Other Compliance Audit Information Relating to For-Profits 

Published November 07, 2016

The Governmental Audit Quality Center (GAQC) focuses on all audits and attestation engagements performed under Government Auditing Standards (referred to as the Yellow Book).  Many federal agencies require audits of for-profit entities that participate in federal programs.  These audits are generally required to be performed under Government Auditing Standards.  The additional requirements for the audits vary.  Some require a Yellow Book financial statement audit, along with a compliance audit that is performed using requirements defined in a federal audit guide. Some require only a compliance audit or program-specific audit. The key for auditors and auditees is to ensure that an appropriate understanding of the applicable audit requirements is obtained and that there is an awareness of where to find related guidance.

This section of the GAQC Web site includes a summary of the various federal audit and attestation guides applicable to for-profit entities that the GAQC is aware of, as well as links to where auditees and auditors can find them. The “GAQC Notes” column includes other information that the GAQC is aware of relating to each federal guide or pertinent information that the GAQC believes may be useful.  

CAUTION:  Auditors are cautioned that much of the federal agency guidance cited below has not been updated for many years.  Therefore, many have not been updated for current professional standards. The GAQC will continue to work with the federal agencies listed below, encouraging them to update and maintain audit guidance on a timely basis.  However, keep in mind that paragraph 22 of  AU-C section 935, Compliance Audits, states that “In instances where audit guidance provided by a governmental agency for the performance of compliance audits has not been updated for, or otherwise conflicts with, current GAAS or Government Auditing Standards, the auditor should comply with the most current applicable GAAS and Government Auditing Standards instead of the outdated or conflicting guidance.” Paragraph A.27 of AU-C section 935 goes on to state that “When there is conflicting guidance, the auditor may decide to consult with the government agency responsible for establishing audit guidance or that provides the funding.”

Federal Agency
Guide Title or Topics  GAQC Notes  
U.S. Department of Agriculture (Agriculture)
Rural Utilities Service (RUS), Policy on Audits of RUS Borrowers (7 CFR 1773) This regulation implements the standard provisions of the security instrument utilized by RUS for both electric and telecommunications borrowers and by the Rural Telephone Bank (RTB) for its telecommunications borrowers and contains detailed auditor guidance.

The GAQC provided comments to USDA suggesting updates and revisions to this guidance over a year ago.  The GAQC is aware that USDA is considering an update.  No more specific information is known at this time.

Interim Guidance Issued: On February 7, 2014, the USDA issued a memorandum titled, Clarification of RUS 1773 Audit Requirements, that clarifies the audit requirements for RUS loan and grant recipients under 7 CFR 1773, Policy on Audit of RUS Borrowers (Part 1773).
 Agriculture Rural Rental Housing Audit Program This audit program provides instruction and guidance for independent public accountants in conducting agreed-upon procedures engagements of recipients of Rural Development loans, except for those audits required to be performed in accordance with Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (Circular A-133). This guidance has not been updated since 2005.
 Agriculture Various other audit documents that can be accessed by clicking here. USDA also lists several other audit-related documents on its Web site covering the federal milk marketing order program, audits of multi-state food processors, and the summer food service program for children.  Auditors are cautioned that this guidance was issued in the late 1990s and its content has not been updated for current professional standards.
U.S. Department of Commerce (Commerce) Program-Specific Audit Guidelines for Broadband Technology Opportunities Program (BTOP) These guidelines cover for-profit entities participating in the BTOP grant program that, among other things, provide access to broadband service to consumers residing in unserved or underserved areas.  It requires that a for-profit recipient or for-profit subrecipient that receives a BTOP award exceeding $100,000 have a program-specific audit using these Commerce guidelines. GAQC commented on the original version of this guidance that was issued in 2010.  Most recently updated in May 2012.  Access a summary that identifies what was changed between the 2010 and 2012 editions of this guidance
U.S. Department of Education (Education) Various audit and attestation guides for for-profit entities such as proprietary schools, lenders, lender servicers, foreign schools participating in various Education programs, as well as participants in certain programs under the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). The guides for lenders (compliance attestation engagement) and lender servicers (financial statement audit and compliance attestation engagement) were updated in 2011.  The GAQC commented on these guides as they were being developed.  

Proprietary Schools -    

Read GAQC Alert #316 for more information.

In September 2016, Education issued an updated.Guide for Audits of Proprietary Schools and For Compliance Attestation Engagements of Third-Party Servicers Administering Title IV Programs.   
U.S. Department of Energy (Energy)
Per an Energy Policy Flash issued Feb. 2, 2016, effective for fiscal years beginning after Dec. 26, 2014, the For-Profit Audit Guide has been superseded by DOE Regulation 2 CFR section 910.501-528.  Reporting on the Schedule of Expenditures of  DOE Awards in relation to the financial statements (if a financial statement audit is performed) maybe performed in accordance with AICPA or PCAOB standards (Policy Flash 2016-16).

U.S. Department of Housing and Urban Development (HUD) HUD Consolidated Audit Guide (HUD Guide) The HUD Guide is applicable to various types of for-profits that participate in HUD programs (e.g., housing partnerships, banks, credit unions, etc.).  HUD’s approach has been to update this guide on a chapter-by-chapter basis.  The GAQC has provided comments to HUD on the various chapters of the HUD Guide as HUD has worked to update them.  

Because of the extensive nature of the HUD Guide’s applicability, the GAQC has developed an entire section of its Web site (much of which is open to the public) to communicate HUD-related matters.  Among other things, the GAQC HUD Resource Center includes information on the HUD Guide (including links to each chapter and when each chapter was last updated) and the latest information the GAQC has on HUD audits covered by the Guide.  Access the GAQC HUD Resource Center.

Legal Services Corporation (LSC) Audit Guide for Recipients and Auditors
(Note that this guide was issued in 1996; audit bulletins relating to this guide that have been issued since then can be found in a FAQ document.)

2016 Compliance Supplement for Audits of LSC Recipients

Note that this Guide requires a Yellow Book financial statement audit and a compliance audit performed in accordance with Uniform Guidance.  However, instead of using the OMB Compliance Supplement, the auditor is to use the Compliance Supplement for Audits of LSC Recipients.  The OIG office at LSC issued an Advisory titled, Quality Control Reviews, in March of 2015 discussing issues noted in quality control reviews of these engagements performed by LSC.

Compliance Supplement for Audits of LSC Recipients.
U.S. Agency for International Development (USAID) Guidelines for Financial Audits Contracted by Foreign Recipients Issued in February 2009, these guidelines are to be used by independent auditors in performing recipient-contracted audits required by USAID agreements with non-U.S. (foreign) recipient organizations. USAID agreements with foreign governments and foreign nonprofit organizations require that a recipient-contracted audit be performed annually in accordance with Government Auditing Standards and these guidelines when the recipient expends $300,000 or more in USAID awards in its fiscal year. The financial audit must include a specific audit of all the recipient’s USAID-funded programs and also include an audit of the recipient’s general purpose financial statements on an organization-wide basis if the recipient has been authorized to use provisional indirect cost rates, or if the mission specifically requests such an audit. 


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