Chapter 1 Introduction and Overview of Government Auditing Standards 01-19
Purpose and Applicability of This Guide 01-11
Overview of Government Auditing Standards 12 -19
Applicability of Government Auditing Standards 12-13
Additional Requirements of Government Auditing Standards 14-15
Use of Terminology to Define Government-Auditing
Standards Requirements 16 -19
Chapter 2 Government Auditing Standards—Ethical Principles and General Standards 01-51
Introduction 01
Government Auditing Standards—Ethical Principles 02-05
Government Auditing Standards—General Standards 06-50
Independence 07-30
Professional Judgment 31-33
Competence 34-42
Quality Control and Assurance 43-45
External Peer Review 46-50
Appendix—Government Auditing Standards Conceptual Framework for Independence 51
Chapter 3 Planning and Performing a Financial Statement Audit in Accordance With Government Auditing Standards 01-71
Introduction 01-03
Agreeing Upon the Terms of the Engagement with Management 04-07
Planning the Audit 08-15
Communications with Other Entities 15Group Audits 16
Materiality 17-18
Audit Documentation 19-22
Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement 23-31
The Entity’s Internal Control 25-28
Identifying and Assessing the Risks of Material Misstatement 29-31
Performing Audit Procedures and Evaluating Audit Evidence Obtained 32-35
Tests of Controls 34-35
Consideration of Fraud 36-42
Assessing the Risk of Material Misstatements Resulting From Fraud 40-42
Consideration of Laws and Regulations in an Audit of Financial Statements 43-52
Consideration of Abuse 53 58 Evaluating Identified Misstatements 59
Developing Elements of a Finding 60
The Auditor’s Communication With Those Charged With Governance 61-65
Communicating Internal Control Matters Identified in an Audit 66
Written Representations From Management 67 68 Other Considerations 69-70
Exit Conference 69-70
Appendix—Examples of Deficiencies in Internal Control 71
Chapter 4 Auditor Reporting Requirements and Other Communication Considerations of Government Auditing Standards 01-89
Introduction 01
Report on the Financial Statements—GAAS Requirements 02-04
Additional Reporting Requirements of Government Auditing Standards 05-06
Reporting on Internal Control over Financial Reporting and on Compliance 07-12
Internal Control over Financial Reporting 13-23
Fraud, Noncompliance With Provisions of Laws, Regulations,Contracts, and Grant Agreements, and Abuse 24-45
Fraud 25-30
Noncompliance with Laws and Regulations 31-34
Noncompliance with Provisions of Contracts and Grant Agreements and Abuse 35-38
Other Considerations 39
Additional Considerations Related to Fraud, Noncompliance with Provisions of Laws, Regulations, Contracts, and Grant Agreements, and Abuse 40-42
Government Auditing Standards—Reporting Findings Directly to Parties outside the Entity 43-45
Report on Audited Financial Statements 46-52
Other Considerations—Citing Compliance with Government Auditing Standards in the Auditor’s
Report 49-51
Other Reporting Responsibilities in an Audit of Financial Statements 52
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 53-54
Other Reporting and Communication Considerations 56-84
Findings—Deficiencies in Internal Control, Noncompliance with Provisions of Laws, Regulations, Contracts and Grant Agreements, Fraud, and Abuse 56-63
Reporting Views of Responsible Officials and Planned Corrective Action 64-67
Distributing Reports 68
Reporting Confidential and Sensitive Information 69-72
Other Written Communications 73-74
Portions of the Entity Not Audited in Accordance With Government Auditing Standards 75-77
Referring to the Work of a Component Auditor 78-84
Freedom of Information Act and Similar Laws and Regulations 85-86
Assurance to Regulators and Oversight Agencies 87-88
Appendix—Illustrative Auditor’s Reports under Government Auditing Standards 89
Chapter 5 Overview of the Single Audit Act, the Uniform Guidance Audit Requirements, and the Compliance Supplement 01-51
Introduction 01-02
Uniform Guidance 03
Single Audit Act and Uniform Guidance Audit Requirements 04-47
Objectives of a Single Audit 04-08
General Audit Requirements 09-20
Reporting Matters 21-23
Auditor Selection and Audit Costs 24-25
Basis for Determining When Federal Awards Are Expended 26-27
Subrecipient and Contractor Determinations 28
Major Program Determination 29-32
Auditee Responsibilities 33-39
Federal Awarding Agency Responsibilities 40
Pass-Through Entity Responsibilities 41
Cognizant Agency for Audit 42-43
Oversight Agency for Audit 44-45
Program-Specific Audits 46
Required Government-wide Evaluation of Single Audit Quality 47
OMB Compliance Supplement 48-49
Frequently Asked Questions 50
Reference Materials 51
Chapter 6 Auditor Planning Considerations under the Uniform Guidance 01-74
Introduction 01-02
Adapting and Applying Applicable Auditing Standards to a Uniform Guidance Compliance Audit 03-06
Identifying Supplementary Audit Requirements 07 Agreeing Upon the Terms of the Engagement With
Management 08-09
Financial Statement Audit Considerations 10-13
Developing an Efficient Audit Approach 14
Defining the Entity to Be Audited 15
Determining the Audit Period 16-17
Fiscal Year and Program Period May Differ 16 Stub Periods 17
Initial-Year Audit Considerations 18-19
Preceding Period Audited by another Auditor 18
Factors to Consider Under the Risk-Based Approach 19
Timing of the Completion of the Audit and Report Submission Deadlines 20
Determining the Major Programs to Be Audited 21
Identifying Direct and Material Compliance Requirements 22-24
Audit Risk of Noncompliance Considerations 25-35
Components of Audit Risk of Noncompliance 27-29
Performing Risk Assessment Procedures 30-35
Assessing the Risks of Material Noncompliance 36-46
Assessing the Risks of Material Noncompliance Due to Fraud 41-46
Audit Materiality Considerations 47-52
Materiality Differences between the Financial Statement Audit and the Uniform Guidance Compliance Audit 48-49
Materiality for Purposes of Reporting Audit Findings 50-52
Audit Documentation 53
Audit Documentation Access and Audit Follow-Up 54-56
Audit Documentation Access and Retention 54-55
Audit Follow-Up 56
Group Audit Considerations in a Uniform Guidance Compliance Audit 57-59
Existence of an Internal Audit Function 60-69
Considerations Related to the Internal Audit Function 62-69
Communications with the Cognizant or Oversight Agency for Audit and Others 70
State and Local Compliance Requirements 71
Desk Reviews and On-Site Reviews 72-73
Restriction on the Auditor’s Preparation of Indirect Cost Proposals 74
Chapter 7 Schedule of Expenditures of Federal Awards 01-41
Introduction 01-02
Identification of Federal Awards 03-05
Federal Agency and Pass-Through Entity Requirements 03-04
Auditee Requirements 05
General Presentation Requirements 06-14
Basis of Accounting 07
Required Content for the Schedule of Expenditures of Federal Awards 08-09
Providing Additional Information 10
Organizing the Content of the Schedule of Expenditures of Federal Awards 11
Inclusion of Nonfederal Awards 12
Considerations Relating to State Awards 13
CFDA Number Not Available 14
Subwards 15
Treatment of Subawards 15
Commingled Assistance 16
Determining the Value of Federal Financial Assistance 17-21
Treatment of Noncash Assistance and Other Federal Financial Assistance 17-18
Determining the Value of Federal Financial Assistance Expended 19
Loan and Loan Guarantee Continuing Compliance Requirements 20-21
Audit Considerations Related to the Schedule of Expenditures of Federal Awards 22-37
Conditions for and Procedures Related to Issuing the In-Relation-To Opinion 22--23
Schedule May Not Agree With Other Federal Award Reporting 24-29
Additional Auditor Requirements Relating to Compliance Audit Objectives and Internal Control Over
Compliance 30-33
Documentation Requirements 34
Management Representations Relating to the Schedule of Expenditures of Federal Awards 35
Subsequent Events 36
Reporting on the Schedule of Expenditures of Federal Awards 37
Issuing an Opinion on the Schedule of Expenditures of Federal Awards under AU-C Section 805 When the Auditor Is Engaged to Perform Only the Compliance Audit Under the Uniform Guidance 38-40
Appendix—Illustrative Schedules of Expenditures of Federal Awards 41
Chapter 8 Determination of Major Programs 01 32
Introduction 01
Determining Major Programs under the Uniform Guidance 02-19
Step 1—Determination of Type A and Type B Programs 03-08
Step 2—Identification of Low-Risk Type A Programs 09-13
Step 3—Identification of High-Risk Type B Programs 14-15
Step 4—Determination of Programs to Be Audited as Major 16
Percentage-of-Coverage Rule 17
Documentation of Risk Assessment 18
Auditor Judgment in the Risk Assessment Process 19
Other Considerations Regarding the Determination of Major Programs 20-21
Federal Agency and Pass-Through Entity Requests for Additional Major Programs 20
Low-Risk Auditee Criteria 21
Assessing Risk When Determining Major Programs 22
Criteria for Federal Program Risk 23-32
Current and Prior Audit Experience 24-29
Oversight Exercised by Federal Agencies and Pass-Through Entities 30-31
Inherent Risk of Noncompliance of the Federal Programs 32
Chapter 9 Consideration of Internal Control Over Compliance for Major Programs 01 64
Uniform Guidance—Definitions 02-03
Internal Control over Compliance for Federal Awards 04-08
Auditee Responsibilities 04-08
Requirements Related to Internal Control in the Uniform Guidance Compliance Audit 09-10
Auditor Responsibilities 09-10
Control Objectives and the Components of Internal Control 11-12
Auditor’s Consideration of Internal Control over Compliance for Each Major Program 13-17
Obtaining an Understanding of Internal Control over Direct and Material Compliance Requirements for Major Programs 18-26
Understanding Direct and Material Compliance Requirements and Identifying Relevant Controls 18-22
Compliance Supplement Internal Control Guidance 23-24
Multiple Organizational Unit Considerations 25
Subrecipient Considerations 26
Planning and Performing the Testing of Operating Effectiveness of Internal Control over Direct and Material Compliance Requirements for Each Major Program 27-60
Assessing Control Risk of Noncompliance 27-28
Planning the Testing of Operating Effectiveness of Internal Control over Compliance for Each Major Program to Support a Low Assessed Level of Control Risk of Noncompliance 29-32
Existence of Ineffective Internal Control in Preventing or Detecting Noncompliance 33-35
Performing Tests to Evaluate the Effectiveness of Controls 36-39
Evaluating the Results of Testing 40-46
Significant Deficiencies and Material Weaknesses in Internal Control over Compliance Related to
Federal Programs 47-60
Documentation Requirements 61-64
10 Compliance Auditing Applicable to Major Programs 01-80
Compliance Objectives in a Uniform Guidance Compliance Audit 02-03
Responsibilities of Auditee 04-05
Use of Professional Judgment 06
Audit Risk of Noncompliance Considerations 07-09
Performing Further Audit Procedures in Response to Assessed Risks 08-09
Materiality Considerations 10-13
Materiality Judgments about Compliance Applied to Each Major Program 11-12
Effect of Material Noncompliance on the Financial Statements 13
Performing a Uniform Guidance Compliance Audit 14-74
Identifying Major Programs to Be Tested 16
Identifying Direct and Material Compliance Requirements 17-32
Planning the Engagement 33-36
Consideration of Internal Control over Compliance for Major Programs 37
Performing Compliance Testing 38-48
Consideration of Fraud 49
Consideration of Abuse 50
Consideration of Subsequent Events 51-53
Evaluation and Reporting of Noncompliance 54-67
Performing Follow-Up Procedures 68-74
Documentation Requirements 75-76
Management Representations Related to Federal Awards 77-79
Suggested Representations 78
Refusal to Furnish Written Representations 79
State and Local Government Compliance Auditing Considerations 80
Chapter 11 Audit Sampling Considerations of Uniform Guidance Compliance
Audits 01-137
Introduction 01-04
Audit Sampling in a Uniform Guidance Compliance Audit 05-11
Purpose and Nature of Audit Sampling in a Uniform Guidance Compliance Audit 06-09
Audit Sampling in the Context of Other Audit Procedures 10-11
Procedures That May Not Involve Audit Sampling 12-30
Inquiry and Observation 13
Analytical Procedures 14-17
Procedures Applied to Every Item in a Population or Subpopulation in Compliance Testing 18-20
Individually Important Items in Compliance Testing 21-28
Understanding and Testing the Operating Effectiveness of Controls over Compliance 29-30
Planning Considerations for Sampling Related to Tests of Controls over Compliance and Compliance Testing 31-91
Determining Audit Objectives 31-32
Defining the Population and Considering Completeness 33-50
Considering the Effect of Population Size 51
Defining Control Deviation and Compliance Exception Conditions 52-53
Dual Purpose Sample Considerations 54-59
Determining the Sample Size 60-91
Selecting Sample Items for Testing 92-100
Random Selection 96
Haphazard Selection 97-98
Systematic Selection with a Random Start 99-100
Performing the Test Procedures 101-107
Investigate and Understand the Nature and Cause of Control Deviations and Compliance Exceptions
102-103
Determine If Additional Testing Is Warranted in Response to an Observed Deviation or Exception
104-107
Evaluating Sample Results 108-132
Evaluating Control Deviations 108-115
Reaching an Overall Conclusion on Tests of Controls 116-117
Evaluating Compliance Exceptions 118-129
Reaching an Overall Conclusion on Tests of Compliance 130-132
Documenting the Sampling Procedure 133-137
Chapter 12 Audit Considerations of Pass-Through Entities and Subrecipients 01-50
Introduction 01
Definitions 02
Applicability of the Uniform Guidance 03-07
Pass-Through Entities, Subrecipients, and Contractors 08-18
Subrecipient Status versus Contractor Status 08-11
Description of Relationships 12-14
Contractor Compliance Considerations 15-18
Single Audit Considerations of Pass-Through Entities 19-45
Pass-Through Entity Responsibilities 20
Audit Planning Considerations 21-24
Auditor Consideration of Internal Control over Compliance 25
Subrecipient Monitoring 26-38
Reporting Considerations 39-42
For-Profit Subrecipients 43
Foreign Public Entities and Foreign Organizations 44
State Designation of a Cluster of Programs 45
Audit Considerations of Subrecipients 46-50
Additional Compliance Requirements Established by Pass-Through Entities 47
Indirect Cost Rates of Subrecipients 48
Information Related to the Schedule of Expenditures of
Federal Awards 49
Audit Findings 50
Chapter 13 Auditor Reporting Requirements and Other Communication Considerations in a Single Audit 01-66
Overview 01 08
Requirements under the Uniform Guidance 03-04
Reporting Package 05
Illustrative Auditor’s Reports 06-08
Reporting on the Financial Statements and Supplementary Schedule of Expenditures of Federal Awards in Accordance With GAAS and Government Auditing Standards in a Single Audit 09-20
Basis of Accounting 09
Implementing Regulations of Federal Awarding Agencies May Define the Entity to Be Audited Differently Than Does GAAP 10
Elements of the In-Relation-To Report on the Supplementary Schedule of Expenditures of Federal Awards 11-13
Potential Report Modifications When Reporting on the Schedule of Expenditures of Federal Awards 14-15
Considerations When Dating the Report on the Scheduleof Expenditures of Federal Awards 16-19
Issuing an Opinion on the Schedule of Expenditures of Federal Awards under AU-C Section 805 When the Auditor Is Engaged to Perform Only the Compliance Audit under the Uniform Guidance 20 Reporting on Compliance and Internal Control over Compliance Applicable to Each Major Program 21-29
Material Instances of Noncompliance 22
Scope Limitations 23-25
Report on Compliance for Each Major Program, Report on Internal Control over Compliance and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 26-28
Dating the Report on Compliance with Requirements That Could Have a Direct and Material Effect on
Each Major Program and on Internal Control Over Compliance 29
Other Reporting Considerations 30-33
Reissuance of the Uniform Guidance Compliance Report 30-31
Other Auditors 32
When the Audit of Federal Awards Does Not Encompass the Entirety of the Auditee’s Operations 33
Schedule of Findings and Questioned Costs 34-46
What Is Required to Be Reported 35-36
Findings Related to the Financial Statements 37-38
Audit Findings Related to Federal Awards 39-40
Findings of Abuse 41
Detail of Audit Findings—Federal Awards 42-44
Other Preparation Guidance 45-46
Protected Personally Identifiable Information 47-48
Communicating Other Findings to Management 49
Summary Schedule of Prior Audit Findings and Corrective Action Plan 50-55
Data Collection Form 56-64
Submission of Reporting Package and Data Collection Form 61
Federal Audit Clearinghouse Responsibilities 62-64
Freedom of Information Act and Similar Laws and Regulations 65
Appendix—Illustrative Auditor’s Reports under the Uniform Guidance 66
Chapter14 Program-Specific Audits 01 16
Use of a Program-Specific Audit to Satisfy Uniform Guidance Audit Requirements 02
Program-Specific Audit Requirements 03
Auditee’s Responsibilities When a Program-Specific Audit Guide Is Not Available 06
Auditor’s Responsibilities When a Program-Specific Audit Guide Is Not Available 07-11
Audit Scope and Requirements 07
Auditor Procedures 08
Auditor’s Reports 09-11
Submission of Report 12-15
Timing of Submission 12
Submission When a Program-Specific Audit Guide Is Available 13
Submission When a Program-Specific Audit Guide Is Not Available 14-15
Appendix—Illustrative Auditor’s Reports for Program-Specific Audits 16
Supplement A Single Audit Act Amendments of 1996
Supplement B Uniform Guidance Audit Requirements
Appendix A Overview of Statements on Quality Control Standards
Appendix B Schedule of Changes Made to the Text from the Previous Edition
Index of Pronouncements and Other Technical Guidance
Subject Index
