GAQC Alert No. 340

GAQC Alert
 
Factors Driving Single Audit Quality Identified in Peer Review Study; FAC Update
   
  AICPA
August 3, 2017
GAQC Alert #340
 
In This Alert
Results of AICPA Single Audit Study
FAC Now Accepting FY 2017 Submissions
Auditee Resources
Auditees play an important role in audit quality. Let your clients know about the Auditee Resource Center, including an entire page dedicated to Uniform Guidance Resources for Auditees.
Mark Your Calendars
The AICPA Governmental and Not-for-Profit Training Program will be held October 23 – 25, 2017, in Las Vegas, NV. Both in-person or virtual attendance options are available. Access registration information.
Additional Resources
GAQC Alerts

Archived GAQC Web Events

Audit Practice Aids and Tools

HUD Information
Dear Center Members
This GAQC Alert is to inform members about the following important single audit developments:
  • The results of a recent study by the AICPA Peer Review Program (PRP), which revealed a set of factors that had a strong correlation with quality in single audits, and a related GAQC Web event planned for September 20, 2017; and
  • The Federal Audit Clearinghouse (FAC) is now accepting submissions of fiscal year (FY) 2017 Data Collection Forms (also referred to as the DCF or Form SF-SAC)
Results of AICPA Single Audit Study

Due to continued concerns about the quality of single audits, the AICPA PRP undertook a study to learn more about the quality of these audits, as well as the factors that correlated to higher-quality single audits. In the study, the Peer Review Program randomly selected a sample of 87 single audits from its Enhanced Oversight Program. The engagements selected had year ends of November 30, 2015, or earlier.

Factors Correlating to Quality. Three factors had a strong correlation to quality performance in the sample:
  • Size of single audit practice
  • Membership in the Governmental Audit Quality Center (GAQC)
  • Qualifications of the engagement partner
Size of Single Audit Practice. Firms that performed 11 or more single audits annually, regardless of firm size, had a non-conformity rate of 15%, compared with 49% for firms that performed 2 to 10 single audits each year and 62% for firms that performed one single audit annually.

GAQC Membership. Firms that were GAQC members were two times as likely to conform to standards as compared to non-members. Additionally, GAQC member firms that performed 11 or more single audits annually had a 0% non-conformity rate.

Qualifications of the Engagement Partner. Engagement partners who performed more single audits annually had fewer instances of nonconformity in the study. A nonconformity rate of 25% was observed in audits performed by an engagement partner who reviewed and signed 11 or more single audits annually. Nonconformity rose to 44% for engagement partners who perform 2 to 10 single audits each year, and to 68% for engagement partners who perform just one single audit annually.

Non-conformity also spiked for firms whose engagement partners:
  • Had less than six years of experience performing single audits
  • Had a history of non-conformity
  • Took less than nine hours of single audit-specific CPE within the previous three years
Key Takeaways. The study's findings support numerous recommendations that the AICPA has promoted through the Enhancing Audit Quality initiative. You have already taken one of the steps recommended, which is becoming a member of the Center. Please be sure to use the information and tools we provide to get the most from your membership and to increase the likelihood that your single audits fall into the "fully conforms to standards" category. Other recommendations include the following:
  • Accept only engagements that you are competent to perform.
  • Use practice aids and Audit and Accounting Guides that are up to date.
  • Make sure the engagement team is your "A" team (and "A" doesn't stand for "available").
  • Establish policies requiring engagement partners to take robust single audit-specific continuing professional education.
  • Consider the engagement team's experience and single audit-specific education.
  • Engage a knowledgeable third party where appropriate.
  • Provide appropriate resources for consultations and ensure that engagement teams perform appropriate consultations throughout the engagement.
  • Consider the need for engagement quality control review (EQCR) and use EQCR criteria that are appropriate in light of the risks of operating in this area.
  • Follow the "shadow/bench/door" best practice for partners that perform materially non-conforming engagements. This means shadowing these partners' work in the area where the nonconformity occurred by involving another partner throughout the engagement; benching the partner by requiring him or her to perform engagements that do not fall into the area where nonconformity was noted; or showing the partner the door. In this system, the severity of the response is based on the severity of the issue.
Upcoming GAQC Web Event. We are still working on our full Web event slate for September 2017 – June 2018. However, we want to inform you now that we will hold a GAQC Web event focusing in on the results of the study on Wednesday, September 20, 2017, from 1:00 PM – 3:00 PM (Eastern). The event, New Insights on Factors Driving Single Audit Quality, will provide, among other things, insights into the most common areas of non-conformity found in the single audits studied. Mark your calendars and watch for a future GAQC Alert with registration information.

Further Study Information. For more information about the study, read the related Journal of Accountancy article or view an infographic about these single audit quality factors.
FAC Now Accepting FY 2017 Submissions

We previously informed you that the FAC was not able to accept submissions for fiscal years ending in 2017. We now want to make you aware that the FAC has just posted an announcement to its Web site stating that "Form SF-SAC for FY17 submissions is now available." The FAC staff also informed the GAQC that it will not be posting a blanket extension as a result of this delay. Instead, they encourage auditees to submit completed audits as soon as possible and to reach out to the FAC directly if they have any concerns about the timing of the submission.

Additionally, the FAC staff indicated to us that there was one small edit made to the DCF to align the wording of one question to wording in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The original question read as follows: "Was the special purpose framework used a basis of accounting required by state law or tribal law?" The revised question now says: "Was the special purpose framework used a basis of accounting required by state law?"

As always, thank you for your membership and dedication to audit quality.
*   *   *   *   *
Sincerely,

AICPA Governmental Audit Quality Center
 
Stay Informed

To stay abreast of these and other relevant events, visit the GAQC Web site. Also, we welcome any suggestions or questions.  Please send them by e-mail to GAQC@aicpa.org

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