The American Institute of CPAs (AICPA) has determined three key factors that must be present for a quality performance in a single audit, following a study that was conducted in 2016.
Here are the key takeaways:
- No matter how big a firm is, the more single audits that are done means a greater likelihood that they will conform to standards. In firms performing 11 or more single audits annually, there’s 85 percent conformity.
- Members of the Governmental Audit Quality Center had twice as much conformity as non-members did. Members who did 11 or more single audits annually had 100 percent conformity.
- Make sure that engagement partners are qualified. Those doing 11 or more audits annually had 75 percent conformity. Non-conformity increased when engagement partners had six years or less of single-audit experience, had previous non-conforming engagements, and had less than nine hours of continuing education specific to single audits in the past three years.
A single audit is defined as a rigorous, organization-wide financial and compliance audit of an organization that expends at least $750,000 of federal assistance in the form of awards, grants, loans and loan guarantees.
The AICPA’s Peer Review Program randomly selected a sample of single-audit engagements for review last year.
“After a careful review of the engagements in question, we have concluded that performing a small number of audits in a specialized area, such as single audits, regardless of firm size, is more likely to result in audit quality issues,” said James Brackens, AICPA vice president of ethics and practice quality, in a statement.
He cautioned about the risks in doing a small number of audits in a specialized area. Brackens advised firms doing such work that they should either invest in the resources necessary to do the work correctly, or focus on other practice areas.
Brackens offered some advice:
- Ensure that practice aids and accounting and auditing guides are current.
- The engagement team should be top-notch and conduct consultations through the engagement.
- Confirm that Engagement Quality Control Review criteria are appropriate in relation to the risks of practicing in this area.
- If the firm is new to practicing in this area, retain another firm that is very experienced in this to consult with.
A sample of 87 single audits were chosen from among about 1,100 engagements. The selected engagements had year-ends of Nov. 30, 2015 or earlier.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.