Auditing

April 1, 2013

  Proposed reforms designed to streamline and improve the way the federal government administers more than $600 billion in grants annually have been published by the Office of Management and Budget (OMB).

The OMB is proposing broad reforms to compliance audits performed under OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (also referred to as single audits or Circular A-133 audits). A number of other key grant reforms also are proposed.

If the proposal is approved, the threshold that triggers a single-audit requirement would be raised from $500,000 a year to $750,000 a year.

The proposal, titled Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards, was developed to combine multiple federal regulations for administering grants into a single, comprehensive, streamlined policy guide. The proposal is available at tinyurl.com/aw79k5o.

Proposed changes are designed to eliminate unnecessary and redundant requirements to achieve better outcomes at a lower cost. The OMB is seeking comments on the proposal by May 2. An AICPA Governmental Audit Quality Center report, GAQC Alert No. 211, provides more information about the proposal.

The increase in the threshold for single audits would mean that states, local governments, and not-for-profit entities that spend $750,000 or more in federal awards in a year would be required to undergo a single audit.

Entities that spend less than $750,000 in federal awards in a year would be required to make records available for review or audit by appropriate officials of the federal agency, passthrough entity, and the U.S. Government Accountability Office, according to the proposal.

The OMB proposes a number of other changes to the current rules for determining which federal programs will be audited as part of a single audit and that the number of types of compliance requirements to be tested in a single audit be reduced from 14 to six. These would be:

Activities allowed or unallowed, and allowable costs/costs principles.

  • Cash management.
  • Eligibility.
  • Reporting.
  • Subrecipient monitoring.
  • Special tests and provisions.


In addition, more detail will be required to be reported in auditor findings, but the questioned cost threshold for reporting will be increased from $10,000 to $25,000.

Eight existing OMB circulars will be combined into one document, which will clarify key differences for different entities.


  A new program announced by the Center for Audit Quality (CAQ) and the Auditing Section of the American Accounting Association (AAA) will help accounting and auditing academics gain access to audit firm personnel to participate in academic research projects.

The joint venture between the CAQ and AAA Auditing Section is designed to help generate research on issues that are relevant to audit practice. The CAQ is affiliated with the AICPA.

Doctoral students and tenure-track professors are the initial group to be provided access to audit firm staff to complete data collection protocols through the Access to Audit Personnel program.

Firms that are CAQ Governing Board members have agreed to participate in the program, which requires doctoral students and tenure-track professors to submit a request for proposal (RFP) to a committee of senior academics and audit practitioners.

The RFP will require the researchers to provide a detailed description of their research, methodology, and how the research will fit into the existing literature. The full criteria for the RFP are available on the CAQ’s website at tinyurl.com/ao43ykd.

A total of five proposals will be approved this year by the committee in what will be an annual program, and the requests will be forwarded to the firms that have pledged to cooperate. The deadline for RFPs to be submitted is April 22.


  A new statement issued by the AICPA Auditing Standards Board (ASB) clears the way for audits of financial statements prepared in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities (SMEs) that the AICPA is developing.

Statement on Auditing Standards (SAS) No. 127, Omnibus Statement on Auditing Standards—2013, defines a new special-purpose framework in the auditing standards that uses a definite set of logical, reasonable criteria that is applied to all material items appearing in financial statements. SAS No. 127 is available at tinyurl.com/arhjb69.

Previously, the special-purpose frameworks included in the AICPA Professional Standards had been limited to:

  • Cash basis.
  • Tax basis.
  • Regulatory basis.
  • Contractual basis.


The statement amends AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks, and takes effect for audits of financial statements for periods ending on or after Dec. 15, 2012. The new definition is similar to one that previously had been deleted from AICPA auditing standards because of lack of use.

The development of the Framework for SMEs, though, creates a need for the new special-purpose framework in the auditing standards. The AICPA’s objective is to provide a simple, robust, and reliable financial reporting framework for SMEs that are not required to file financial statements in accordance with GAAP.

An ED of the framework was released Nov. 1 and is available at tinyurl.com/aopd5ma.

In addition, the ASB’s new statement permits reference in the auditor’s report on group financial statements to component auditors’ reports on component financial statements in some cases.

SAS No. 127 permits such a reference when the group and component financial statements are prepared using different financial reporting frameworks if certain other criteria are met.

The statement amends AU-C Section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), and takes effect for audits of group financial statements for periods ending on or after Dec. 15, 2012.


  Auditors should use professional judgment of the circumstances to determine which effective date of AU-C Section 905 applies in a compliance audit performed pursuant to AU-C Section 935, Compliance Audits, and Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, according to a new Technical Question and Answer developed by two AICPA teams.

The Audit and Attest Standards and Governmental Auditing and Accounting teams developed the nonauthoritative guidance in TIS Section 9110.20. The guidance relates to which effective date should be used in a particular circumstance in AU-C Section 905, Alert That Restricts the Use of the Auditor’s Written Communication.

The guidance refers to circumstances in a compliance audit when:

  • The financial statements of an entity are for a period prior to Dec. 15, 2012, and
  • The opinion on compliance and reporting on internal control over compliance relating to that same period is issued after Dec. 15, 2012.


The effective date to be used depends on the auditor’s professional judgment of the circumstances, according to the guidance, which is available at tinyurl.com/6kj2uku.

PROFESSIONAL DEVELOPMENT: EARLY CAREER

Making manager: The key to accelerating your career

Being promoted to manager is a key development in a young public accountant’s career. Here’s what CPAs need to learn to land that promotion.

PROFESSIONAL DEVELOPMENT: MIDDLE CAREER

Motivation and preparation can pave the path to CFO

CPAs in business and industry face intense competition to land a coveted CFO job. Learn how to best prepare yourself for the role.

PROFESSIONAL DEVELOPMENT: LATE CAREER

Second act: Consulting

CPAs are using experience to carve out late-career niches. Learn how to successfully make a late-career transition to consulting, from CPAs who have done it.