OSCPA staff report
Effective for fiscal years beginning on or after Dec. 26, 2014, single audits that were formerly performed under U.S. Office of Management and Budget (OMB) Circular A-133 must now be performed under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Uniform Guidance presents both opportunities and challenges for CPA firms
practicing in this area.
In brief, the Uniform Guidance consolidates federal grants administration requirements into one regulatory location and makes significant revisions to the requirements that had been previously contained in numerous OMB circulars (for details, see Uniform Guidance: A year in review in the March/April issue of CPA Voice.) The new regulation addresses grant management policy for federal agencies administering federal programs, recipients of federal funds and auditors.
Among the changes for auditors are revisions to the major program determination process, threshold changes and modifications to the compliance requirements subject to audit. To achieve high-quality engagements, auditors should carefully review the new requirements to make sure they clearly understand how to implement the guidance.
Changes to client requirements under the new regulations may also present an audit quality challenge. Clients may make changes to their internal control in response to the Uniform Guidance that auditors need to understand and test. Further, the criteria that auditors test compliance against may have changed.
Audit quality study
A provision of the Uniform Guidance calls for a government-wide audit quality study once every six years. The first quality study will likely occur in 2019 or 2020 as determined by the OMB, and will include single audits submitted to the Federal Audit Clearinghouse as early as 2018 (meaning certain 2017 year-end single audits could be included in the scope of the study). Given the need for firms to retool their single audit procedures to implement the Uniform Guidance, this is also an important time to reexamine existing processes to ensure best practices.
Previous federal studies of single audit quality have indicated quality challenges. The previous OMB study released in 2007 found only 49% of audits in this area acceptable, with the most prevalent deficiencies being missed major programs, errors in the Schedule of Findings and Questioned Costs, and missing documentation related to a finding. A recommendation in that study to revise and improve single audit standards was one of the factors in the development of the Uniform Guidance.
The AICPA Peer Review Board has undertaken two initiatives to help prepare members for the OMB study. First, the AICPA Peer Review Program is conducting oversight reviews of randomly selected single audits within the enhanced oversight program that began last year as part of the Enhancing Audit Quality initiative (see Enhancing Audit Quality Update—the profession takes charge in the July/August issue of CPA Voice).
The second initiative is matching firms enrolled in the AICPA Peer Review Program with firms identified in the Federal Audit Clearinghouse as performing single audit engagements, to determine if firms are properly enrolled, if all required engagements were included in the peer review, and to rapidly remedy those omissions.
Steps to success
A commitment to enhancing audit quality is foundational to the CPA profession. Since the release of the Uniform Guidance, OSCPA has been working with the AICPA to help firms prepare for implementing the new guidance with educational resources and implementation tools.
Some steps you can take right now to be successful in single audit engagements include:
• Tone from the top—partners and firm managers should emphasize the importance of single audit quality to their professional staff. A recently issued Uniform Guidance flyer http://bit.ly/2dwg1ZW containing tips for auditors implementing the Uniform Guidance may help firm leaders with this effort.
• The AICPA Governmental Audit Quality Center (GAQC) provides up-to-date information, resources, tools and events to support governmental engagements and single audits. If your firm is not already a member, consider joining.
• Listen to a free, archived GAQC web event, Avoiding Common Deficiencies in Yellow Book and Single Audits http://bit.ly/2efZqi9 to learn more about common pitfalls and tips to prevent them in your single audit practice.
• Check out a new free practice aid that the AICPA has released, Establishing and Maintaining a System of Quality Control for a CPA Firm’s Accounting and Auditing Practice, http://bit.ly/2e7ALHE which contains customizable illustrative policies and procedures and includes tips, warnings and reminders to help practitioners better implement the quality control policies and procedures.
• Review the AICPA’s free AICPA Competency Framework: Governmental Auditing, http://bit.ly/2dWpATs which includes single audit competencies to gauge your knowledge, and learn more about the AICPA’s exam-based single audit certificate program as a way to demonstrate your competencies.
• Direct your clients to the free tools and resources available through the GAQC Auditee Resource Center http://bit.ly/2eg0O47 to help them understand their role under the Uniform Guidance.
A commitment to excellence
As a forward-looking profession, we have a long-standing commitment to quality and must always look for way to improve. Preserving the reputation professionals have worked very hard to earn is what enables the public to rely upon CPA services. Successful adoption of the Uniform Guidance is yet another opportunity to show an unrelenting dedication to audit quality.