Audit Checklist for Letter of Credit6

8/12/2019 Audit Checklist for Letter of Credit6

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U nited S ta tes G enera l Accounting Office

P residents Council on I nt egrity a nd E fficiency

G AO/P C IE

Financial

AuditMa nua l

E xposure D ra ft

Volum e 2G AO-01-281G


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C ONTE NTS - P ART I I


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CONTENTS - PART II

D ecem ber 2000 G AO/P C I E F in a n cia l Au dit Ma n u a l - P a r t II C on t en t s-1

600 PLANNING AND GENERAL (U nder development - a va ilable in

a future updat e)

650

650 A

650 B

U sing t he Work of Oth ers

Exa mple Reports When U sing t he Work of Oth ers

Exa mple Audit P rogram for U sing t he Work of Others

700 INTERNAL CONTROLS

800 COMPLIANCE (U nder development - a va ilable in a fut ure

update)

801 (Reserved)

802 G en er al C om plia n ce C hecklist

803 Ant ideficiency Act

804 Clos ing Appropr ia t ion Account s (Na t iona l De fense Author iza t ion

Act for Fis cal Yea r 1991)

805 B u d get Accou nt in g a n d P r oced ur es Act of 1950

806 C h ief F in a n cia l Officer s Act of 1990

807 F ed er a l M a n a ger s' F in a n cia l I n t eg rit y Act of 1982

808 F ed er a l C red it Refor m Act of 1990

809 P r ov is ion s G ov er n in g C la i ms of t he U n i ted S t a t es G ov er n men t (31U .S.C . 3711-3720E ) (In cluding th e D ebt Collection Im provement

Act of 1996)

810 P rompt P ayment Act

811 S ingle Audit Act of 1984

812 P a y a n d Allow a n ce S y st em for C iv ilia n E m ploy ees a s P r ov id ed

P rima rily in Cha pters 51-59 of Title 31, U nited S ta tes C ode

813 C ivil S er vice R et ir em en t Act of 1930

814 F ed er a l E m ploy ees H ea l t h B e n efit s Act of 1959

815 F ed er a l E m ploy ee's G r ou p L if e I n su ra n ce Act of 1980

816 F ed er a l E m ploy ees ' C om pen sa t ion Act

900 SUBSTANTIVE TESTING


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CONTENTS - PART II

D ecem ber 2000 G AO /P C I E F in a n cia l Au dit Ma n u a l - P a r t II C on t en t s-2

1000 REPORTING

1001 Ma n agemen t Represen ta t ion s

1001 A Il lust ra t ive Mana gement Representa t ion Let ter

1002 (Reserved)

1003 F in a n cia l S t a t em en t Au dit C om plet ion C h eck lis t

1004 Check li st for Repor t s P repared Under the CFO Act (Will be

a va ilable for comment J a nua ry 15, 2001)

1005 S ubseq uen t E ven ts Review

1006 Rela ted P a rt ies Review


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S E C TION 600

P la nning a nd G enera l

[U nder development; a vaila ble in a future upda te.]


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S E C TION 700

In t erna l Cont rols

(This section is reserved .)


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S E C TION 800

Compliance

[Under development; available in a future update.]


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S E C TION 900

S ubsta nt ive Test ing

(This section is reserved.)


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S E C TION 1000

Reporting


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1001 - MANAGEMENT REPRESENTATIONS

December 2000 GAO/PCIE F inancia l Audit Manua l - P a r t I I P age 1001-1

.01 This sect ion dea l s w ith the management represent a t ions tha t the auditor i s

required to obta in from current ma na gement a s pa rt of th e a udit , as

described in sections 280 a nd 550. It covers th e four genera l ar eas of

representa tions: representa tions a bout the finan cial sta tements, interna l

cont rol, fina ncial man a gement sy stems substa ntia l compliance wit h th e

requirements of th e Federa l Fina ncia l Man a gement Improvement Act of

1996 (FFMI A), and complia nce w ith la w s an d regulations. In t he AIC P A

st a nda rds, t hese represent a tions a re discussed in sections AU 333 (SAS 85),

AT 400.41 (from Stat ement on Standar ds for A tt estat ion Engagement s

(SS AE) Number 2, a s am ended), and AU 801. OMB a udit guida nce a lso

conta ins guidan ce on ma na gement r epresenta tions lett ers.

.02 Writ t en represent a t ions f rom mana gement ord ina r i ly conf irm ora l

representa tions given t o the aud itor, indicate a nd document t he continuing

appropriateness of those representations, and reduce the possibility of

misundersta nding. Ma na gement represent a tions a re not a substitut e for

a udit procedures. If a represent a tion is contr a dicted by other aud it evidence,

th e audit or should investigat e the circumsta nces a nd consider th e reliability

of th e representa tion. Also, th e a udit or should then consider w heth er it is

a ppropria te to rely on other ma na gement representa tions. Ma na gement's

refusal to furnish w ritt en representa tions is a scope limitat ion sufficient to

preclude an unq ua lified opinion.

.03 The specific representa t ions obtained will depend on the circumsta nces of the

engagement a nd t he na ture a nd ba sis of presenta t ion of the f inancia l

sta tements. These representa tions a pply to a ll the fina ncia l sta tements an d

a ll periods covered by th e audit report. In a ddition to the representa tions

given in th e AIC P A sta nda rds, the a uditor genera lly should consider the

need to obta in representa tions on other ma tt ers based on th e circumsta nces

of the a udited entity. Also, the representa tions given in t he exa mple

representa tion lett er in s ection 1001 A should be deleted if ina pplicable or

customized to the situa tion of the entit y being aud ited.

.04 The mana gement representa t ion le t ter should be obta ined from the highest

level of the a udited entity. The officials w ho sign th e man a gement

representa tion letter should be those who, in the a uditor's view, a re

responsible for and knowledgeable, directly or through others, about the

ma tt ers in the representa tion lett er. These officials should genera lly be th e


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1001 - Management Representations

December 2000 GAO/PCIE F inancia l Audit Manua l - Pa r t I I Pa ge 1001-2

head of th e entity a nd the CFO, or equivalent. Additional man a gement

representation letters should be obtained from any component units for

w hich separa te reports a re to be issued.

.05 The mana gement representa t ion le t ter should be on the audi ted ent i ty 's

lett erhead. The representa tions should be a s of a da te no earlier tha n th e

da te of th e aud itor's reportth e end of fieldw ork. To ensure th e lett er is

ready in t ime, a dra ft letter generally sh ould be provided to an d discussed

with man a gement early in the a udit a nd updat ed for circumsta nces found

thr oughout the audit . Where ma na gement signs th e lett er after the end of

fieldwork, the letter should sta te tha t th e representa tions are as of th e date

of the a udit report. If ma na gement signs t he lett er before the end of

fieldwork, the audit or genera lly should obta in a sepa ra te lett er to updat e therepresenta tions to th e end of fieldwork. H owever, w here the time difference

is short , th e auditor may upda te the represent a tions ora lly and document th e

updat e in th e workpa pers.

.06 Al though the management represent a t ion let t er genera l ly shou ld be

a ddressed to the Comptroller G eneral (a t G AO) or the agency IG , the a udit

tea m should consider ha ving th e ent ity deliver it directly t o a member of the

tea m to avoid an y delays in receiving the lett er.

.07 Especia lly for l a rge audit ed ent i t ies , management may need to speci fy a

ma teriality t hreshold in the ma na gement represent a tion letter, below w hichitems w ould not be considered exceptions. The a udit or should be sa tisfied

tha t such a ma teria l ity threshold is so far below design mat eria l ity t ha t even

ma ny items below this level would not, in the a ggregat e, approa ch design

ma teria lity. For exa mple, a t hresh old th a t is 5 percent (or less) of design

ma teriality m a y be sufficient ly low . The mat eriality level may be different

for different representa tions a nd w ould not a pply to th ose representa tions

not directly relat ed to a mounts in th e fina ncial sta tements (such as

responsibility for th e sta tements).

REPRESENTATIONSRELATINGTOTHE FINANCIALSTATEMENTS

. 08 Pa ragraph AU 333.06 l is t s 17 management represent a t ions tha t a re

ordina rily included in a G AAS a udit if a pplica ble. These genera lly rela te to

ma na gement a cknowledging its responsibility for the fina ncia l sta tements

a nd its belief tha t t he fina ncial sta tements a re fairly presented in conformity


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w ith g enera lly a ccepted accountin g principles; completeness of fina ncial

informa tion; recognition, measurement, a nd disclosure; a nd subsequent

event s. Exa mples of a dditional represent a tions th a t ma y be a ppropriat edepending on an entity's business or indust ry a re given in a ppendix B t o AU

333. The au ditor ma y review section AU 333 for items t ha t could be a dded to

th e representa tions, man y of which w ould ha ve to be modified in t he federa l

government environment. (OMB ha s added a representa tion dealing with

intra governmenta l tra nsa ctions an d th eir reconcilia tions for CF O Act

agencies and components.)

.09 Appendix B of AU 333 gives example language for the fol lowing s itua t ions :

Genera l Unaudited interim information accompanies the financial statements.

The impa ct of a new a ccountin g principle is not known .

There is justifica tion for a cha nge in a ccounting principles.

Fina ncia l circumsta nces a re stra ined, with d isclosure of ma na gement 's

intentions a nd t he entity's ability t o cont inue as a going concern.

The possibility exists t ha t th e va lue of specific significa nt long-lived

a ssets or certa in identifiable inta ngibles ma y be impaired.

The w ork of a specialist ha s been used by th e entity.

Cash

Disclosure is required of compensat ing ba lan ces or other a rra ngementsinvolving restr ictions on ca sh ba la nces, line of credit, or simila r

arrangements.

Finan cial instruments

Mana gement intends to and ha s the a bil ity t o hold to maturity debt

securities classified as h eld t o mat urity.

Management considers the decline in value of debt or equity securities to

be tempora ry.

Man a gement ha s determined the fair va lue of significa nt fina ncia l

instruments tha t do not ha ve readily determina ble mar ket values. There ar e financial inst ruments w ith off-bala nce-sheet risk a nd fina ncia l

instrum ents w ith concentr a tions of credit risk.

Receivables

Receiva bles ha ve been recorded in th e financial st a tements.


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Inventories

E xcess or obsolete invent ories exist.

Deferred charges

Ma terial expenditures ha ve been deferred.

Debt

Sh ort-term d ebt could be refina nced on a long-term ba sis, an d

ma na gement int ends to do so.

Contingencies

Est ima tes a nd disclosures ha ve been ma de of environmenta l remediat ion

liabilities and related loss contingencies. Agreements may exist to repurchase assets previously sold.

P ension a nd postretirement benefits

An a ctua ry m easured pension lia bilit ies and costs.

There is involvement with a multiemployer plan.

P ostretirement benefits ha ve been elimina ted.

Em ployee la yoffs tha t w ould oth erwise lea d to a curta ilment of a benefit

plan a re intended to be tempora ry.

Ma na gement intends t o either cont inue to make or not ma ke frequent

a mendments to its pension or other postretirement benefit plans, w hich

may affect the amortization period of prior service cost, or managementha s expressed a substa ntive commitm ent t o increase benefit obligat ions.

Sales

There ma y be losses from sa les commitm ents.

There ma y be losses from purcha se commitm ents.

Na tu re of the product or indus tr y indica tes th e possibility of undisclosed

sa les terms.

.10 The auditor genera l ly should consider the need for a ddit iona l customizing of

th e exa mple representa tion lett er given in section 1001 A a nd for t hea dditional representa tions in para gra ph 1001.09. Ma ny of th e

represent a tions ma y ha ve to be qua lified, especially in a n initia l aud it or in

lat er audits wh ere significa nt problems remain. For insta nce, w here th e

exa mple represent a tion lett er sta tes tha t t here are no viola tions of law s or

regulations, the entit y ma y need to a dd a t t he end of the sta tement, " except

a s follows:" a nd describe the violat ions.


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.11 In addi t ion, the audi tor genera l ly should consider whether circumstances

ma y require tha t a dditional descriptive items be included in th e

representation letter, especially as support for conclusions the auditor makesin the audit . This is importa nt w here the corrobora ting informa tion tha t can

be obta ined by procedures other t ha n inq uiry is limited. For exa mple, the

letter should include descriptions of (1) th e reas ons for a udit ed-entit y-

imposed scope limita tions, such a s la ck of a va ilabilit y of certa in records,

(2) th e basis for ma teria l liability estima tes, key a sset va luat ions, or the

probability of conting encies, an d (3) significan t pla ns or inten tions for the

entity. For exam ple, if the ent ity ha s a pension plan outside of the Civil

Service Retirement Syst em or t he Federal E mployees' Retirement Syst em,

a n i tem should sta t e tha t t he ent i ty does not plan to termina te the plan an d

tha t m an agement believes the actuaria l assumptions a nd methods used tomeasure pension liabilities and costs for financial reporting purposes are

a ppropria te in th e circumsta nces.

REPRESENTATIONSRELATINGTOINTERNALCONTROLS

.12 Interna l control representa t ions when the auditor opines on interna l control

a re found in AT 400.41. These represent a tions rela te to ma na gement 's

(1) a cknow ledging its responsibility for intern a l control, (2) st a tin g th a t

ma na gement ha s a ssessed th e effectiveness of its interna l contr ol an d

specifying the control criteria used, (3) stating management's assertion about

th e effectiveness of its intern a l contr ol ba sed on t he control criteria ,(4) sta ting th a t ma na gement h a s disclosed to the a uditor all significa nt

deficiencies in th e design or opera tion of int erna l control th a t could a dversely

a ffect th e entity's a bility to meet t he int erna l contr ol objectives a nd pointing

out those tha t a re mat erial wea knesses (using the definition in the

representa tion lett er, w hich is t he definition in AU 325), (5) describing a ny

fra ud, an d (6) sta ting w hether th ere w ere a ny cha nges to interna l cont rol

subsequent to the end of the report ing period. Where the a udit or is not

opining on int erna l control, he or she should delete representa tions 2 an d 3

a bove. Depending on circumsta nces, th e a udit or should consider modifying

representa tion 4 a bove to remove the phra se "pointing out th ose tha t a rema terial w eaknesses." The auditor also should modify the introductory

para gra ph to th e representa tion letter.

.13 For i tems 2 and 3 , the auditor expects ent i t ies to use cr i ter ia es tab l ished

under FMF IA an d OMB Circula r A-123 in th eir F MFIA interna l control

a ssessment . St a nda rds in G AO's green pa mphlet Standard s for I ntern al


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Cont r ol i n t he Feder al Gover nm entw ere established as sta nda rds for federa l

entit ies to follow , an d th ey w ere incorpora ted by OMB int o Circular A-123.

The N ovember 1999 upda te t o th ese st a nd a rd s (G AO/AIM D -00-21.3.1) iseffective for fisca l yea r 2000 FMFI A reports a nd incorporat es concepts from

the private sector guidance I ntern al Contr olI ntegrated Fr ameworkby the

Committee of Sponsoring Orga niza tions (COSO) of t he Treadw a y

Commission. En tit ies should summa rize in the representa tion letter an y

ma terial w eaknesses relat ing to financial reporting (including sa fegua rding),

complian ce (including budget), an d performa nce mea sures controls. E xam ple

w ording for the representa tions is given in section 1001 A for the case w here

ma na gement a sserts t ha t i ts internal control as of the dat e of the f inancia l

sta tements provided reasonable assura nce tha t misst a tements, losses, or

noncomplia nce ma terial in r ela tion to the finan cia l sta tements or requiredsupplementa ry st ewa rdship informa tion w ould be prevented or detected on a

timely basis. If there a re ma teria l w eaknesses, ma na gement should include

a brief description of th em in its representa tion lett er a nd modify its

a ssertion a ccordingly.

.14 For ent i t ies tha t have not formal ly assessed the ef fect iveness of the ir

interna l cont rol, AT 400 provides tha t t he a uditor ma y a ssist ma na gement in

its a ssessment by gat hering or preparing informa tion t ha t m an agement ca n

use in eva luat ing th e effectiveness of its interna l cont rol. The aud itor may

a lso use the informa tion in forming a n opinion on interna l cont rol. Thus, th e

exa mple representa tions a re a ppropria te for inclusion in the m a na gementrepresenta t ion let ter i f man agement a nd t he a uditor a gree on t he

conclusions r egar ding t he effectiveness of intern a l control.

REPRESENTATIONS RELATING TO FINANCIAL MANAGEMENT

SYSTEMS' SUBSTANTIAL COMPLIANCE WITH FFMIA

REQUIREMENTS

. 15 FFMIA requ ires the audi tor who per forms a CFO Act a udi t t o repor t whe ther

the entity's finan cial ma na gement syst ems comply substa nt ially wit h (1)

federal finan cia l ma na gement systems r equirement s, (2) a pplica ble federa la ccounting st a nda rds (now recognized a s generally a ccepted a ccounting

principles), an d (3) th e SG L a t t he tra nsa ction level. In order to report in

a ccordance with FFMI A, the a uditor should obta in representa tions from

ma na gement a s to the entity 's systems' compliance w ith t hese requirements.


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.16 The auditor shou ld ob t a in represent a t ions tha t mana gement t akes

responsibility for complying substa ntia lly wit h t he FFMI A requirement s,

sta ting th a t it ha s assessed the systems' complia nce, sta ting th e criteriaused, and asserting the systems' substantial compliance (or lack thereof).

The criteria should be th e requirement s in OMB Circula r A-127, Financial

M anagement Systems(wh ich incorporat es the SG L, the J FMIP Federal

Fi nan cia l M anagement Systems Requi r ement sdocuments, a nd other OMB

circular s). These requirement s ar e furt her described, including indicat ors of

substa nt ial complia nce, in OMB 's FF MIA implementa tion guidan ce for C FOs

a nd IG s, referenced in OMB 's a udit guida nce.

REPRESENTATIONSRELATINGTOCOMPLIANCEWITHLAWS

ANDREGULATIONS

.17 AU 801.07 sugges t s tha t a represent a t ion rela t ing to compl iance w i th law s

a nd regulat ions sta te tha t ma na gement ha s ident if ied a nd disclosed to the

a uditor a l l law s an d regulat ions that ha ve a direct a nd ma teria l effect on the

financial sta tements.

.18 In addi t ion, AT 500 (SSAE 3) dea ls wi th compliance a t t es ta t ion. The audi tor

is not required to follow this st a nda rd beca use it does not a pply to aud its

reporting on compliance a s part of a n a udit of fina ncia l sta tements or on

a udits reporting in a ccordance with Government Audi t in g Standard s.

However, in situa tions in which the a uditor believes additiona lrepresenta tions regar ding complia nce may be needed, exa mples a re given in

AT 500.70.

EFFECTOFCHANGEINMANAGEMENTONREPRESENTATION

LETTER

.19 Somet imes mana gement is relucta nt to s ign representa t ions for per iods

w hen it did not ma na ge th e entity. The auditor should explain t o

ma na gement tha t by issuing the f ina ncial sta tements, i t is making the

a ssert ions implicit in the financia l sta tements. Mana gement may w ish toundersta nd th e tra nsa ctions and contr ols supporting th e finan cia l

sta tements, a nd t he audit or should help it do so. Where a chan ge in

ma na gement is expected, the auditor may advise the new ma na gement to

obta in representa tions from t he old ma na gement a bout t he period prior t o

th e cha nge.


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1001 A - EXAMPLE MANAGEMENT

REPRESENTATION LETTER

December 2000 G AO/P CI E Fina ncial Audit Manua l - P a rt II P a ge 1001 A-1

[Ent ity Let terhead]

[Da te of aud itor's report a nd completion of fieldw ork]

The Honora ble [na me of Ins pector G enera l or Comptr oller G enera l]

[In spector or Comptroller] G enera l [of th e Un ited S ta tes]

[Na me of a gency] [or U .S. G enera l Accountin g Office]

Wa shingt on, D.C.

Dea r [na me]:

This lett er is in connection w ith y our au dits of th e [entit y's] ba la nce sheet a s

of September 30, 20X1 and 20X2, [or da tes of a udit ed fina ncial st a tement s]

a nd t he related st a tements of net costs, cha nges in net position, budgetar y

resources, fina ncing, an d custodia l activit y [if applica ble], for t he yea rs t hen

ended for th e purposes of (1) expressing a n opinion a s t o whet her t he

finan cia l sta tements a re present ed fa irly, in a ll ma teria l respects, in

conformit y w ith genera lly a ccepted a ccountin g principles, (2) expressing a nopinion [or reporting] on [entity's] internal control as of September 30, 20X2

[or da te of latest a udited fina ncia l sta tements], (3) reporting w hether t he

[entity's] finan cial ma na gement sy stems substa nt ially comply with federal

finan cia l ma na gement systems requirements, a pplica ble federal a ccounting

standards (generally accepted accounting principles), and the U.S.

Gover nm ent Stan dar d Gener al L edgera t t he tra nsact ion level as of

September 30, 20X2, a nd (4) test ing for complia nce wit h a pplicable law s a nd

regulations.

Certa in representa tions in this letter a re described a s being limited to

ma tters tha t a re materia l . For purposes of this let ter , ma tters are

considered ma teria l if th ey involve $X or more. It ems also ar e considered

ma teria l, regardless of size, if th ey involve an omission or misst a tement of

a ccount ing informa tion tha t, in t he light of surrounding circumst a nces,


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1001 A - Example Management Representation Letter

December 2000 G AO/P CI E Fina ncia l Audit Manu a l - P a rt II P a ge 1001 A-2

ma kes it proba ble th a t t he judgment of a r easonable person relying on the

informa tion w ould be cha nged or influenced by t he omission or

misstatement .

We confirm, t o the best of our kn owledge a nd belief, the follow ing

representa tions ma de to you during t he au dits (these representa tions ar e as

of [da te of completion of fieldwork], perta in t o both yea rs' fina ncial

sta tements, a nd upda te th e representa tions we provided in t he prior yea r):

1. We are responsible for th e fa ir presentat ion of the financial sta t ements

a nd st ewa rdship informa tion in conformity w ith generally a ccepted

a ccounting principles.

2. The financial sta tements a re fa ir ly presented in conformity with

genera lly a ccepted a ccounting principles.

3. We have made ava il able t o you a l l

a . f inancia l r ecords and rela t ed da t a ,

b. w here a pplica ble, minutes of meetings of the Board of Directors [or

other sim ilar bodies, such a s congr essiona l oversigh t committ ees] or

summa ries of a ctions of recent m eetings for w hich minutes ha ve not

been prepared, a nd

c. communicat ions from the Office of Man a gement and B udget (OMB)

concerning n oncomplia nce wit h or deficiencies in fina ncial r eport ing

practices.

4. There are no mat eria l t ra nsact ions tha t h ave not been properly recorded

in th e accounting records underlying the fina ncia l sta tements or

disclosed in the notes to the financial sta tements.

5. We believe tha t the effects of the uncorrected f inancial st a t ementmissta tements summa rized in th e accompa nying schedule a re

immat eria l , both individually and in the a ggregat e , to the f inancia l

sta tements t a ken as a w hole. [An example a ccompan ying schedule is

included in section 595 C.] [If ma na gement believes tha t cert a in of the

identified items a re not misst a tements, ma na gement s belief ma y be

a cknow ledged by ad ding t o th e represent a tion, for exam ple, "We believe


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tha t items XX a nd XX do not constit ute missta tements beca use

[description of rea son]."] [This represent a tion is requir ed for a udit s of

financial statements for periods beginning on or after December 15,1999.]

6. The [ent i ty] ha s sat isfactory t i t le to a l l own ed assets, including

stewa rdship property , pla nt, a nd equipment; such a ssets ha ve no liens or

encumbra nces; a nd no assets ha ve been pledged.

7. We have no plans or intent ions tha t ma y ma ter ia l ly a f fect the carry ing

va lue or classifica tion of assets a nd liabilit ies.

8. G uara ntees under wh ich the [ent i ty] is cont ingently liable ha ve beenproperly reported or disclosed.

9. Relat ed party t ran sact ions and related accounts receivable or paya ble,

including a ssessment s, loa ns, a nd gua ra nt ees, ha ve been properly

recorded a nd disclosed.

10. All intraent i ty t ra nsa ct ions a nd ba lances ha ve been appropriat ely

identified and eliminated for financial reporting purposes, unless

oth erwise noted. All intra governmenta l tra nsa ctions a nd balan ces ha ve

been a ppropria tely r ecorded, reported, a nd d isclosed. We ha ve reconciled

intra governmenta l t ra nsact ions a nd ba lances w ith t he appropria tetra ding part ners for th e four fiduciary tra nsa ctions identified in

Treasurys I ntr a-governmental Fi du ciar y Tr ansacti ons Accoun ti ng Gui de,

an d other intra governmenta l a sset , l iabili ty , a nd revenue amounts a s

required by OMB B ulletin 97-01, a s a mended.

11. There are no

a. possible violat ions of law s or regulat ions w hose effects should be

considered for disclosure in t he finan cia l sta tements or a s a basis for

recordin g a loss cont ingency,

b . ma teria l liabili t ies or gain or loss cont ingencies tha t a re required to

be accrued or disclosed t ha t ha ve not been a ccrued or disclosed, or

c. unasser ted cla ims or a ssessments tha t a re probable of assert ion a nd

must be disclosed th a t h a ve not been disclosed.


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Reporting



12. We have complied w ith a ll aspects of cont ra ctual a greements t ha t w ould

ha ve a ma terial effect on th e fina ncial sta tements in th e event of

noncompliance.

13. No ma terial events or tra nsa ctions ha ve occurred subsequent t o

September 30, 20X2 [or da te of lat est a udited fina ncial sta tements], th a t

ha ve not been properly recorded in t he finan cia l sta tements a nd

stewa rdship informa tion or disclosed in t he notes.

14. There ha s been no ma terial fra ud (intentional missta tements or

omissions of am ounts or disclosures in fina ncia l sta tements a nd

misa ppropriat ion of a ssets tha t could ha ve a ma terial effect on the

finan cial sta tements or stewa rdship informa tion) or a ny fra ud involvingma na gement or employees w ho ha ve significa nt roles in interna l contr ol.

[If t here were a ny incidents of fraud meeting the foregoing criteria, th ey

should be described.]

15. We are responsible for esta blishing a nd ma inta ining interna l cont rol.

16. P ursuant to the Federa l Mana gers Financial Integrity Act , we have

a ssessed th e effectiveness of [entit y's] int erna l control in a chieving t he

following objectives:

a . rel iab i li ty of financia l repor t ing

transactions are properly recorded,processed, a nd sum ma rized to permit t he prepara tion of finan cial

statements and stewardship information in accordance with generally

a ccepted a ccounting principles, an d a ssets a re safeguar ded aga inst

loss from una uth orized a cquisition, use or disposition;

b . compliance wi th a ppl icab le laws a nd regula t ionst ra nsa ct ions are

executed in a ccorda nce with (i) la w s govern ing t he use of budget

a uthority a nd w ith other law s an d regulat ions that could have a

direct a nd ma terial effect on the fina ncia l sta tements a nd (ii) a ny

other la w s, regulat ions, a nd governmentw ide policies identified byOMB in i ts a udit guidance; an d

c. reliabili ty of performa nce report ingt ransa ct ions and other da ta tha t

support report ed performa nce measur es a re properly recorded,

processed, a nd summa rized to permit the prepara tion of performa nce

information in accordance with criteria stated by management.


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Reporting



17. Those controls in pla ce on September 30, 20X2 [or da te of lat est a udit ed

finan cia l sta tements], provided rea sona ble a ssura nce th a t t he foregoing

objectives a re met .

[If t here ar e ma terial w eaknesses, the foregoing representa tion

should be modified t o read:

Those contr ols in pla ce on S eptember 30, 20X2, provided

reasonable assurance that the foregoing objectives are met except

for the effects of th e ma teria l wea knesses discussed below or in

the a t t a chment .

or: In tern a l cont rols a re not effective.

or: In tern a l controls do not meet t he foregoing objectives.]

18. We ha ve disclosed t o you a ll significa nt deficiencies in th e design or

opera tion of interna l cont rol tha t could a dversely a ffect th e entity's

a bility to meet th e interna l cont rol objectives a nd ident ified t hose we

believe to be ma teria l wea knesses. [This item is not required if th e

a uditor is not opining on int erna l cont rol.]

19. There ha ve been no cha nges to interna l contr ol subsequent to

September 30, 20X2 [or dat e of lat est a udit ed fina ncial st a tement s], orother factors tha t might significa ntly a ffect it . [If there were changes,

describe them, including a ny corrective actions ta ken w ith r egard to a ny

significan t deficiencies or ma teria l wea knesses.] [This item is not

required if the a uditor is not opining on interna l contr ol.]

20. We are responsible for implementing a nd ma inta ining finan cial

ma na gement systems tha t comply substan t ia l ly w ith federa l f ina ncial

management systems requirements, federal accounting standards

(genera lly a ccepted a ccounting principles), a nd t he U .S. Gover nm ent

Standar d Gener al L edgera t t he tra nsact ion level .

21. We ha ve a ssessed the financial ma na gement syst ems to determine

whether they comply substantially with these federal financial

ma na gement systems requirements. Our assessment wa s based on

guidan ce issued by OMB .


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Reporting



22. The fina ncia l mana gement syst ems complied substa ntia lly w ith federa l

finan cial ma na gement syst ems requirements, federal a ccount ing

standa rds , and t he U .S. Gover nm ent St and ar d Gener al L edger a t t h etra nsa ction level as of [da te of the lat est finan cial sta tements].

[If the finan cial ma na gement syst ems substa ntia lly comply with only

one or tw o of th e above element s, th is represent a tion should be

modified as follow s:

As of [da te of fina ncial st a tement s], the [entit ys] fina ncial

ma na gement systems comply substa ntia lly wit h [specify wh ich of

the three elements for which there is substantial compliance (e.g.,

federal accounting sta nda rds and t he SG L a t the tra nsact ionlevel)], but did not comply subst a nt ia lly w ith [specify w hich of th e

element s for w hich t here wa s a lack of substa nt ial compliance

(e.g. , federal fina ncia l ma na gement systems requirements)], a s

described below (or in an attachment).]

[If th e fina ncia l man a gement sy stems do not comply substan tia lly

w ith a ny of thee three elements, t he follow ing para gra ph should be

used instead:

As of [da te of fina ncial st a tement s], the [entit y's] fina ncial

ma na gement systems do not comply substa nt ia l ly w ith t hefederal financial management systems requirements.]

[If t here is a la ck of subst a nt ia l compllia nce w ith one or more of th e

th ree requirements, identify herein or in a n a tt a chment all the facts

perta ining to th e noncomplia nce, including the na ture a nd extent of

th e noncomplia nce a nd t he primary reason or ca use of th e

noncompliance.]

23. We ar e responsible for [entit y's] complia nce w ith a pplicable law s a nd

regulations.

24. We have identified a nd disclosed to you a ll la w s a nd regulat ions th a t

ha ve a direct a nd ma terial effect on the determina tion of financial

sta tement am ounts.


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Reporting



25. We ha ve disclosed to you all known insta nces of noncompliance with law s

an d regulat ions.

[Na me of Hea d of Entit y]

[Title]

[Na me of Chief Fina ncial Officer]

[Title]


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1002 - RESERVED



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Reporting

1003 - FINANCIAL STATEMENT AUDIT

COMPLETION CHECKLIST

D ecember 2000 G AO/P C IE Fina ncia l Audit Ma nua l - P a rt II P a ge 1003-1

Ent i ty :

J ob C ode: ___________________________________________________________________

Principal Report:

Oth er Report s (including ma na gement letters):

INSTRUCTIONS

.01 This checklist i s a tool to help audi tors of financia l sta tements comply wi th

genera l ly a ccepted government a udit ing standa rds a nd w ith OMB audit guidance.

This checklist should be completed before th e report is issu ed a nd should be

prepared by the audit ma na ger and reviewed by the a ssista nt director and a udit

director. If th e audit is conducted at multiple sites, the site supervisor may

complete pa rt s of the checklist for each site (wit h t he a udit ma na ger completing a n

overall checklist). While pa rt s of the checklist a re useful in au dit pla nnin g, no

specific signat ures a re required on th e checklist in th e pla nning pha se.

.02 The deta i led quest ions in this checklist a re to be answered "N/A" (not a ppl icable),

" Yes," or " No." Check N/A wh en the item does not exist or wh en the item exists butis judged to be not ma teria l. It is not necessa ry t o create a dditional documenta tion

to support th e Yes a nsw ers, but a column is provided t o give a w orkpa per reference

(" W/P " ). All No a nsw ers should be discussed at t he end of th is checklist. B eca use

th e checklist is designed for th e wide ra nge of finan cia l sta tement a udits, th ere will

be ma ny " not applicable" an swers. If the reason why a q uestion is not applicable is

not obvious, the a uditor should document th e reason on th e checklist or in a n

a tt a chment. The questions a re summa rized; for most questions, there is a

reference to professional litera tur e tha t provides more deta il .

.03 Sect ion V has quest ions on GAOs report considerat ions ; sect ion VI ha s quest ions

on G AOs qu a lity contr ol. G AO a udit ors should complete th ese sections. IGa uditors a nd other a uditors ma y use these sections or may substi tute forms t ha t

consider their report ing style a nd q ua lity contr ols.

.04 As noted in FAM 650, auditors whose work GAO and the IGs use may complete th is

checklist an d the " Checklist for Report s Pr epared under the CFO Act." Where th is


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Reporting

1003 - Financial Statement Audit Completion Checklist


ha s been done, GAO or I G a uditors should review t he checklists prepared by t he

other auditors.

.05 The FAM includes a separat e "Checklist for Reports Prepared under the CFO Act "

(section 1004) that covers accounting, financial reporting, and disclosure issues and

should be completed for all entities reporting under generally accepted accounting

principles promulga ted by F ASAB. When th e report covers finan cia l sta tements

prepa red using genera lly accepted a ccounting principles promulgated by FASB , th e

a uditor should prepar e th e a ppropriat e AIC P A disclosure checklist.

.06 GAO auditors should prepare the "G AO workpaper set " t ha t provides guidance on

workpa pers. IG a nd oth er a uditors may develop simila r tools.

.07 For G AOs f inanci a l audi t s, a second par tner rev iew should be per formed and the

Chief Accounta nt should read t he report . These reviews by t he second part ner

a nd/or Chief Account a nt a re document ed on th e la st tw o pages of th is checklist. IG

a uditors a nd other a uditors should consider th e need for simila r r eviews.


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Reporting


December 2000 GAO/PCIE F inanci a l Audit Manua l - Pa r t I I Pa ge 1003-3

CONTENTS

Section

I . P lanning and Concluding the Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

II . Key Audit Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

II I. Consulta tion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

IV. Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

V. G AOs Report Considerat ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

VI. G AOs Quality Cont rol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

VII. Explan a tion of " No" Answ ers and Oth er Comments . . . . . . . . . . . . . . . . . . . 31

VIII . Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

IX. Second P a rt ners concurrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

X. Chief Account a nts concurrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

References:

AIC P A P rofessiona l St a nda rds (vol. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AU

G AO/P CI E F ina ncial Audit Ma nua l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FAM

G overnment Auditing St a nda rds, as a mended . . . . . . . . . . . . . . . . . . . . . . . G AG AS


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D ecem ber 2000 G AO/P C IE Fina ncia l Audit Ma nua l - P a rt II P a ge 1003-4

S ect ion I : P la nning a nd C oncluding the Audit N/A Yes No W/P

1. D o t he w or kpa p er s docu m en t t h a t t h e a u di t

team ha s establ ished an understanding with

the client a s to t he objectives of the w ork,

management's responsibilities, auditors

responsibilities, and limit a tions of th e work?

(FAM 280) ___ ___ ___ ___

2. Were ent ra nce conferences held? ___ ___ ___ ___

3. Does the ent i t y prof ile (or equ iva len t )

document a n understa nding of the entitysufficient t o pla n the a udit ? (FAM 290.03) ___ ___ ___ ___

4. D o t h e w or kpa p er s con t a in a n a d eq u a t e

general risk analysis or the equivalent? (FAM

290.04)

___ ___ ___ ___

5. D id t h e a u d it t ea m a d eq u a t el y per for m a n d

document t he follow ing plannin g steps? (FAM

290.04)

a . P er for m pr elim in a ry a na ly tica l

procedures (FAM 225)

b. D et er m in e pla n n in g, des ig n, a n d t es t

ma teria lity (FAM 230)

c. I den t ify s ig nifica n t la w s a n d r eg ula t ion s

(FAM 245)

d . I d en t if y r elev a n t b ud get r es t ri ct ion s

(FAM 250)

e. U n der st a n d t h e bu dg et for mu la t ion

process (FAM 260.51)

(contin ued on next page)

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Sect ion I : P la nning a nd Concluding t he Audit N/A Yes No W/P


5. (continued)

f. As ses s in her en t r isk a n d t h e ov er a ll

effectiveness of th e contr ol environment ,

risk assessment, communicat ion, a nd

monitoring, including w hether

w eaknesses in the cont rol environment,

risk assessment, communicat ion, a nd

monitoring preclude t he effectiveness of

specific control activities (FAM 260)

g . Assess the r isk of f raud (FAM 260)

h . D es ig n t he a ud it t o a ch ieve a n a c cept a b le

level of audit assura nce tha t t he

financial sta tements are not mat erial ly

misst a ted (GAO uses 95 percent ) (FAM

260.04)

i. C on sid er t he ef fect s of in form a t ion

technology, in cluding service cent ers

(FAM 220, 260.17, 260.41-42, a nd 270)

j. Assess the FMFIA process (FAM 260.43)

k . Cons ider opera t ions cont rol s to be tes ted

(FAM 275)

l. U n der st a nd per for ma n ce mea s ur es

cont rols (FAM 275)

m. P lan o ther procedures (representa t ion

letters, rela ted party tra nsactions,

sensit ive pay ment s) (FAM 280)

n . Cons ider loca t ions to be v is ited (FAM

285)

(cont inued on next pa ge)

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5. (continued)

o. P l a n pr oced ur es t o t es t com pl ia n ce w i t h

the requirement s of FFMIA (FAM

350.20)

p. C on sid er st a f fin g r eq uir em en t s

q. Consider timing of procedures a nd

milest ones (FAM 295 D)

r. Consider assista nce from entitypersonnel

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6. D oes t h e g en er a l r isk a n a l y sis or t h e

equiva lent reflect a ppropriat e considerat ion of

findings a nd recommend a tions from previous

audits tha t could affect t he current a udit

object ives? (G AG AS , pa r . 4.10) ___ ___ ___ ___

7. Did the aud it t eam ident i fy budget con t rols for

each relevant budget restriction and performsufficient w ork to support t he conclusions on

int erna l cont rol? (FAM 250, 310.05, 330.09) ___ ___ ___ ___

8. Did the aud it t eam ident i fy compl iance

cont rols and perform su fficient w ork to

support th e conclusions on int erna l cont rol?

(FAM 245, 310.05, 330.09) ___ ___ ___ ___

9. I f t he a u di t t ea m u sed t h e w or k of ot h er s

(CP A firms, IG s, internal a uditors, orspecia lists), did the a udit t eam meet the

requirement s of FAM 650? ___ ___ ___ ___


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S ect ion I : P la nning a nd Concluding t he Audit N/A Yes No W/P


10. Did the audit team perform overa l l ana ly t ica l

procedures, including document a tion of th e

following?

a . E xpect a tions

b. D at a/sources

c. P a ra met ers

d . E x pl a n a t ion s/cor r ob or a t ion

e. C on clus ion s (FAM 590.04)

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11. Do the workpapers indica t e tha t the audit

tea m properly performed th e follow ing

procedures in th e report ing pha se of the

a udi t ? (FAM 590.01)

a . E v a lu a t e m is st a t em en t s (F AM 540)

b. B r in g a l l m is st a t em en t s t o t h e a t t en t ion

of entity ma na gement (FAM 540.07)

c O bt a in a t t or ney s' r epr es en t a t ion s (F AM

550.02)

d . Rev iew subsequen t even t s (FAM 550.04

a nd 1005)

e. O bt a in m a n a gem en t r epr es en t a t ion s

(FAM 550.08 an d 1001)

f. I den tify a nd test r ela t ed pa r tytr a nsa ctions (FAM 550.12 a nd 1006)

g . R ev iew t h e con sis t en cy of ot h er

informa tion a ccompanying the fina ncia l

st a tem ent s (FAM 580.76)

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12. Does the aud i t summary memorandum or

equivalent properly summarize or refer to

w orkpapers addressing th e following? (FAM

590.02-.03)

a . C h a ng es fr om or ig in a l r is k a s ses sm en t s

b . Ad di t ion a l fr a u d r isk f a ct or s or ot h er

conditions identified during th e audit

calling for a n a ddit iona l response and

the a ddit iona l response

c. The bas is for conclus ions on s ign if ican t

audit ing, accounting, and report ing

issues

d . Conclus ions on adequacy of p rocedures

e. U na djust ed m isst a tem en ts

f. C on clu sion s on fin a n cia l st a t em en t s

g . C on clus ion s on in t er n a l con t r ol

h . C on clus ion s on com pl ia n ce w i t h la w s a n d

regulat ions and t he requirements of

FFMIA

i . C on clus ion s on t h e con si st en cy of

accompan ying informa tion with the

principal sta tements

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13. Do the workpapers document tha t the

following occurred?

a . D ev ia t i on s f rom t h e " sh ou ld " pr oced ur es

in the FAM a nd the basis t herefor were

a pproved by the a ssistan t director wit h

copies of the documenta tion sent t o the

audit director a nd the reviewer

b . D ev ia t i on s f rom t h e " m u st " pr oced ur es in

th e FAM were a pproved by the reviewer

(FAM 100.27)

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D ecem ber 2000 G AO/P C IE Fin an cia l Audit Ma nua l - P a r t I I P a ge 1003-10

S ect ion I I : Key Audit Area s N/A Yes No W/P

Answ er these questions for each key audit ar ea or

cycle. Ind ica te the key a udit ar eas a nd cycles

these questions apply to:

1. D id th e a ud it t e a m pr epa r e t h e f ol low in g

documentation summarizing considerations in

pla nning a nd performing t he w ork in the keyaudit a reas a nd cycles?

a . C y cle M a t rix or a n eq uiv a len t (or

document a tion in Account Risk Analysis

or an equivalent) showing links between

a ccounts, cycles, a pplica tions a nd line

items (FAM 290.05)

b . Accou n t Risk An a ly si s or a n e qu iv a len t

(FAM 290.06)

c. C y cle M em or a n d um a n d /or f low ch a r t or

equivalents (FAM 390.04-.05)

d . S pecific C on t rol E va lu a t ion or a n

equiva lent (FAM 390.06)

e. Wr it t en a u d it pr og r a m (AU 311.05)

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2. I f condit ions changed during the course of the

audit , w a s the audit progra m modified as

a ppropriat e in the circumsta nces? (AU311.05) ___ ___ ___ ___


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S ect ion I I : K ey Audit Area s N/A Yes No W/P


3. When the audi t t eam per formed sampl ing , d id

it properly determine and document the

following?

a . Th e m et h od u sed in r ela t ion t o t es t

objectives

b. S a m ple s ize a n d t he m et hod of

determining it

c. Test s perfor med

d . R es ult s (m is st a t em en t s a nd d ev ia t ion s

found)

e. Eva lua t ion (includ ing project ion to the

population)

f. C on clu sion (F AM 490.06)

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4. When the aud i t t eam performed subs t an t ive

a na lytical procedures, did it properly

document th e follow ing?

a . E xpect a t ion s a n d t h e m et h od u sed t o

develop them

b. D a t a s ou rces /r elia b ilit y

c. L im it /crit er ia

d . C l ien t expl a na t i on s a n d cor r ob or a t in g

evidence

e. Ad dit ion a l s teps needed

f. C on clu sion s (F AM 490.06)

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5. When the aud it t eam per formed in ter im

test ing, did it do the following?

a . Tes t t h e r ollfor w a r d per iod

b. P r oper ly docum en t:

1. Th e ba s is for u sing in t er im t e st ing

2. Th e pr oced ur es p er for m ed

3. Th e ef fect s of a n y miss t a t em en t sfound (FAM 495C .06)

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6. D id th e a u dit t ea m ev a lu a t e t h e

rea sonableness of significa nt a ccounting

est ima t es ma de by ma na gement ? (AU 342) ___ ___ ___ ___

7. Wer e kn ow n a n d lik ely m is st a t e men t s

identif ied in t he test ing of the key ar ea carr ied

forw ar d to the summ ar y of possible

a djustment s? (FAM 540.04) ___ ___ ___ ___

8. D id a n inf or m a t ion sy st em s a u d it or r e view

the specific cont rol eva lua tion to evalua te th e

a udit t eam 's decision on which contr ols a re

computer-relat ed (including cont rols rela ting

t o ser vice-cent er-produced record s)? (FAM

350.09) ___ ___ ___ ___


47/84

Reporting




9. Ba sed on the inherent and con t rol ri sk , d id

the audit team perform a dequat e substa ntive

test s of the follow ing? (If not a key a rea ,

check the N/A box.)

Fund Balance with Treasury (FBWT)

Consider th ese issues:

Did the a udit team test the a gency's

yea r-end reconciliat ion of Fund B a lan ces

w ith Trea sury t o Trea sury a ccountledgers an d tria l bala nce reports

(Fina ncial Mana gement Service (FMS)

For ms 6653, 6655)?

Did the audit t eam determine whether

th e audit ee did the following?

1. Researched and resolved d if ferences

before making a djustments

2. R ecor ded a n y n eces sa r yadjustments in the a gency's FB WT

accounts

3. R epor t ed t he a d ju st m en t s t o

Treasury

4. D i sclosed in t h e n ot es t o t h e

f inancia l s ta t ements m at er ia l

unreconciled differences a nd budget

clear ing a ccount differences at yea r-

end, and material unreconciled

differences wr itt en off by the a gency

during the year?

(continu ed on next page)

___ ___ ___ ___


48/84

Reporting




Fund B ala nce with Treasury (continued)

Did the audit t eam a ssess (a t a bsolute

va lue) th e ma teria lity of unreconciled

differences, such as those report ed on the

Statement of Differences (FMS form

6652) and those included in budget

clear ing a ccounts (such a s budget

accounts F3875, F3878, F3879)?

(GAO/AIMD -97-104R)

Receivables


Where pra ctica l, w ere a ccounts

receivable confirmed a nd a ppropriat e

follow-up steps taken, including second

request s a nd altern a te procedures? (AU

330.30-.31)

If substa ntive test w ere performed prior

to yea r-end, wa s there an a dequat e

review of tra nsa ct ions from t he interim

da te to th e ba lan ce sheet dat e? (AU

313.08-.09)

If a significan t number a nd am ount of

a ccounts receivable w ere not confirmed,

were other appropriate a udit ing

procedur es perform ed? (AU 330.31-.32)

___ ___ ___ ___


49/84

Reporting




Inventories


Were physica l inventories observed a t a ll

locat ions wh ere ma terial a mounts were

locat ed? (AU 331)

If perpetual inventory records are

ma inta ined, do the workpapers indicat e

th a t differences disclosed by th e physica l

invent ory (or cycle count s) are properlyreflected in t he financial sta tements?

(AU 331)

When the physical inventory is ta ken at

a da te other tha n the ba lance sheet da te

(or w here rota ting procedures a re used),

did the a uditor consider inventory

tra nsa ct ions betw een th e inventory

da te(s) a nd the bala nce sheet dat e? (AU

313.08-09)

Do the workpapers contain evidence that

count s w ere correctly m a de an d recorded

(w a s cont rol over inventory t a gs or count

sheets m aint a ined) an d test count

qua ntit ies w ere reconciled w ith t he

count s reflected in t he fina l inventory?

(AU 331.09)

(continu ed on next page)

___ ___ ___ ___


50/84

Reporting




Invent ories (contin ued)

Were there adequa te tests of the

following?

a . C ler ica l a ccu r a cy of t he in ven t or y

b. C os t in g met h od s a nd s ubs t a nt ia t ion

of costs used in pricing a ll element s

of the inventory

c. C ut off

Were an a lytical procedures used t o test

the overall va lua tion of inventories?

Investments


Wa s a summ a ry schedule prepa red (or

obta ined) an d deta ils tested w ith r espect

to the description, purcha se price an d

da te, changes dur ing th e period, income,

market value, etc. of investments?

Were securities either exam ined or

confirm ed? (AU 332.04)

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51/84

Reporting




P roperty , P lant , a nd Eq uipment


Wa s a summ a ry schedule prepa red (or

obtain ed) to show beginning ba lan ces,

changes during the period and ending

ba lan ces for the following?

a . P r oper t y, pla n t , a n d eq uipm en t

b . Accu m ula t ed depr ecia t i on

Do the tests a ppear a dequate and w ere

proper conclusions dr a w n?

____ ___ ___ ___

Liabilities


Did the audit team perform a n a dequate

sear ch for un recorded lia bilities?

Did the audit team consider expenses

tha t m ight require a ccrual (e.g.,

pensions, compensa ted a bsences, other

postr etirement benefits, or

postemployment benefits provided to

former or ina ctive employees prior to

ret irement), a nd w hether a ccrued

expenses w ere reasonably sta ted?

___ ___ ___ ___


52/84

Reporting




Revenue and Expenses


Did the a udit tea m compare revenue a nd

expenses for t he period to expecta tions,

based on the budget an d the results of

th e preceding period? (AU 329)

Were significant variances and

fluctua tions from expecta tions

expla ined ? (AU 329)

Did the a udit team consider the

following?

a . The ent i t y 's revenue recogn it ion

policy

b. U nusua l t ra nsa ct ion s

Do tests a ppear a dequat e and w ere

proper conclusions d ra w n?

___ ___ ___ ___


53/84

Reporting



S ect ion I I I : C onsult a t ion N/A Yes No W/P

1. Where wa rran ted by the complexit y or

unusua l nat ure of a n issue (for exam ple, issues

w here the FAM requires consulta tion, issues

not discussed in FAM or professional

sta nda rds, going concern, economic

dependency, issues arising a fter report

issuance), was there appropriate consultation

w ith specia lists, including the following?

The reviewer (FAM Appendix A)

The st a tis ticia n (FAM Appendix A)

The Office of Gener a l Coun sel (FAM

Append ix A)

The technical a ccount ing expert ? (FAM

100.25)

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2. Were significant consulta t ions appropria t ely

documented? (FAM 100.24) ___ ___ ___ ___

3. Were the persons consul ted made awa re of a l l

releva nt fa ct s a nd circumst a nces? ___ ___ ___ ___


54/84

Reporting



S ect ion IV: Report N/A Yes No W/P

1. Does the audi tor 's repor t include the

following?

a . Int roduct ion

b . S ign if ica n t ma t t e rs (i f a p pl ica b le)

c. C onclusions on:

i. F ina ncia l st a t ement s

ii. I nt er na l con tr ol

ii i. C om pl ia n ce w i t h l a w s a n d


the Federa l Financial Mana gement

Im provement Act of 1996 (FF MIA)

iv. Cons is tency of other in forma t ion

with f inancia l s ta t ements

d . Object ives , scope, and methodology ,

including description of all inst a nceswh ere G AG AS a nd OMB a udit guidan ce

w ere not follow ed

e. Agency comments (FAM 580.04, 580.81)

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55/84

Reporting


S ect ion IV: Repor t N/A Yes No W/P


2. Is the aud i tor 's repor t appropria te a s t o the

following?

a . Wording

b. S cope of w ork

c. Genera l ly accep ted accoun t ing principles

d. E xpla na tor y pa ra gra phs

e. O pin ion on fin a n cia l s t a t em en t s

f. C on clu sion s on in t er na l con t rol

g . R epor t in g on com plia n ce w it h la w s a n d


FF MI A (FAM 580)

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3. Is background ma ter ia l (purpose, au thor i t y ,

a nd funct ions of progra ms/a ctivit ies) limit ed

to w ha t is necessa ry? ___ ___ ___ ___

4. Is the aud i tor 's repor t da ted in con formity

w ith professiona l sta nda rds? (AU 530) (FAM

1601) ___ ___ ___ ___

5. Does the auditor 's report cover a l l periods for

wh ich financial sta tements a re presented?

(AU 508.65) ___ ___ ___ ___

6. I f the f inancia l s t a t ements of a pr ior periodar e presented and ha ve been audited by a

predecessor au ditor w hose report is not

presented, does th e aud itor's report refer to

t he pr edecessor a udit or 's report ? (AU 508.74) ___ ___ ___ ___


56/84

Reporting




7. Does the audi tor 's repor t descr ibe the

responsibility the auditor is taking for

supplementary information, including

stew a rdship informa tion? (AU 551; FAM

580.79) ___ ___ ___ ___

8. a . Wh en illeg a l a ct s in volve fu nds received

from other governmental entities, did the

audit team sa t is fy i t sel f tha t the audited

entity notified the proper officials of

those entit ies w ithin a reasonable t ime?

b . I f t h e en t it y did n ot , or w a s u na b le t o d o

so beca use th e top officia l w a s involved,

did the audit tea m report t hese acts to

the officials of those oth er governmenta l

entities? (G AG AS, par . 5.23)

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9. Does the audi tor 's repor t include the

following?

a . I den t ifica t ion of w h ich ma t t er s a r ereport a ble conditions and w hich of the

reportable condit ions a re ma terial

w eaknesses (G AG AS, pa r. 5.27)

b. R efer en ce to a s epa r a t e let t er , if

a pplica ble, describing n onreport a ble

conditions (GAGAS, par. 5.28)

c. P r es en t a t ion of fr a ud , illeg a l a ct s , a n d

reportable noncompliance with law s a nd

regula tions (G AG AS, par. 5.18)

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10. When appropria t e , d id the audit team issue a

sepa ra te report on fraud, a buse, or il legal a cts

or indica t ions of such a ct s? (G AG AS , pa r 5.21) ___ ___ ___ ___


57/84

Reporting


S ect ion IV: Repor t N/A Yes No W/P


11. Did the report d isclose the sta tus of a l l known,

but uncorrected, significant or material

findings a nd recommend a tions from prior

audits tha t affect current a udit object ives?

(G AG AS pa r . 4.10) ___ ___ ___ ___

12. Do the workpapers document a reasonable

bas is for t he follow ing?

a . Th e opinion a b ou t w h et h er t h e f in a n cia l

sta tements a nd disclosures comply in a llma terial respects w ith generally

a ccepted a ccount ing prin ciples (FAM

560)

b . The conclus ions on in terna l con t rol

c. The conclus ions about compl iance wi th

law s and regula t ions and t he

requirements of FFMIA

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13. Do the workpapers document a reasonable

bas is for reported findings, including the

follow ing? (FAM 590.05-06)

a . I nt er na l con tr ol w ea kn es ses

b . I n st a n ces of n on com pl ia n ce w i t h la w s

an d regulat ions and t he requirements of

FFMIA

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58/84

Reporting




14. Do the findings include (wh ere appropriate)

the follow ing?

a . C on d it i on (d escr ib e t h e ex is t in g

situat ion)

b. C r it er ia (s ta t e w h a t w e a r e com pa r in g

to)

c. C a u se (r ef lect r ea son or rea son s w h y t he

condition a nd criteria d iffer)

d . E f fect (d escr ib e t h e r esul t of t he

difference betw een the condition a nd

criteria)

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15. Are recommendat ions a nd suggest ions

rea sona ble, doa ble, a nd cost -effect ive? ___ ___ ___ ___

16. Does the presenta t ion of agency comments

include t he follow ing?

a . Ty pe of com m en t s ob t a in ed (or a l ,

wri t ten)

b . Ti t le of the most sen ior of ficia l (s)

involved

c. Accu ra t e ch a r a ct er iz a t ion of g en er a l

agr eement or disagr eement w ith the

report

d . D escr ipt ion of t h e sub st a n ce of t h ecomments

e. R esolu t ion of a ll su bs t a n t iv e com m en t s

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59/84

Reporting



S ect ion V: G AOs Report Considera t ions Yes

1. Overa l l , does the report ha ve the fol lowing chara cter is t ics?

a . Pro fess iona l (the work ref lect s an unders t and ing of the

issues, an aw a reness of the external environment,

including sensit ivity to relevant trends, a nd a pract ical

approach to w ha t can be done to deal with the

problems noted)

b . Accura te (present s in forma t ion or f ind ings accura te ly ;

conta ins no nota ble errors in logic or rea soning)

c. Object ive (presenta t ion i s f a i r and impar t i a l ; t one i s

constructive and objective)

d . Fa ct -b a sed (s t a t es in for m a t ion a n d find in g s

completely , includes all necessa ry fa cts a nd/or

explana tions, dist inguishes between fa ct a nd un proven

or uncorroborat ed ma teria l, resolves conflicting

evidence)

e . Ba lanced (presen t s sound and log ica l ev idence to

support conclusions, d oes n ot use a djectives or a dverbs

to characterize evidence in a way that implies criticismor conclusions by innuendo, appropriately recognizes

positive as pects of the progra ms or issues reviewed)

f . Timely and useful (prov ides relevan t and t imely

information)

g . C lea r and concise (presenta t ion i s clea r , concise, and

well organized; message is presented logically; writing

style is a dapted t o the a udience)

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60/84

Reporting



S ect ion VI : G AOs Qua lit y C ont rol N/A Yes No W/P

1. Was the repor t reviewed by the fol lowing?

a . Audit D irect or

b. O ffice of t h e G e ner a l C ou ns el

c. C hief Account ant

d. S econd P a rtner

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2. Did the aud i t d irector review the fol lowing?

(FAM 1301.17)

a . G e ner a l r is k a n a ly sis or eq uiv a len t

b . Accou n t ri sk a n a ly ses or eq u iv a len t for

ma terial a reas w ith high combined risk

c. M em or a n da on k ey a ccou nt in g a n d

a udit ing issues

d. S um ma r y m em or a nd a for ma t er ia l a rea s

with high or moderate combined risk

e. M a na g em en t r epr es en t a t ion let t er

f. L eg a l r epr es en ta t ion let t er

g . S u mm a r y of u na d ju st ed m is st a t em en t s

h. Audit s um ma ry m em or an dum

i. E xit con fer en ce m em or a ndu m

j. F ina ncia l st a tements

k . G AO w or kpa p er set (FAM 1301. 17)

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61/84

Reporting


S ect ion VI : G AOs Qua lit y Cont rol N/A Yes No W/P


3. Did the a ss ist an t d i rector review the fol lowing?(FAM 1301.17)

a . E nt it y pr ofile or eq uiva len t

b . G e ner a l r is k a n a ly sis or eq uiva l en t

c. Accou nt r isk a n a l y ses or eq u iv a len t

d. I nit ia l a udit pr ogra ms

e. Lea d schedules

f. C om plet ed a udit pr ogr am s

g . M em or a n da on key a ccou nt in g a n d

audit ing issues

h . S umma ry memora nda

i . C h eck li st for repor t s pr epa r e d u n der th e

CF O Act (for sta tement s using G AAP

promulgated by FASAB)

j. F in a n cia l r epor t in g a n d d is clos ur e

checklist (for sta tement s using G AAP

promulgat ed by FASB )

k . M a na g em en t repr es en t a t ion let t er

l. L eg a l r epr es en ta t ion let t er

m . S u mm a r y of un a dju st ed m is st a t em en t s

n . E xit con fer en ce m em or a n du m

o. Audit sum ma ry mem or an dum

(contin ued on next page)

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62/84

Reporting


S ect ion VI : G AOs Qua lit y C ont rol N/A Yes No W/P


3. (continued)

p. F ina ncia l st a t ement s

q . G AO w or kpa p er set (FAM 1301. 17)

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4. D id t h e a s s is t a n t d ir ect or or a u d it m a n a g er

determine that all significan t r eview notes were

resolved a ppropria t ely? (FAM 1301.24) ___ ___ ___ ___

5. Did an a ss ist an t d i rector in i t ia l a l l workpaperbundle covers to indicate that all workpapers

w ere sufficient ly review ed? (FAM 1301.05) ___ ___ ___ ___

6. Were review notes, superseded versions of

workpapers, and draft reports (except the

referenced draft a nd the dra ft sent to the a gency

for comment), including review notes a nd

superseded versions in electronic form, placed in

a separ at e folder t o be reta ined until the report

is issued (unless th e au dit dir ector decides to

reta in them until th e next audit )? (FAM1301.24) ___ ___ ___ ___

7. Were review responsibi li t ies communica t ed to

a ll individua ls on th e a ssignment ? (FAM

1301.19) ___ ___ ___ ___

8. Were workpapers prepared by an informa t ion

systems a uditor subject to review by an

informa tion systems auditor for t echnical

content an d to review by a member of the a uditteam to determine that related a udit object ives

w ere a chieved? (FAM 1301.20) ___ ___ ___ ___


63/84

Reporting


S ect ion VI : G AOs Qua lit y Cont rol N/A Yes No W/P


9. For a r ea s t h a t a r e b ot h m a t er ia l a n d h a v e h ig hcombined risk, did t he a udit d irector or

a ssistan t director perform secondary reviews of

t he w orkpa pers? (FAM 1301.12) ___ ___ ___ ___

10. Were a l l workpapers prepared by the a udit

director or assista nt directors rea d by a udit

ma na gers or a uditors in charge to determine

their consistency w ith a ny relat ed workpapers?

(FAM 1301.15) ___ ___ ___ ___

11. If the workpa pers indicat ed a difference of

opinion between enga gement personnel or

between engagement personnel and a specialist

or other person consulted, w a s t he difference

resolved a ppropriat ely and w a s the ba sis of the

resolut ion documented? (FAM 1302) ___ ___ ___ ___


64/84

Reporting


D ecem ber 2000 G AO/P C IE F in an cia l Audit Ma nua l - P a r t I I P a ge 1003-30

Section VII: Explanation of "NO" Answers and Other Comments

The follow ing pa ges ar e provided for comments on a ll "n o" a nsw ers or to expand

upon a ny of the "yes" a nswers.

Page Question Disposition

no. no. Explanatory comments of comments


65/84

Reporting



Section VIII: Conclusions: B ased on your review a nd

knowledge, do you believe the following?

Yes No*

1. The audi t t eam per formed the engagement , in a l l ma teria l

respects, in a ccordan ce w ith genera lly accepted

government a udit ing sta ndar ds (wh ich include genera lly

accepted a udit ing sta nda rds) and a pplicable OMB

guidance or t he a uditor's report w as a ppropriat ely

modified ___ ___

2. The financia l s t a t ements con formed , in a l l ma ter ia l

respects, w ith genera lly a ccepted a ccounting prin ciples or

the a udit or 's report w a s a ppropr ia tely modified ___ ___

3. Th e a udit or 's repor t w a s a ppr opr ia t e in the cir cum st a nces ___ ___

4. The documenta t ion on th is engagement supports :

The au ditors opinion on th e financial st a tement s

The auditors conclusions on internal control

The a uditors conclusions on compliance w ith law s

an d regulat ions and the requirements of FFMIA

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___

5. The aud it t eam complied in a l l ma ter ia l respect s wi th the

a udit orga niza t ion s policies a nd procedures ___ ___

* I f any o f the above 5 st a tements have "no" responses , please descr ibe the

response in a memora ndum t o the reviewer.

Da te of completion of field w ork

Audit Ma na ger _____________________________________________ D a t e

Assis t a nt Direct or __________________________________________ D a t e

Audit D irector ____________________________________________

Documents

Audit Checklist for Letter of Credit6