Best Free Reprint Articles

by Stephen L. Larson
During 2005 and 2006, the American Institute of Certified Public Accountants issued several new standards to improve and clarify auditing standards in general.

There were two statements that were issued and became effective upon issuance:

Statement on Auditing Standards (SAS) Numbers 102 and 103.

SAS No.102, Defining Professional Requirements in Statement on Auditing Standards, clarifies steps in auditing standards that are “unconditional requirements” defined by works such as “must” and “is required to”; and steps that are “presumptively mandatory requirements” defined by words such as “should”.

SAS No. 103, Audit Documentation, provides guidance on audit documentation as an essential element of audit quality. This standard also gives guidance on the date of the audit report which cannot be earlier than the date on which the auditor has obtained sufficient appropriate audit evidence to support the opinion. As a result, the audit report date will need to be close to the date the reports are released

The American Institute of Certified Public Accountants also issued the Risk Assessment standard in March 2006. The project originated as a joint project with SAS No. 99, Consideration of Fraud in a Financial Statement Audit. These standards were issued because the Accounting Standards Board believes that they will strengthen auditing standards and provide a more in depth understanding of the entity and its environment, a more rigorous assessment of material misstatements and improved linkage between assessed risk and the nature, timing and extent of audit procedures performed.

The following standards are in the suite of SASs issued in connection with the Risk Assessment standards:

SAS No. 104 — Amendment to SAS No.1- Codification of Auditing Standards and Procedures

SAS No. 105 — Amendment to SAS No.95 — Generally Accepted Auditing Standards

SAS No. 106 — Audit Evidence

SAS No. 107 — Audit Risk and Materiality in Conducting and Audit

SAS No. 108 — Planning and Supervision

SAS No. 109 — Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement

SAS No. 110 — Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained

SAS No. 111- Amendment to SAS No. 39 - Audit Sampling

A greater understanding of the entity is required. Auditors are no longer able to assess control risk at maximum without a basis for that determination.

There are several steps auditors must take in applying the Risk Assessment Standards.

Gathering Information - The auditors must begin with gathering information about the entity and its environment, including its internal control. Information gathering should include at minimum information obtained from external factors; information about the nature of the client; information in connection with the objectives and strategies and related business risks of the client; information regarding the client’s measurement parameters including a review of the client’s financial performance; and information in connection with the client’s internal controls.

Understand the Entity - The auditor must also understand the entity and its environment, including its internal control. The auditor must anticipate and evaluate what could go wrong, and be able to synthesize the information gathered to determine how it might affect the financial statements. The auditor must also evaluate the design of the client’s controls and determine if those controls have been implemented (which is different than test of controls). In evaluating whether controls have been implemented, the auditor should determine if there is an awareness of the existence of the procedure in question and if the staff implementing the control have a working knowledge of how the procedure should be performed.

Assess Risk - The auditor must assess the risk of material misstatement by identifying risks throughout the process, relate the identified risks to what can go wrong at the relevant assertion level and consider whether the risks could result in a material misstatement to the financial statements. Once “significant risks” have been identified, the auditor can then design audit procedures accordingly.

Design Audit Procedures - The auditor should design overall responses and further audit procedures at both the financial statement level, and the relevant assertion level. In designing audit procedures, the auditor must provide and document a clear linkage between the assessment of the risk of material misstatement and the nature, timing and extent of the further audit procedures.

Stephen L. Larson co-founded Caporicci & Larson, Certified Public Accountants (CPA) in 1989 and currently serves as Senior Partner. The firm specializes in municipal government auditing. For more information visit http://www.c-lcpa.com

Article Source: U Publish Articles

Original Source: SAS Update - Caporicci & Larson San Diego, Orange County, Oakland, and Sacramento

by Brian Kelly
In May of 2006 the Office of Management and Budget issued a new revised supplement for OMB A-133. This revised supplement had several changes made to grant program narratives on the program requirements, which resulted in other parts of the compliance supplement also being changed. The changes range from minor verbiage changes to specific changes in program requirements as a result of Hurricane Katrina. A brief over view of the changes can be seen in Appendix V of the 2006 Compliance Supplement.

The major Program requirement changes were in the following parts of the supplement:

Part 3 - Compliance Requirements
Part 4 - Agency Program Requirements
Part 5 — Clusters of Programs

PART 3
The significant change made in Part 3 was in Section D, which was the creation of a disaster waiver for Davis Bacon requirements as a result of Hurricane Katrina. On September 8, 2005, the President of the United States issued a proclamation suspending the Davis-Bacon Act for the payment of Davis-Bacon wages in areas affected by Hurricane Katrina. The waiver was rescinded as of November 8, 2005.

For further information and guidance on the disaster waiver refer to Appendix VI of the 2006 Compliance Supplement.

Another notable change made in Part 3 was in Section I (Procurement, Suspension and Disbarment). This section has been changed to clearly state the compliance requirements pertaining to procurements as it applies to the implementation of OMB Circular A-102 “Common Rule” and OMB Circular A-110, which was effective November 26, 2003.

Local governments and Indian tribal governments which are not sub-recipients of States will use their own procurement procedures provided that these procedures conform to applicable Federal law and regulations as well as the standards identified in A-102 “Common Rule”.

Institutions of higher education, hospitals, and other non-profit organizations shall use the procurement procedures that conform to applicable Federal law and regulations and the standards identified in OMB Circular A-110.

This section has also added procedures and references for identifying contractors who have been suspended and/or disbarred from participating in Federal award programs. This verification may be accomplished by checking the Excluded Parties List System (EPLS), which is maintained by the General Services Administration (GSA). For further information on EPLS refer to Part 3 Section I of the 2006 Compliance Supplement.

PART 4
This part of the 2006 Compliance Supplement mainly summarizes program requirements for various grants. These requirements are summarized and then organized and presented in the order of Federal agency and then CFDA number. The changes made to these programs range from basic verbiage changes to significant compliance requirement changes. The Following is a list of the Federal Agencies that have made changes to their grant programs:

Department of Agriculture (CFDA# 10.XXX)
Department of Commerce (CFDA# 11.XXX)
Department of Defense (CFDA# 12.XXX)
Department of Housing and Urban Development (CFDA# 14.XXX)
Department of Labor (CFDA# 17.XXX)
Department of Transportation (CFDA# 20.XXX)
Department of the Treasury (CFDA# 21.XXX)
National Foundation of the Arts and Humanities (CFDA# 45.XXX)
Department of Energy (CFDA# 81.XXX)
Department of Education (CFDA# 84.XXX)
Department of Health and Human Services (CFDA# 93.XXX)
Department of Homeland Security (CFDA# 97.XXX)
United States Agency for International Development (CFDA# 98.XXX)

If you have any grant award from any of these agencies you should review the list of grant programs listed in Appendix V of the 2006 Compliance Supplement to determine if any of the changes will affect the grants which have been awarded to you.

PART 5
As a result of the changes made in Part 3 and 4 of the Compliance Supplement the list of grant clusters were changed.

Appendices
As a result of the changes made in Part 3 and 4 of the Compliance Supplement the various exhibits, reference sources and explanatory information contained in the Appendices were changed.

Traditionally the Office of Management and Budget has reviewed OMB A-133 Compliance Supplement on an annual basis to assure that the information contained is as current as possible to assist in evaluating program compliance on federal award programs. These revisions are normally made available on their web site in May of each year. Therefore it is advisable to become familiar with the web site and monitor it for updates and other pertinent information pertaining to the Single Audit Act.

Brian Kelly is a Senior Auditor with Caporicci & Larson, a California-based CPA firm specializing in government compliance auditing. Their website can be found at http://www.c-lcpa.com/.

Article Source: U Publish Articles

Original Source: SAS Update — Caporicci & Larson San Diego, Orange County, Oakland, and Sacramento