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| Firm Compliance Questionnaire Due Soon |
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| The required 2016 GAQC Compliance Questionnaire for CPA firm members is due January 27, 2017! If you did not receive it or have questions, send an e-mail to gaqc@aicpa.org. |
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| Happy New Year! We wish you the best for 2017 and look forward to continuing our work together to enhance audit quality. This GAQC Alert provides you with updates on an assortment of topics as follows: |
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Tailoring the AICPA's free Quality Control (QC) Practice Aid to your governmental audit practice; |
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A recent Journal of Accountancy (JoA) article describing tips for single audit success; |
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A recent GAQC flyer with additional tips for performing single audits; |
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The latest on the AICPA's Enhancing Audit Quality (EAQ) project; |
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Updated federal audit quality review checklists issued; |
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A quick note from the Federal Audit Clearinghouse (FAC) about retiring the 2010 Data Collection Form (DCF) submissions; and |
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An update on the latest Governmental Audit Quality Center (GAQC) activities relating to the U.S. Department of Education (ED) Student Financial Assistance (SFA) cluster. |
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| Tailoring the AICPA's QC Practice Aid to Your Governmental Audit Practice |
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We previously informed you that GAQC members can access a new free Practice Aid (PA) titled, Establishing and Maintaining a System of Quality Control for a CPA Firm's Accounting and Auditing Practice , which includes customizable illustrative QC policies and procedures and includes tips, warnings and reminders. While at first glance you may conclude the PA is not directed specifically to your governmental audit practice, the information in the PA can be tailored to maintain and improve audit excellence in your governmental audit practice, including your single audits. Keep in mind there are two versions of the PA—one for small-and-medium-sized firms and another for sole practitioners. You should refer to the one that works best for your firm size. While the PA is written for a CPA firm audience, it will also be useful to our state audit organization members.
Maintaining high governmental audit quality is always important, but especially now with the forthcoming single audit quality study required by the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 CFR 200 (Uniform Guidance). This PA is a tool you can use to develop new QC policies and procedures or to assist in evaluating and refreshing existing practices. To use it most effectively, you should tailor it to the facts and circumstances of your practice. To illustrate how that might be done for your governmental audit practice, we have included below three QC areas covered by the PA and have indicated how certain aspects within each area might be tailored to be specific to your governmental audit practice. These areas are only a sampling of the QC requirements and illustrative policies and procedures included in the PA. You should carefully read the PA in its entirety. |
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Acceptance and Continuance of Client Relationships and Specific Engagements. Client acceptance and continuance is one of the most important critical decisions that affects engagement quality. The PA discusses this QC element and the related policies that a firm might have. In part, it states that policies and procedures should provide the firm with reasonable assurance that it will undertake or continue relationships and engagements only where it is competent to perform the engagement and has the capabilities, including the time and resources, to do so. Among the things to think about in this area from the perspective of your governmental audit practice is whether your policies emphasize that engagement personnel have an adequate level of competency before accepting the engagement and also have access to sufficient technical resources in this highly specialized field, such as the AICPA Audit Guide, Government Auditing Standards and Single Audits; key information and updates received from the GAQC and other sources; and that appropriate ongoing specialized continuing professional education (CPE) and training are provided to staff working on governmental audits to ensure they maintain the necessary competence and meet the CPE requirements of Government Auditing Standards (also referred to as the Yellow Book). |
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Human Resources. The PA also covers various policies and procedures relating to the QC element relating to human resources such as policies around assigning appropriate personnel with the necessary competence and capabilities to perform engagements in accordance with professional standards and applicable legal and regulatory requirements. This is of particular importance in your governmental audit practice. For example, in thinking about how this policy is applied to your single audits, consider the criteria you have in place for determining the personnel to be assigned to these engagements, including partners, and for performing engagement quality control reviews (EQCR) by someone not otherwise involved with the engagement. For clients with numerous federal programs and/or related findings, consider whether your QC policies ensure your most experienced single audit staff are assigned. |
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Relevant Ethical Requirements. The PA also discusses this aspect of the QC requirements and includes related illustrative policies and procedures. When considering these illustrations from the perspective of your governmental audit practice, you should tailor your application of the guidance to also address the ethical requirements in the Yellow Book and refer to related resources. For example, your firm QC policies should acknowledge the additional requirements of the Yellow Book as it relates to the performance of nonaudit services. You should also consider that your policies ensure that staff have access to specialized resources such as: |
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- Government Auditing Standards, 2011 Revision (i.e., http://www.gao.gov/assets/590/587281.pdf).
- Contact information to reach the staff of the Government Accountability Office (GAO) to discuss questions on Yellow Book rules on ethics, independence, and other areas (i.e., 202.512.9535 or yellowbook@gao.gov).
- The free AICPA PA, 2011 Yellow Book Independence—Nonaudit Services Documentation Practice Aid , which assists auditors in identifying and evaluating threats to independence when considering whether to provide a nonaudit service and preparing required documentation.
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| On a final QC note, remember that as a GAQC member firm, your firm must: |
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Establish policies and procedures specific to the firm's governmental audit practice to comply with the applicable professional standards and Center membership requirements. These policies and procedures must be documented and appropriately communicated. |
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Establish annual internal inspection procedures (in addition to meeting the QC standards requirement for monitoring), that include a review of the firm's governmental audit practice by individuals possessing current experience and knowledge of the accounting and auditing practices specific to governmental audits. |
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- The engagements inspected should be representative of the firm's governmental audit practice considering the number and different types of governmental audits (e.g., single audits, program-specific audits as defined under Uniform Guidance, and other compliance audits and attestation engagements performed under various federal, state, or local agency audit guides) and the various locations at which those audits are performed.
- The internal inspection results specific to the firm's governmental audit engagements should be made available to the firm's peer reviewer.
- The firm's monitoring process should include a review of the firm's compliance with the Center membership requirements.
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| The PA includes tips that will help you design your QC system to effectively meet these Center membership requirements. |
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| JoA Single Audit Article |
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| If you missed the November 2016 JoA, it included an article titled, 11 Tips for Success with Single Audits . Experts interviewed for the article advise practitioners to follow tips provided for high-quality results in these highly specialized and risky engagements. The 11 tips relate to areas such as client acceptance, planning, independence, engagement performance, and quality control. Read the article to get more detail. |
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| GAQC Flyer on Uniform Guidance Single Audits |
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| The GAQC also put its own spin on tips when performing single audits under the Uniform Guidance in a new flyer titled, Key Matters to Understand and Tips for Enhancing Audit Quality . The flyer first focuses on 10 key matters auditors need to know when performing audits under the Uniform Guidance. The second part of the flyer provides 10 tips to help auditors enhance their single audit quality under the Uniform Guidance. The flyer may be useful to highlight these key areas with staff. Let us know if you have any additional tips to share by sending an e-mail to gaqc@aicpa.org. |
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| The Latest EAQ News |
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| As further discussed in GAQC Alert #259 , the AICPA launched the EAQ initiative in 2014 and the related 6-Point Plan to improve audits in 2015. In case you missed it, the AICPA also issued, Enhancing Audit Quality Initiative, Highlights and Progress 2016 , which describes the progress made in this program to date. Among the items discussed in this report are the new QC PA discussed above, as well as enhancements to the Peer Review Program to better identify practice issues and require more targeted and timely remediation. New industry-specific training programs have also been developed focusing on competency development and related certificate programs, including the Single Audit exam-based certificate program highlighted in GAQC Alert #320 which helps highly competent auditors distinguish themselves in the marketplace. We encourage our members to read this EAQ report card. |
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| Updated Federal Quality Checklists Issued |
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| The Council of the Inspectors General on Integrity and Efficiency (CIGIE) recently updated two guides that they use to review single audits performed under the Uniform Guidance. Both guides are generally presented in a checklist format. They are as follows: Guide for Quality Control Reviews of Single Audits (PDF or Word), and Guide for Desk Reviews of Single Audit Reports (PDF or Word). You should review these documents to gain an understanding of what federal agencies look for when reviewing audit quality. Additionally, you should consider the AICPA peer review checklists and these guides as part of your Inspection and QC programs. Taking this step may help improve the quality of your governmental audits. |
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| FAC Retiring 2010 Data Collection Form Processing |
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At the end of each calendar year, the FAC retires the collection of the oldest audit year on file (i.e., beyond the most recent 6 years). The FAC asked the GAQC to communicate that at the end of calendar year 2016, they closed the processing of 2010 DCF submissions. They also indicated they would be reaching out to users who have an incomplete 2010 submission that they have accessed in the last 3 years. The following related FAC announcement was posted on the FAC Web site:
The Federal Audit Clearinghouse will retire Fiscal Year 2010 processing on December 31, 2016. Therefore, FY 2010 single audit submissions will not be available in IDES after December 31, 2016.
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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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