Knowledge Check – Audits
Select the appropriate response to complete the statement and then, select the Submit button.
1. Which type of review applies to an organization that has expended $750,000 or more of Federal funds in a single accounting year?
A. Reviewed Financials
B. Single Audit
C. Compiled Financials
D. Program Audit
E. B and D
The correct answer is ‘B.’ Grantees and sub-recipients that expend $750,000 or more in a year in federal awards must have an audit conducted in accordance with 2 CFR Part 200, Subpart F—Audit Requirements. A single audit includes both an entity’s overall financial statements and its federal awards (from all applicable federal programs). If a grantee or sub-recipient expends less than $750,000 a year in federal awards, it is exempt from the audit requirements for that year; however, records must be available for review or audit by appropriate officials of the federal agency, pass-through entity and the Government Accountability Office.
2. The Federal Audit Clearinghouse is the entity that conducts audits for organizations.
True
False
The correct answer is ‘False.’ The Federal Audit Clearinghouse, which operates on behalf of OMB, distributes single audit reporting packages to Federal agencies, supports OMB oversight and assessment of Federal award audit requirements, maintains a database of completed audits, and helps auditors and auditees minimize their reporting burden.
3. Audits can benefit your agency by doing all of the following EXCEPT:
A. Verifying that you are complying with laws, regulations, and agreements.
B. Providing additional Federal funding if no findings are reported.
C. Providing information on whether financial records are reliable.
D. Assessing whether there is proper accounting and disbursing of funds.
The correct answer is ‘B.’ The purpose of an independent audit is, first, to affirm that the systems and records maintained by the auditee are in compliance with GAAP and all additional requirements for Federal grantees laid out in 2 CFR 200 and then to publish those financial records in a standardized format that is easily understood.
4. According to 2 CFR 200 (and 24 CFR Part 85 and 84), grantees and sub-recipients must hire an independent auditor who:
A. Has a special government-issued license for conducting single audits of HUD programs as a means of in protecting participants’ confidentiality
B. Has past experience working with HUD programs, per the requirements outlined in the Government Auditing Standards.
C. Has experience conducting audits dealing with funds in excess of $750,000.
D. Is a certified public accountant (CPA) with a current license issued by the State in which the CPA practices.
The correct answer is ‘D.’ An auditor’s judgment is primary attribute that sought in securing his/her services. Judgment is necessary to determine which audit procedures are sufficient to achieve the audit objectives, and whether additional or alternative audit procedures are needed to achieve such objectives. The auditor is responsible for determining the nature, timing, and extent of the audit procedures necessary to meet the audit objectives (i.e., it is the auditor who determines the necessary amount of his/her audit work needed to form an opinion on whether the recipient complied with laws and regulations). For this reason, 2 CFR 200 insists that the auditor hired is a certified public accountant (CPA) with a current license issued by the State in which the CPA practices.
5. An FY 2014 grantee wants to refer back to the Federal regulations governing compliance requirements and suggested audit procedures specific to its program. This grantee should reference the:
A. Generally Accepted Auditing Standards (GAAS).
B. Accounting Standards and Processes (ASP).
C. 2 CFR 200 – Subpart F – Audit Requirements
D. OMB Circular A-133 Compliance Supplement.
The correct answer is ‘C.’ The Omnibus Circular took effect in December 2014 and is the one-source reference for all Federal auditing questions for all HUD grantees accessing funds beginning with Fiscal Year 2014 allocations. (Section 811 PRA grantees funded through prior years’ allocations will continue to follow the guidance provided in the OMB Circular A-133 Compliance Supplement, which is substantially the same.)