Sneak Preview: GAO Details Audit Considerations During Pandemic

Jerry Ashworth
September 4, 2020 at 07:48:54 ET
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(The following was excerpted from a recent article in the Single Audit Information Service.) Auditors conducting engagements on new government programs created to respond to the COVID-19 pandemic, as well as on existing programs, may want to consider conditions that could increase their clients’ risk for fraud and determine if clients have revised their internal controls to address disruptions created by the pandemic, according to a new Government Auditing Standards (GAGAS) audit alert released by the Government Accountability Office (GAO).

The alert is the second GAO has issued pertaining to GAGAS audits in response to COVID-19 concerns. Earlier this year, GAO issued an alert that provided auditors more time to complete their continuing professional education.

The new alert stresses that its does not amend GAGAS, also referred to as the Yellow Book, and that it “does not contain requirements, and is not considered interpretive guidance.” It does, however, provide “considerations and reminders given the circumstances related to the pandemic.” It adds, “Procedures to be performed as part of an engagement should be developed to the extent they are necessary to the engagement objectives and in light of the context of a particular engagement. Auditors may need to pay particular attention to certain areas of audit work because of potentially compressed reporting time frames and possible limitations on the means of obtaining evidence during the COVID-19 pandemic.”

For example, auditors are responsible for reducing audit risk (i.e., performing financial audits that lead to inappropriate audit opinions or performance audits that lead to improper findings and recommendations) to an acceptable low level when planning an engagement and assessing whether the evidence is sufficient and appropriate within the context of the audit objectives. The alert noted that the circumstances related to the COVID-19 pandemic may increase audit risk, particularly when “the program dollar amounts and number of citizens served is substantial, and the adequacy of the audited entity’s systems and processes for preventing and detecting inconsistencies, significant errors or fraud may be in question.” The alert explained that audit risk can be reduced by: (1) ensuring a scope of work sufficient to address audit objectives; (2) adding specialists and other resources to conduct the audit; (3) changing the methodology to obtain alternate forms of corroborating evidence; and (4) aligning the findings and conclusions to reflect the evidence obtained.

(The full version of this story has now been made available to all for a limited time here.)

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