Term
| What did the Chief Financial Officers Act of 1990 require? |
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Definition
* Federal agencies were to prepare financial statements, which would be subjected to a financial audit. Audits were to be carried out by the Comptroller General or Inspector General of the agency.
* Each of 24 largest Federal departments and agencies (CFO Agencies) were to create the position of chief financial officer. In accordance with the CFO Act, each agency or department was to vest its financial management functions in its chief financial officer.
* A new position (Deputy Director for Management) was to be created in the Office of Management and Budget. The individual in this position represents the chief government officer responsible for financial management within the Executive Branch of the government. (p 3.4.5) |
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Term
| What is the goal of the FIAR Program? |
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Definition
| All entities of DoD achieve unqualified audit opinions on their respective financial statements (and, therefore, the same for the DoD consolidated financial statements). It defines the key tasks, underlying detailed activities and resulting work products that all reporting entities should follow to become audit ready. (p 3.4.6) |
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Term
| What two specific requirements does DoD have with successful audits? |
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Definition
* By 9/30/14, achieve a successful audit of the DoD Statement of Budgetary Resources (SBR) General Fund. Toward the end, USD(C) intends to have audit ready business environment for the current year budgetary activity (SBA).
* By 9/30/17, achieve a successful audit of all DoD financial statement, which includes Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of Custodial Activity. (p 3.4.6) |
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Term
| What is the primary purpose of a financial statement audit? |
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Definition
| To attain a unqualified opinion that an entity's financial statements are presented fairly in all material respects in conformity with the applicable financial reporting framework. (p 3.4.6) |
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Term
| In order to achieve required successful audits (an unqualified audit opinion), what two priorities has USD(C) designated? |
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Definition
1. Improving budgetary information
2. Mission critical asset information (p 3.4.6) |
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Term
| What are the four waves of the FIAR strategy? |
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Definition
The FIAR strategy is laid out in a series of four "waves" of accomplishments.
Wave 1: Appropriations Received Audit
Wave 2: Statement of Budgetary Resources (to include Fund Balance with Treasury Reconciliation)
Wave 3: Mission Critical Asset Existence and Completeness Audit
Wave 4: Full Audit Except for Existing Asset Valuation (p 3.4.7) |
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Term
| Why are the first three waves of the FIAR strategy performed concurrently? |
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Definition
| They focus specifically on the USD(C)'s priorities and, when completed, will lead toward becoming fully audit ready. Greater emphasis is placed on Wave 4 because that is the culmination of achieving audit readiness. (p 3.4.7) |
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Term
| What is Wave 1 Appropriations Received Audit of the FIAR strategy? |
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Definition
| In early 2013, an independent public accounting firm completed a mock audit and validated audit readiness of "Appropriations Received" for most DoD organizations. (p 3.4.7) |
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Term
| What is Wave 2 Statement of Budgetary Resource (to include Fund Balance with Treasury Reconciliation) of the FIAR strategy? |
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Definition
| Segment assertions and examinations began in 2012. The Department is required to have audit ready business environment in support of budgetary execution transactions by 9/30/14. (p 3.4.7) |
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Term
| What is Wave 3 Mission Critical Asset Existence and Completeness Audit of the FIAR strategy? |
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Definition
| This audit is intended to ensure that all assets recorded in their respective "Accountable Property Systems of Record" actually exist (i.e. Existence) and that all assets are actually recorded in proper "Accountable Property Systems of Record" or other official documents (e.g. Completeness, Rights assertion, etc.). Determination of value of those assets is to be addressed in Wave 4. (p 3.4.7) |
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Term
| What is Wave 4 Full Audit Except for Existing Asset Valuation of the FIAR strategy? |
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Definition
| Before beginning work on Wave 4, reporting entities should devote resources and efforts towards completing the previous waves. The rationale is that much of the work to complete those earlier waves impacts the requirements and objectives of Wave 4. Most of that previous work pertains to resolving any disconnects in the interdependencies within the financial accounts. (p 3.4.7) |
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Term
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Definition
| A comprehensive assessment and report on the financial condition and/or the results of the performance of a Government entity, program, or related activity. They are essential elements of public accountability and control. They are required by legislation; hence, Executive agencies must comply with requirements. (p 3.4.9) |
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Term
| Who must follow the Generally Accepted Government Auditing Standards (GAGAS)? |
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Definition
* The U.S. Government Accountability Office (GAO)
* the Federal Offices of Inspectors General (IGs)
* Other Federal auditors, including Army, Navy, and Air Force audit groups
* Many Military internal review (IR) groups
* Non-Federal auditors when auditing Federal organizations, programs, activities, and functions (p 3.4.10) |
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Term
| What four General Standards apply to all audits and attestation engagements? |
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Definition
1. Auditor Independence
2. Auditor Professional Judgment
3. Auditor Competence
4. Quality Control and Assurance (p 3.4.11) |
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Term
| What is the General Standard of Auditor Independence? |
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Definition
In all matters relating to the audit work, the audit organization and the individual auditor, whether government or public must be independent. Independence comprises:
* Independence of Mind
* Independence in Appearance (p 3.4.11) |
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Term
| What is Independence of Mind? |
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Definition
| The state of mind that permits the performance of an audit without being affected by influences that compromise professional judgment, thereby allowing an individual to act with integrity and exercise objectivity and professional skepticism. (p 3.4.11) |
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Term
| What is Independence in Appearance? |
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Definition
| The absence of circumstances that would cause a reasonable and informed third party, having knowledge of the relevant information, to reasonably conclude that the integrity, objectivity, or professional skepticism of an audit organization or member of the audit team had been compromised. (p 3.4.11) |
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Term
| What are the threats to auditor independence? |
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Definition
* Self-interest review
* Self-review threat
* Bias threat
* Familiarity threat
* Undue influence threat
* Management participation threat
* Structural threat (p 3.4.12) |
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Term
| What is self-interest threat? |
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Definition
| The threat that a financial or other interest will inappropriately influence an auditor's judgment or behavior. (p 3.4.12) |
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Term
| What is self-review threat? |
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Definition
| The threat that an auditor or audit organization that has provided non-audit services will appropriately evaluate the results of previous judgments made or services performed as part of the non-audit services when forming a judgment significant to an audit. (p 3.4.12) |
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Term
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Definition
| The threat that an auditor will, as a result of political, ideological, social, or other convictions, take a position that is not objective. (p 3.4.12) |
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Term
| What is familiarity threat? |
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Definition
| The threat that aspects of a relationship with management or personnel of an audited entity, such as a close or long relationship or that of an immediate or close family member, will lead an auditor to take a position that is not objective. (p 3.4.12) |
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Term
| What is undue influence threat? |
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Definition
| The threat that external influences or pressures will impact an auditor's ability to make independent and objective judgments. (p 3.4.12) |
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Term
| What is management participation threat? |
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Definition
| The threat that results from an auditor's taking on the role of management or otherwise performing management functions on behalf of the entity undergoing an audit. (p 3.4.12) |
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Term
| What is structural threat? |
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Definition
| The threat that an audit organization's placement within a Government entity, in combination with the structure of the Government entity being audited, will impact the audit organization's ability to perform work and report results objectively. (p 3.4.12) |
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Term
| What is the General Standard of Auditor Professional Judgment? |
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Definition
Auditors should:
* Exercise reasonable care and diligence
* Maintain integrity and objectivity
* Carefully select the methodology and procedures for gather information
* Exercise professional skepticism and not be satisfied with less than persuasive evidence in examining a program
* Obtain reasonable, not absolute, assurance that material misstatements or significant inaccuracies will not occur (p 3.4.13) |
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Term
| What is the General Standard of Auditor Competence? |
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Definition
Requires that auditors:
* Staff collectively possess adequate professional competency for the task required
* 80 hours of continuing education every 2 years (p 3.4.14) |
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Term
| What is the General Standard of Quality Control and Assurance? |
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Definition
* Audit organizations must establish a system to provide reasonable assurance that the audit organization and its personnel comply with professional standards and applicable legal and regulatory requirements.
* Audit organizations performing audits and attestation engagements in accordance with GAGAS must have an external peer review performed by reviewers independent of the audit organization being reviewed at least once every three years. (p 3.4.15) |
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Term
| What are field work standards? |
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Definition
| They provide guidance for auditors to follow when performing the audit. They vary depending on the type of audit or engagement being performed. (p 3.4.16) |
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Term
| What are the three field work standards for financial audits? |
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Definition
* Planning
* Consideration of internal control
* The need for evidence to sport the auditor's opinion (p 3.4.16) |
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Term
| What are the four field work standards relating to planning for performance audits? |
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Definition
* Internal Control
* Evidence
* Supervising Staff
* Audit Documentation (i.e. work papers) (p 3.4.16) |
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Term
| What are the four reporting standards for financial audits? |
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Definition
* Compliance with Generally Accepted Accounting Principles (GAAP) or other principles
* Consistency of application of accounting principles
* Whether management's disclosures are reasonably adequate
* The type of auditor opinion (p 3.4.17) |
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Term
| What are the three reporting standards for performance audits? |
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Definition
* The form of the report (in writing or some other retrievable form)
* Report contents (e.g. objectives, scope and methodology, and findings, including internal control, fraud, etc.)
* Distribution of reports (usually available to the public) (p 3.4.17) |
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Term
| What are the DoD IG's audit functions? |
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Definition
* Provide leadership
* Conducts, supervises, monitors, and initiates audits and investigations
* Recommends policies for economy, efficiency, and effectiveness
* Recommends policies for prevention/detection of fraud/abuse (p 3.4.18) |
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Term
| What are the main audit groups within DoD? |
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Definition
* The Office of Assistant Inspector General for Auditing (OIG, DoD)
* The Army Audit Agency
* The Naval Audit Service
* The Air Force Audit Agency (p 3.4.19) |
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Term
| What do internal DoD internal audit organizations ensure? |
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Definition
* Plans are established
* Written policies and procedures are provided
* Fraud, waste, and abuse are minimized (p 3.4.20) |
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Term
| When can DoD contract for non-Federal auditors? |
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Definition
When:
* Expertise is not available within DoD
* Temporary assistance is required (p 3.4.20) |
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Term
| What are the three types of audits? |
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Definition
* Financial audits
* Performance audits
* Attestation Engagements (p 3.4.21) |
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Term
| What does the Defense Contract Audit Agency (DCAA) do? |
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Definition
| They perform all necessary contract audits for the Department of Defense and provides accounting and financial advisory services regarding contracts and subcontracts to all DoD Components responsible for procurement and contract administration. (p 3.4.21) |
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Term
| What are financial audits expected to determine? |
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Definition
Whether an entity has:
* Financial information that is presented in accordance with established or stated criteria
* Adhered to specific financial compliance requirements
* An internal control structure over financial reporting and/or safeguarding of assets that is suitably designed and implemented to achieve the control objectives (p 3.4.22) |
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Term
| What is the general objective of financial audits? |
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Definition
| To provide an opinion on whether the financial statements are presently fairly in all material respects. (p 3.4.22) |
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Term
| What are the applicable standards for financial audits? |
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Definition
* Generally Accepted Government Auditing Standards (GAGAS) - Issued by GAO
* Generally Accepted Auditing Standards (GAAS) - Issued by AICPA
* AICPA Statements on Auditing Standards (SASs) (p 3.4.22) |
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Term
| What are the performance audit objectives? |
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Definition
May vary widely and include assessments of:
* Program effectiveness, economy, and efficiency
* Internal control
* Compliance with applicable laws, regulations, and public policies
* Prospective analyses (analysis or conclusions about information that is based on assumptions about events that may occur in the future along with possible actions that the audited entity may take in response to the future events) (p 3.4.22) |
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Term
| What is the general objective of performance audits? |
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Definition
| To assess the adequacy of performance and, if poor, appraise the consequences and determine the causes and actions that might be taken to improve performance. (p 3.4.22) |
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Term
| What is the applicable standard for performance audit? |
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Definition
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Term
| What are attestation engagements? |
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Definition
| Auditors issue an examination, a review, or an agreed-upon procedures report on a subject matter, an assertion about a subject matter that is the responsibility of another party. (p 3.4.22) |
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Term
| What are the applicable standards for attestation agreements? |
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Definition
GAGAS
ACIPA Standards for Attestation Engagements (p 3.4.22) |
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Term
| What are the non-audit services auditors provide? |
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Definition
* Develop methods and approaches to be applied in evaluating a new or proposed program
* Forecast potential program outcomes under various assumptions without evaluating a new or a proposed program
*Perform investigative work (p 3.4.23) |
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Term
| What are the two broad principles governing non-audit services? |
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Definition
* Non-audit services should not involve performing management functions or making management decisions.
* Audit organizations should not audit their own work or provide non-audit services in situations where the non-audit services are significant or material to the subject matter of audits. (p 3.4.24) |
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Term
| How do audit organizations select the areas for audit coverage? |
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Definition
By identifying:
* Regulatory and statutory requirements
* Specific concerns of management and Congress
* High-risk areas (p 3.4.24) |
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Term
| What are the phases of a Government audit? |
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Definition
* Plan - Define the audit's objectives, scope, and methodology to achieve those objectives
* Review - Develop evidence to support conclusions and recommendations
* Report - Prepare a written report on the results of the audit (p 3.4.25) |
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Term
| What happens during the Planning phase of an audit? |
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Definition
* Define audit's objectives and scope
* Design methodology
* Consider materially (significance) and internal control effectiveness in procedures (p 3.4.25) |
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Term
| What happens during the Review phase of an audit? |
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Definition
Gathering evidence that is:
* Sufficient (quantity)
* Appropriate (quality) (p 3.4.26) |
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Term
| What happens during the Audit Report phase of an audit? |
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Definition
GAGAS requires auditors to prepare written or electronic audit reports that:
* Communicate the results of the audit to management (and others as appropriate)
* Make the audit information available for timely use by management
* Comply with standards for form, content, and distribution (p 3.4.27) |
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Term
| What are the classical elements of an audit finding? |
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Definition
* Condition - "What is?"
* Criteria - "What should be?" From laws regulations, standards, best practices, etc.
* Effect - "So what?" Often dollars, but others
* Cause - "Why?" Recommendations should address (p 3.4.28) |
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Term
| What are the potential benefits of an audit? |
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Definition
* Monetary
* Non-Monetary - those that are valuable to the Government but cannot be expressed in monetary terms. Often relate to operational readiness, personnel safety, data accuracy, compliance with laws and regulations, or streamlining of organizations or processes. (p 3.4.29) |
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