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 Conference
Audit Approach to OMB Circular No. A-123 2 Agenda Auditors objective Consolidated level procedures Bureau level procedures Assurance statement procedures 3 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
4 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 5 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
6 Bureau Level Procedures Inspect a sample of the bureau control documentation for consistency with CFO Councils 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
7 Bureau Level Procedures Inspect a sample of the internal control testing documentation to verify that it includes Managements 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 8 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 9 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 managements 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 agencys internal control