AICPA Project Finds Better Audits Come with Experience

June 28, 2017 | By Jerry Ashworth | Post a Comment

tick-1241542Practice makes perfect. That expression can apply to many topics ranging from playing the piano to swinging a golf club. A recent sampling project also shows that it can apply to single audits as well.

The American Institute of Certified Public Accountants (AICPA) conducted a random sample of 87 single audits to assess the quality of those audits and to determine if they conform to audit standards. Although AICPA is still gathering information from the project, it has determined that 62 percent of audits that were conducted by auditors who have performed only one single audit did not conform to auditing standards. In comparison, 49 percent of audits performed by auditors who have conducted between two and 10 single audits did not meet the standards. However, the number goes way down for those auditors with more experience. AICPA found that only 12 percent of the audits conducted by auditors who have performed 11 single audits or more did not conform to standards.

Mary Folster of AICPA’s Government Audit Quality Center recently told attendees at AICPA’s Not-For-Profit Conference at National Harbor, Md., that the largest problem found in the engagements focused on the auditors work, or lack thereof, on internal control over compliance. In addition, there was confusion between the financial statement audit and the compliance audit. She noted that auditors: (1) mistakenly relied on the walkthrough of internal control over financial reporting to eliminate the need for testing controls on compliance; (2) assessed control risk as “high,” thinking they could eliminate the need to test controls over compliance; and (3) performed detailed tests as part of the financial statement audit, doing no work to assess compliance with direct and material requirements, and classified the procedures as “dual purpose tests,” foregoing any compliance testing. Others used out-of-date practice aids, or no aids at all.

Coming on the heels of the 2007 National Single Audit Sampling Project, which found that more than half of all single audits either had unacceptable or limited reliability, it’s disturbing to find that auditors are still making errors when conducting single audits. AICPA is placing a great emphasis in promoting audit quality. In addition, the audit community can turn to Thompson products such as the Single Audit Information Service to ensure that their audits comply with auditing standards and are of sufficient quality. In the meantime, auditees looking to hire a firm to conduct their single audits may want to consider an auditor with plenty of experience. The numbers don’t lie.

Let us know what you think about this survey and what it means for the audit profession. We’d like to hear from you.

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