Big Change in Compliance Supplement’s Internal Controls Section

July 21, 2015 | By Jerry Ashworth | Post a Comment

how toWhen auditors are conducting their single audits of federal awards, they tend to prefer to follow a relatively concrete set of instructions. True, auditor judgment is a part of the job, but having suggested audit procedures, such as those found in the Office of Management and Budget Compliance Supplement, can help lead them through the audit process.

In prior years’ Compliance Supplement, previously known as the OMB Circular A-133 Compliance Supplement (see our blog from last week), there was considerable discussion on evaluating internal controls in Part 6. However, this year’s supplement presents a striking challenge.

In this year’s Part 6, OMB retained none of the language from the 2014 Compliance Supplement, and included this paragraph: “The Committee of Sponsoring Organizations of the Treadway Commission (COSO) updated the ‘Internal Control — Integrated Framework,’ and, in September 2014, the Government Accountability Office (GAO) issued an updated ‘Standards for Internal Control in the Federal Government,’ commonly referred to as ‘the Green Book.’ Due to the need to update other parts of this supplement for the uniform guidance in 2 C.F.R. Part 200, OMB was unable to also update Part 6 for the revisions to COSO and the Green Book without delaying the issuance of this supplement. Since the 2014 version of Part 6 is out of date, it was not carried forward to this supplement. Nonfederal entities and their auditors should look to the COSO and Green Book for guidance on internal controls until Part 6 is updated. OMB plans to update Part 6 for the 2016 Compliance Supplement.”

That’s it. Nothing else. That’s all auditors have to go by when referring to this section. Needless to say, this year may prove a bit more complex for auditors who are evaluating internal controls.

If you are an auditor, we’d like to hear your reaction to this advisory. What does this mean for your audits? What new steps are you taking? Or, could it be that you generally were following the COSO framework anyway, so this will create minimal impact? I’m sure other auditors and award recipients out there would be interested in what you have to say. Until then, we will wait and see what the 2016 Compliance Supplement brings on this subject.

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