01-20-04 Regular Meeting - Laserfiche WebLink

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How do Single Audits differ from regular financial statement audits? Single Audits are subject to the GAO's Govern- mentAuditing Standards (Yellow Book). There- fore, the auditor's report on the fair presentation of the financial statements must be accompanied by a report on compliance and internal controls over financial reporting. Single Audits also place special testing and re- porting responsibilities upon auditors in regard to federal awards. First, in a Single Audit, the auditor must determine and report whether the legally required Schedule of Expenditures of Federal Awards prepared by the government is fairly presented in relation to the government's basic financial statements. Second, the auditor must test and report on compliance and internal controls over compliance for federal awards pro- grams. To meet this latter requirement, the au- ditor must gain an understanding of internal controls over compliance and then test those con- trols for each major federal program. The result- ing auditor's report must provide an opinion on whether the government complied with laws, regulations, and provisions of contracts or grant agreements that could have a direct and mate- rial effect on each major federal program. More information on the auditor's special Single Audit reporting responsibilities can be found in the next section of this publication devoted to au- ditor's reports. 2S AN ELECTED OFFICIAL'S GUIDE What is a "lawyer's letter"? GAAP require that the financial statements and the notes to the financial statements reflect the potential effects of pending litigation. Auditors, however, do not ordinarily possess the legal ex- pertise needed to assess the potential effects of pending litigation. Therefore, auditors are required by GAAS to obtain a letter from the government's legal counsel to corroborate man- agement's treatment of pending litigation in the financial statements and in the notes to the fi- nancial statements. TO AUDITING 21