Under the American Recovery and Reinvestment Act of 2009, the federal government is passing down almost $300 billion in additional funds to governments and nonprofit organizations. Much of the funding is subject to audits under Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
As a result, the OMB is encouraging auditors to communicate early—prior to the completion of the single audit—about deficiencies in internal control over compliance relating to Recovery Act funds. Questions have been raised about whether or how auditors might communicate such findings in writing. The Auditing Standards Board, working with the AICPA Governmental Audit Quality Center, has responded to these questions by issuing Interpretation Nos. 2–4 of Statement on Auditing Standards no. 112, Communicating Internal Control Related Matters Identified in an Audit (AU section 325A). The interpretations confirm that an interim communication may be made and provide examples of language that auditors can use.
Although AU section 325A has been superseded by SAS no. 115 (of the same title) to reflect changes in the definitions of control deficiency, significant deficiency and material weakness, these newly issued interpretations reference AU section 325A because the OMB has not yet revised the definitions in Circular A-133 for SAS no. 115. Once it does, these interpretations will be conformed and included as interpretations of SAS no. 115 at AU section 325.