Key factors correlate with quality in single audits

Performing a small number of specialized audits may lead to nonconformities, a study found.

A new study by the AICPA Peer Review team has revealed a set of factors that had a strong correlation with quality in single audits, which are compliance audits of governments, not-for-profits, institutions of higher education, and Indian tribes expending $750,000 or more in federal awards in a given year.

In the study, the Peer Review team randomly selected a sample of 87 single audits for "enhanced oversight" by subject-matter experts in public practice. The review showed that three factors had a strong correlation to quality performance in the sample:

  • Size of single audit practice. Firms that performed 11 or more single audits had a nonconformity rate of 15% in the study, compared with 49% for firms that perform two to 10 single audits each year and 62% for firms that perform one single audit annually.
  • Membership in the AICPA Governmental Audit Quality Center (GAQC). Fifty-eight percent of audits by firms that are not members of the GAQC were found to be nonconforming, compared with 32% nonconformity for audits by GAQC member firms. When considering firms that both performed 11 or more single audits in a year and were GAQC members, the nonconformity rate dropped to zero.
  • Qualifications of the engagement partner. Nonconformity decreased when engagement partners had six or more years of experience, and when engagement partners had taken nine or more hours of single-audit-specific CPE in the three years before the audit.

"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," James Brackens, CPA, CGMA, AICPA vice president—Ethics & Practice Quality, Public Accounting, said in a news release.

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