audit approach to obm circular no. a-123 (.ppt)
TRANSCRIPT
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A U D I T / T A X / A D V I S O R Y / L I N E O F B U S I N E S S
DOI Annual Business ConferenceDOI Annual Business ConferenceAudit Approach to Audit Approach to OMB Circular No. A-123 OMB Circular No. A-123
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Agenda
• Auditors’ objective
• Consolidated level procedures
• Bureau level procedures
• Assurance statement procedures
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Auditors’ Objective
• Test for compliance with Federal Managers’ Financial Integrity Act (FMFIA) of 1982 – OMB Circular No. A-123, Appendix A provides guidance for
the internal control over financial reporting of FFMIA
• Utilize managements’ documentation to assist in understanding financial reporting processes
• Consider internal control test results
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Consolidated Level Procedures
• Gain an understanding of managements’ process
• Verify establishment of senior assessment team, its authority, and members
• Verify appropriateness of significant financial reports selected
• Assess reasonableness of materiality assessments for each significant financial report
• Verify significant accounts, major transaction cycles, and the relevant financial report assertions are identified and included
– For each significant financial report
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Bureau Level Procedures
• Inspect a sample of bureaus’ control documentation to verify that it includes controls at the:– Entity level
– Control environment, risk assessment, monitoring, control activity, and information and communication processes
– Process, transaction, and application level
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Bureau Level Procedures
• Inspect a sample of the bureau control documentation for consistency with CFO Council’s Implementation Guide – Controls to mitigate the risk of financial statement errors
– Data characteristics: source; receipt; processing; and transmission
– Supervisor review; process and calculations performed in preparation of financial reporting; and process outputs
– Use of computer application controls and controls over spreadsheets used in the preparation of financial reporting
– Identification of errors: types of errors found; reporting errors; and resolving errors
– Ability of personnel to override the process or controls
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Bureau Level Procedures
• Inspect a sample of the internal control testing documentation to verify that it includes– Management’s assessment of the design of key controls
– Nature, timing, and extent of testing of key controls
– Assessment of operating effectiveness of key controls tested
– Response and conclusions for deficiencies identified
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Assurance Statement Procedures - Bureaus
• Read bureau assurance statement for conformance with Department guidance– Based on Department materiality
• Compare managements’ and auditors’ testing results to bureau assurance statement to verify that: – Managements’ results support the assurance statement
– Management identified all material weaknesses
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Assurance Statement Procedures - Consolidated
• Inspect the assurance statement to verify that it includes:– Results of the bureau level assurance statements
– Any material weaknesses that are identified
– Statement of management’s responsibility for establishing and maintaining adequate internal controls
– Statement identifying OMB Circular A-123 as the framework used by management to conduct the assessment
– An assessment of the effectiveness of the agency’s internal control