Peer Review Changes/Revisions Related to A-133 Engagements

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1 Peer Review Changes/Revisions Related to A-133 Engagements Peer Review Changes/Revisions Related to A-133 Engagements Jim Brackens, CPA, AICPA, VP - Firm Quality and Practice Monitoring David Jentho, CPA, Chair, AICPA Practice Monitoring Task Force Nancy Miller, CPA, Chair, AICPA Technical Standards Subcommittee Governmental Group (Ethics)

2 Topics for Today s Conference Call Single Audit Quality Concerns (PCIE Report) AICPA Response Revisions to Peer Review Standards Interpretation 63-1a Revisions to Single Audit Checklist and Engagement Profiles for Not-for-Profit and Governmental Engagements Additional Changes under Consideration by PRB 2

3 Questions during the call any questions or comments during the call to the Peer Review Technical mail box: Include your name and phone number if you are willing to discuss your question on the call 3

4 Single Audit Quality Concerns (PCIE Report) Scope: June 2007 PCIE Report covered 208 out of 38,000 single audits performed in 2002/2003 Report Results/Concerns: Acceptable 49% Unacceptable/Limited reliability 51% Findings: PCIE Reports Areas of Improvements Needed Internal control, compliance, documentation, sampling, due professional care 4

5 Single Audit Quality Concerns (PCIE Report) Frequent Single Audit Violations Major program determination (missed major program look back rule) Percent of coverage Incorrect threshold for major program determination Improper identification of clusters (missing programs) Failure to test all major programs within clusters Not including all grants within a CFDA # Internal control documentation and compliance testing 5

6 PCIE Recommendations OMB commitment to work with AICPA, NASBA and other similar organizations to address PCIE recommendations Revise and improve Single Audit Standards, criteria, and guidance Enhance documentation requirements, including sample sizes for compliance testing (SAS 39) Pre-requisite and continuing training for staff conducting single audits 6

7 Impact on AICPA and Peer Review Specific mention of AICPA responsibility in PCIE report Congressional testimony by AICPA Potential repercussions for continued unacceptable single audits Governmental Audit Quality Center Recent GAQC Call: The Recovery Act: A Practitioner's Perspective (will be archived on the GAQC website within 2 weeks) 7

8 AICPA Response AICPA developed seven task forces to examine the PCIE study's detailed findings and make recommendations as follows: Sampling/Materiality Issues In A Single Audit Environment Internal Control And Compliance Responsibilities In A Single Audit Environment Schedule Of Expenditures of Federal Awards Reporting Issues Reporting Audit Findings In A Single Audit Single Audit Training Needs And Continuing Professional Education Evaluation Practice Monitoring In A Single Audit Environment Compliance Auditing Considerations In Audits Of Governmental Entities And Recipients Of Governmental Financial Assistance 8

9 Practice Monitoring Task Force (PMTF) Areas of Focus: Establish consistent measures of A-133 deficiencies Develop guidance and training materials for peer reviewers Task Force Activities: Meeting with OIGs to discuss Peer Review process and comparing to QCR process Brainstorming session to consider comments and recommendations received from IGs 9

10 PMTF Actions Taken Interpretation 63-1a revised to require selection of an A-133 engagement Revision to Interpretation 63-1a (June 2009 Peer Review Alert) Effective for peer reviews commencing on or after September 1, 2009 Must-selects must include A-133 engagements No further modification to System Report mustselect paragraph 10

11 Revised Interpretation 63-1a Peer Review Standards Interpretation 63-1a has been updated. The Peer Review Board (PRB) has revised this interpretation to require that additionally, if the engagement selected is of an entity subject to GAS but not subject to the Single Audit Act/OMB Circular A-133 and the firm performs engagements of entities subject to OMB Circular A-133, at least one such engagement should also be selected for review. 11

12 Revised Governmental and Not-For-Profit Audit Engagement Checklist (and Engagement Profiles) PRP Manual Section 20, 500 and 20,600 Enhanced key A-133 Single Audit Data Single Audit Major Program Determination worksheet 12

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15 Part A & B Single Audit/A-133 Supplemental Checklists (Mandatory use effective for peer reviews commencing November 1, 2009 and after) Part A Supplemental Checklist for Review of Single Audit Act/A-133 Engagements PRP Manual Section 22100A Begin with Part A Checklist Addresses most problematic concerns Determination of major programs Audit of major programs Audit findings Schedule of Expenditures of Federal Awards 15

16 Part A & B Single Audit/A-133 Supplemental Checklists Complete Part A until a question answered No -- confirms engagement not performed in conformity with applicable professional standards in all material respects (Inspectors General consider these failures make engagement unacceptable ) Not required to further complete Part A nor Part B once reviewer reaches conclusion of failed engagement Document decision Consider expanding scope of peer review as applicable (PRP Standards Section 1000 par. 68) 16

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18 Part A & B Single Audit/A-133 Supplemental Checklists Part B Supplemental Checklist for Review of Single Audit Act/A-133 Engagements PRP Manual Section 22100B Report on Compliance Schedule of Findings and Questioned Costs Other Audit Issues and Program Specific Audits Failure in one of these areas does not necessarily result in an engagement that has not been performed in accordance with GAGAS in all material respects 18

19 Failure to Meet Coverage Percent for High Risk Auditee 19

20 Example of a Missed Major Program 20

21 Potential Concerns About New Engagement Profile and Supplemental Checklists Reviewed firm completes Engagement Profile and Major Program Determination - minimal data requested that should be easily ascertained and documented. Major Program Determination Worksheet - template provided or use auditor s determination worksheet IF it provides all of the same information, including lookback information. Part A&B Checklists include minimal (5) new questions; otherwise just split out of existing Single Audit/A-133 Supplemental Checklist. Part A&B Checklist format should save peer reviewers time. 21

22 PMTF Direction and Considerations Recommended Enhanced Peer Review Report Acceptance and Oversight Procedure Changes Engagement Profile and Part A Supplemental A-133 Checklist evaluated by Technical Reviewer and/or RAB as part of report acceptance procedure Timeline Concerns about the new process: Required subject matter expertise and experience by Technical Reviewers and Report Acceptance Bodies Consideration of national pool of A-133 subject matter experts for consultations and to provide technical advice Enhanced RAB responsibilities 22

23 Questions, Comments or Suggestions? any questions or comments during the call to the Peer Review Technical mail box: Include your name and phone number if you are willing to discuss your question on the call 23

24 Thank you! 24