AUD Area IV.D Study Notes: Reporting on Compliance (Government, Grants, and Attestation Contexts)

Compliance

An entity’s adherence to laws, regulations, contracts, grant agreements, or other external requirements.

Reporting on compliance

The set of auditor reports that assess whether an entity complied with specified requirements.

Internal control over compliance

Systems and procedures designed to ensure compliance with laws, regulations, and agreements.

Questioned costs

Costs that are questioned by auditors as not compliant with federal award requirements.

GAAS

Generally Accepted Auditing Standards, which govern the conduct of audits.

Compliance audit

An audit specifically designed to report on compliance with specified requirements.

Single audit

An engagement performed under Uniform Guidance for entities expending federal awards above a certain threshold.

Yellow Book

Government Auditing Standards that apply to audits of government entities and recipients of government funds.

Material misstatement

A misrepresentation or omission of information that could influence the economic decisions of users.

Major programs

Federal programs that require compliance testing during a single audit based on risk criteria.

Reasonable assurance

A high, but not absolute, level of assurance that an examination engagement achieves.

Limited assurance

A moderate level of assurance, typically provided in a review engagement.

Agreed-upon procedures (AUP)

An engagement where specific procedures are performed with findings reported without assurance.

Material weakness

A deficiency in internal control over compliance that creates a reasonable possibility of material noncompliance.

Finding

A significant deficiency or noncompliance issue identified during an audit that must be reported.

Compliance attestation

An engagement to report on compliance with specified laws, regulations, and contracts.

Effective internal control

An internal control system that adequately prevents or detects noncompliance with laws and rules.

Scope limitation

A situation in which the auditor cannot obtain sufficient evidence regarding compliance.

Criteria

The compliance requirements that an entity must meet, such as laws or contract terms.

Audit report

A formal opinion issued by the auditor detailing the results of the audit and compliance findings.

Unmodified opinion

An opinion that states the financial statements reflect a true and fair view, without significant issues.

Adverse opinion

An opinion indicating that financial statements do not present a true and fair view due to significant problems.

Qualified opinion

An opinion that indicates the financial statements are generally fair but have some specific issues.

Control deficiency

A shortfall in a company's internal controls that can lead to the risk of material noncompliance.

Internal control framework

The structure and processes an organization uses to ensure compliance and accurate reporting.

Public accountability

The obligation of governments and organizations to justify their expenditures and operations to the public.