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level: GAGAS/GAS

Questions and Answers List

level questions: GAGAS/GAS

Question	Answer
FYI - Requirements under GAGAS vs GAAS Additional reporting requirements regarding internal control—Government Auditing Standards require a written report on internal control in every financial audit under GAGAS. This includes commentary about the auditor's understanding of internal control for planning purposes and the assessment of control risk, as well as the scope of the auditor's testing of internal control. When the auditor communicates significant deficiencies, the auditor should also obtain a response from officials of the entity and include a copy of management's written response (or a summary of management's oral response) in the auditor's report. Government Auditing Standards require a written report on compliance with applicable laws and regulations. This report should distinguish between (a) general requirements that apply to all federal financial programs; and (b) specific requirements that apply to a particular program by a specific statutory (legislative) requirement. Government Auditing Standards also require the auditor to report any known instances of illegal acts that could result in criminal prosecution.	Single Audit Act of 1984, as Amended—The Single Audit Act is applicable to state and local governmental entities that have expenditures of federal assistance (grants) aggregating at least $750,000 in a given year. It imposes certain requirements on such entities and their auditors that go beyond GAAS and even GAGAS. 1. Efficiency—A single coordinated audit of the aggregate federal financial assistance provided to a state or local governmental entity (with emphasis on the entity's major programs) is intended to result in greater efficiency compared to the alternative, which would be having multiple audits of the entity conducted on a grant-by-grant basis. 2. Added requirements—A single coordinated audit of the aggregate federal financial assistance involves more than just a financial statement audit. Additional testing of internal control is required for major programs, and additional testing is also required for major programs regarding the entity's compliance with applicable laws, regulations, or other requirements applicable to major programs. 3. Multiple reports—The auditor should issue reports on (a) the fairness of the entity's financial statements (and schedule of expenditures of federal assistance); (b) internal control over financial reporting (with emphasis on major programs); and (c) compliance with applicable laws, regulations, and other requirements. If audit findings were identified, the auditor should also prepare a Schedule of Findings and Questioned Costs.
True or False Government Auditing Standards require a report on the entity's compliance with applicable laws and regulations.	True
True or False The Single Audit Act requires a single, coordinated audit of the aggregate federal financial assistance for an entity having expenditures of at least $750,000 of federal assistance in its fiscal year.	True
True or False Government Auditing Standards require the auditor to report known instances of illegal acts that could result in criminal prosecution.	True
True or False The "general requirements" apply to all (or most) federal financial assistance programs, whereas the "specific requirements" apply to a particular federal program and usually arise from statutory requirements.	True
GAGAS Requirements on I/C vs GAAS Government Auditing Standards require that the scope of the auditors' testing of internal control over financial reporting be described. It can be included as a separate report or in a combined report with the report on compliance with laws and regulations. Generally accepted auditing standards do not require this report.	GAGAS Requirements on Significant Deficiencies vs GAAS An auditor is responsible for assuring that management communicates significant deficiencies to specific legislative and regulatory bodies when reporting under Government Auditing Standards. Government Auditing Standards require that each significant deficiency noted be identified.
FYI - Compliance Audits Evaluating the Evidence and Forming an Opinion—Most governmental audit requirements specify that the auditor's opinion on compliance is at the program level (and materiality is usually determined based on the program taken as a whole). 1. The auditor should consider likely questioned costs (not just known questioned costs) and other noncompliance that may not result in questioned costs. 2. The auditor may include a variety of factors in assessing the risk of noncompliance, including: (a) the complexity of the compliance requirements; (b) how long the entity has been subject to those compliance requirements; (c) the degree of judgment involved in compliance; and (d) the entity's compliance in prior years.	Reporting—The auditor may issue (1) a separate report on compliance only; (2) a combined report on compliance and on internal control over compliance; or (3) a separate report on internal control over compliance Reporting—The auditor may issue (1) a separate report on compliance only; (2) a combined report on compliance and on internal control over compliance; or (3) a separate report on internal control over compliance
True or False - Compliance Audits When issuing a combined report on an entity's compliance with applicable compliance requirements and on the entity's internal control over compliance under AICPA professional standards, the auditor may express an opinion as to compliance, but should express a disclaimer of opinion with respect to internal control over compliance.	True