01-20-04 Regular Meeting - Laserfiche WebLink

Browse Search

IliT7'I~®D ~IC7'I®1V How does performance auditing differ from a financial statement audit? Performance auditing shares many of its goals and techniques with a financial statement audit. Nonetheless, there are some very important dif- ferences between the two types of auditing. The scope of the typical financial statement au- dit encompasses all of the transactions and events affecting a government's financial state- ments. Performance audits, on the other hand, are typically much more narrowly focused, often on a single program, department, or activity. Financial statement audits also enjoy the benefit of widely accepted criteria (i.e., GAAP) that de- fine fair presentation. There are no such similarly widely accepted standards of what constitutes eff~- cient or effective performance. Accordingly, an important part of the performance auditor's task is to develop persuasive criteria of efficiency and effectiveness to apply to each audit engagement. Finally, the financial statement auditor's role is limited to commenting on the financial report, which is a management document. The entire re- port connected with a performance audit, on the other hand, is a auditor document. 5O AN ELECTED OFFICIAL'S GUIDE Auditing plays an important role in public-sector finance. Indeed, it is essential to the credibility of state and local government financial report- ing. Nonetheless, many key individuals, includ- ing both elected officials and management, often lack even a basic understanding of the goals and techniques of auditing in the public sector. The purpose of this booklet is to aid those without specialized expertise to gain a practical under- standing of what auditors do and how they do it. This booklet is divided into several separate sec- tions. The first section deals with auditing~ba- sics, and briefly reviews the different types of au- ditors and audits, as well as the standards used by auditors in performing their work. The second section is devoted specifically to the annual financial statement audit. Among other matters, this section deals with the important concepts of reasonable assurance and material- ity, as well as with the role of a government's framework of internal controls in a financial statement audit. This section also describes cer- tain letters required by auditors from manage- ment and legal counsel. The following two sections expand upon the fi- nancial statement audit section by dealing with two particular types of financial statement audit - the Yellow Book audit and, more narrowly, the Single Audit. The fifth section is devoted to the various types of auditor reporting associated with different types of financial statement audit engagements. The discussion goes beyond auditor's reports, strictly speaking, to address issues such as find- ings, management letters, and questioned costs. xi