The investment of time and resources necessary to perform high-quality single audits of federal funds can be substantial and daunting for many CPA firms. Add the implementation of new single audit rules to the mix, and the challenges increase exponentially. The good news is that through the Enhancing Audit Quality initiative, the VSCPA and the American Institute of CPAs (AICPA) provide education, tools and resources that continue to support firms in driving improved single audit quality.
Audit quality is always important, and data gathered through Peer Review and ethics investigations indicate that firms performing single audits should pay particular attention to these specialized engagements. Additionally, the AICPA Peer Review Program recently engaged experts in public practice to review a statistical sample of “must-select” engagements, including single audits. These reviews revealed that 44 percent of the engagements reviewed did not conform to applicable professional standards in all material respects. Issues identified in the reviews included missed major programs and failure to test internal controls over compliance. Maintaining and driving high audit quality for these engagements is a key focus for the profession.
Now Is a Great Time to Revisit Your Processes
Effective for fiscal years beginning on or after Dec. 26, 2014 (generally Dec. 31, 2015, calendar year ends and beyond), 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. 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.
Finally, the Uniform Guidance emphasizes the importance of audit quality by requiring a government-wide audit quality study once every six years. The first study will likely occur in 2019 or 2020 as determined by 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, there is a unique opportunity to reexamine existing processes and tap into best practices.
Steps to Success for Firms
Since the release of the Uniform Guidance, the VSCPA has been working with the AICPA to help firms prepare for implementing the Uniform Guidance. Now that the implementation is underway, we will continue to collaborate to provide educational resources and tools to assist practitioners. Here are some steps you can take now to be successful in your single audit engagements:
- Get resources and information from the VSCPA's Single Audit Resource Center, including CPE opportunities to keep you current.
- Partners and firm managers should emphasize the importance of single audit quality to their professional staff. A recently issued Uniform Guidance flyer containing tips for auditors implementing the Uniform Guidance may help firm leaders with this effort.
- The AICPA’s 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, 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, 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, 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 to help them understand their role under the Uniform Guidance.
A Commitment to Excellence
The CPA profession has a long history of transforming challenges into opportunities. Successful adoption of the Uniform Guidance is yet another opportunity to show an unrelenting dedication to audit quality.