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7/27/2019 DOI Plenary A123 Norris
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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 Conference
Audit Approach to
OMB Circular No. A-123
7/27/2019 DOI Plenary A123 Norris
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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’ FinancialIntegrity Act (FMFIA) of 1982
– OMB Circular No. A-123, Appendix A provides guidance forthe internal control over financial reporting of FFMIA
• Utilize managements’ documentation to assist inunderstanding 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 assessm ent team , its authority,and members
• Verify appropriateness of sign i f icant f inanc ial reports selected
• Assess reasonableness of mater ial i ty assessments for eachsignificant financial report
• Verify significant accounts, major transaction cycles, and therelevant financial report assertions are identified and included
– For each significant financial report
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Bureau Level Procedures
• Inspect a sample of bureaus’ contro ldocumentat ion to verify that it includes controls atthe:
– 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 contro l
documentat ion for consistency with CFO Council’sImplementation Guide
– Controls to mitigate the risk of financial statement errors
– Data characteristics: source; receipt; processing; andtransmission
– Supervisor review; process and calculations performed inpreparation 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 test ing documentat ion 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 controlstested
– Response and conclusions for deficiencies identified
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Assurance Statement Procedures -
Bureaus
• Read bureau assurance statement for conformancewith Department guidance
– Based on Department materiality
• Compare managements’ and auditors’ testing resultsto 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 itincludes:
– Results of the bureau level assurance statements
– Any material weaknesses that are identified
– Statement of management’s responsibility forestablishing and maintaining adequate internal controls
– Statement identifying OMB Circular A-123 as thef ramework used by management to conduct theassessment
– An assessment of the effectiveness of the agency’sinternal control