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CPA Compliance Audits And CPA Details

CPA Compliance Audits

CPA Compliance Audits: Governments frequently establish governmental audit requirements for entities to undergo an audit of their compliance with applicable compliance requirements.

This section is applicable when an auditor is engaged, or required by law or regulation, to perform a compliance audit in accordance with all of the following:

  • Generally accepted auditing standards (GAAS)
  • The standards for financial audits under Government Auditing Standards
  • A governmental audit requirement that requires an auditor to express an opinion on compliance

This section addresses the application of GAAS to a compliance audit.

CPA Compliance Audits

Compliance audits usually are performed in conjunction with a financial statement audit. This section does not apply to the financial statement audit component of such engagements. Although certain AU sections are not applicable to a compliance audit, as identified in the appendix of this section, all AU sections other than section 801 are applicable to the audit of financial statements performed in conjunction with a compliance audit. .

CPA Compliance Audits

This section is not applicable when the governmental audit requirement calls for an examination, in accordance with Statements on Standards for Attestation Engagements, of an entity’s compliance with specified requirements or an examination of an entity’s internal control over compliance. AT section 601, Compliance Attestation, is applicable to these engagements. If the entity is required to undergo a compliance audit and an examination of internal control over compliance, this section is applicable to performing and reporting on the compliance audit, and AT section 601 is applicable to performing and reporting on the examination of internal control over compliance.

CPA Compliance Audits

Sections 100–700 and 900 address audits of financial statements, as well as other kinds of engagements. Sections 100–300 and 500 generally can be adapted to the objectives of a compliance audit. However, with certain exceptions, sections 400, 600, 700, and 900 generally cannot be adapted to a compliance audit because they address the auditor’s report on an audit of financial statements and other topics that are not applicable to a compliance audit.

The AU sections that are not applicable to a compliance audit are listed in the appendix of this section. All of the other AU sections are applicable to a compliance audit. However, the auditor is not required, in planning and performing a compliance audit, to make a literal translation of each procedure that might be performed in a financial statement audit, but rather to obtain sufficient appropriate audit evidence to support the auditor’s opinion on compliance.

CPA Compliance Audits

Some AU sections can be adapted and applied to a compliance audit with relative ease, for example, by simply replacing the word misstatement with the word noncompliance. Other AU sections are more difficult to adapt and apply and entail additional modification. For that reason, this section provides more specific guidance on how to adapt and apply certain AU sections to a compliance audit. .

Government Auditing Standards and governmental audit requirements contain certain standards and requirements that are supplementary to those in GAAS, as well as guidance on how to apply those standards and requirements. Management’s Responsibilities .

A compliance audit is based on the premise that management is responsible for the entity’s compliance with compliance requirements. Management’s responsibility for the entity’s compliance with compliance requirements includes the following:

  1. Identifying the entity’s government programs and understanding and complying with the compliance requirements
  2. Establishing and maintaining effective controls that provide reasonable assurance that the entity administers government programs in compliance with the compliance requirements
  3. Evaluating and monitoring the entity’s compliance with the compliance requirements d. Taking corrective action when instances of noncompliance are identified, including corrective action on audit findings of the compliance audit

CPA Compliance Audits

For the purpose of adapting GAAS to a compliance audit, the following terms have the meanings attributed as follows: Applicable compliance requirements. Compliance requirements that are subject to the compliance audit. Audit findings. The matters that are required to be reported by the auditor in accordance with the governmental audit requirement.

Audit risk of noncompliance. The risk that the auditor expresses an inappropriate audit opinion on the entity’s compliance when material noncompliance exists. Audit risk of noncompliance is a function of the risks of material noncompliance and detection risk of noncompliance. Compliance audit. A program-specific audit or an organisation-wide audit of an entity’s compliance with applicable compliance requirements. Compliance requirements.

CPA Compliance Audits

Laws, regulations, rules, and provisions of contracts or grant agreements applicable to government programs with which the entity is required to comply. Deficiency in internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A deficiency in design exists when a control necessary to meet the control objective is missing or an existing control is not properly designed so that, even if the control operates as designed, the control objective would not be met.

A deficiency in operation exists when a properly designed control does not operate as designed or the person performing the control does not possess the necessary authority or competence to perform the control effectively. Detection risk of noncompliance. The risk that the procedures performed by the auditor to reduce audit risk of noncompliance to an acceptably low level will not detect noncompliance that exists and that could be material, either individually or when aggregated with other instances of noncompliance. Governmental audit requirement. A government requirement established by law, regulation, rule, or provision of contracts or grant agreements requiring that an entity undergo an audit of its compliance with applicable compliance requirements related to one or more government programs that the entity administers.

CPA Compliance Audits

Government Auditing Standards. Standards and guidance issued by the Comptroller General of the United States, U.S. Government Accountability Office for financial audits, attestation engagements, and performance audits. Government Auditing Standards also is known as generally accepted government auditing standards (GAGAS) or the Yellow Book. Government program. The means by which governmental entities achieve their objectives. For example, one of the objectives of the U.S.

Department of Agriculture is to provide nutrition to individuals in need. Examples of government programs designed to achieve that objective are the Supplemental Nutrition Assistance Program and the National School Lunch Program. Government programs that are relevant to this section are those in which a grantor or pass-through entity provides an award to another entity, usually in the form of a grant, contract, or other agreement. Not all government programs provide cash assistance; sometimes non cash assistance is provided (for example, a loan guarantee, commodities, or property).

CPA Compliance Audits

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