GASB standards that become effective this
year
– Footnotes to identify places where GASB
standards issued but not yet effective
48
Technical Update - AICPA
Status of A&A Guides
• NPO A&A Guide
– In production and available in early Summer 2008
– SAS 102 “must and shoulds”
– Other new SAS guidance
• Task force working on complete overhaul to
the Guide to address many issues that have
accumulated
▪ 2-4 year timeframe
49
Technical Update – FASB
NPO Update
• Proposed FSP on Endowment (UPMIFA)
– Review recent Center call on this exposure draft (ED)
available on the GAQC Web site under the Resources tab
– Proposed effective date of June 30, 2008, year-ends
•
•
•
•
Omnibus FSP
Fair Value Measurements
Consolidation and Equity Method Guidance
Upcoming NPO Webcast on June 5, 2008, will
provide good information to assist you with your NPO
financial statement audits
50
Technical Update – FASAB
May affect your audits this year:
 Technical Release 7, Clarification of Standards Relating
to the National Aeronautics and Space Administration's
Space Exploration Equipment
 Statement of Federal Financial Accounting Technical
Release 8: Clarification of Standard Relating to InterEntity Costs
 Technical Release 9: Implementation Guide for
Statement of FASAB 29: Heritage Assets and
Stewardship Land
May affect your future audits:
 ED on Accounting for Federal Oil and Gas Resources;
comments were due 1/11/2008
51
Technical Update – GASB
May affect your audits for the first time this year:
Statement 43—OPEB Plans
Statement 45—OPEB Employers
Statement 49—Pollution Remediation
Statement 50—Pension Disclosures
May affect your audits in future years:
Statement 51—Intangible Assets
Statement 52—Land and Other Real Estate
Held as Investments by Endowments
52
Technical Update – GASB
 Service Efforts and Accomplishments Reporting—an
amendment of GASB Concepts Statement No. 2
• ED issued on April 4, 2008 with comments due July 3, 2008
 Reporting of Fund Balance
• ED released February 2008 with comments due June 30, 2008
 Derivatives
• ED issued in June 2007
• Statement expected Summer 2008
 Upcoming SLG Webcast to be held June 11, 2008, will
provide good information to assist you with you state and
local government financial statement audits
53
AICPA and GAQC Audit
Resources
54
AICPA Audit Resources
 AICPA Conferences
• NPO Industry Conference (June 18-20, 2008 in Washington, DC.)
• Government A&A Update Conference (August 18-20, 2008 in
Washington, DC and again on September 21-23, 2008 in Denver, CO)
• Government and NPO Training Program (October 26-29, 2008 in Las
Vegas, NV)
 8 hours of Single Audit Training developed by GAQC to be held at
each National Conference as follows:
• NPO Industry Conference on June 18, 2008 (add-on day)
• Government A&A Update Conference on August 20, 2008 in DC and
September 21, 2008 in CO (add-on day)
• Government and NPO Training Program (part of main program – will be
its own individual concurrent session track for one full day)
55
AICPA and Other Resources
Upcoming AICPA Webcasts
• NPO Strategic Briefing (June 5, 2008)
• SLG Strategic Briefing (June 11, 2008)
AICPA CPExpress
Other CPE courses, including State Society
courses
56
AICPA Audit Resources
A&A Guides
•
•
•
•
GAS/A133
SLG
NPO
HC
Audit Risk Alerts
•
•
•
•
GAS/A133
SLG
NPO
HC
57
GAQC Audit Resources
GAQC Web site (www.aicpa.org/GAQC)
Archived Alerts and Update Newsletters
Archived Conference Calls (findings, data
collection form, SEFA, etc.)
Archived Webcast (have your staff view)
Flowcharts
Illustrative Report Examples
Nonauthoritative practice aids
58
GAQC Audit Resources
Member discussion forum
Links to other key organizations, news items,
and documents
Articles
U.S. Standard Activities Summary
Member listing
Membership Q&A
Updated and expanded marketing toolkit
Governmental event and conferences summary
59
Summary & Questions
2008
Governmental
Audit Quality Center
Annual Update Webcast
60
Thank You
For Participating!
61
Upcoming AICPA Webcasts
For a complete listing of all AICPA Webcasts, please look at
our 2008 calendar at www.cpa2biz.com/webcasts
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