A single audit can be referred to as the review of the manner in which the organization functions in order to ensure that the company is under compliance. This is mostly carried out in cases of grants, where the overall efficacy of the grant application is scrutinized bearing in mind the overall extent to which the company has complied with the rules and regulations.
In this regard, the required components that need to be scrutinized to get a fair idea are financial statements, financial records, expense journals as well as underlying internal controls that are present.
Single Audit was previously referred to as the OMB Circular A-133 audit. It was basically an organization-wide financial statement as well as federal awards’ audit of a non-federal entity that has the capacity to spend around $750,000 (or more) in federal funds across the span of one year.
In this regard, it is intended to provide a high degree of assurance to the Federal Government pertaining to a non-federal entity that has sufficient adequate proof of having internal controls in place.
Additionally, it is also directly in compliance with the existing program requirements. Non-federal entities that are relevant in this regard also include local government, universities, and other various non-profit organizations.
The single audit test model is created to duly examine non-federal entity post-award reporting requirements, which are duly mentioned under the Single Audit Act. These requirements are mainly facilitated using an additional streamlined approach under the organizations in this regard.
Furthermore, it should also highlighted that Single Audit is supposed to be completed by all the recipients who receive $750,000 or more in federal funds in the recipient’s fiscal year.
The Audit must be performed in accordance with the principles of the relevant accounting standards, by an independent auditor. It should also be noted that a single audit does not prevent federal agencies from conducting their own given audit of a recipient, a specific award, or a given program.
Components included in the Single Audit
An audit mainly includes review of a number of given components, which include the following:
Financial Statement: The auditor in this regard is supposed to determine the financial statements of the auditee, that are presented fairly in all the material aspects that are kept in accordance with generally accepted accounting principles that are relevant in this regard.
Internal control: Internal Control review also stands to be an increasingly important component in this regard, predominantly because of the fact that the review on internal controls is made on basis of Federal programs that are based on the guidance that is provided by the relevant auditing body.
The underlying premise to study for internal controls lies in the realms of ensuring that there is proper transparency about the existing state of affairs in this regard.
Compliance: The extent of compliance with the relevant accounting standards the body also directly impacts the credibility of the organization, and the manner in which these respective findings can be justified and recognized in this regard.
Importance of Single Audit
Single Audit is concerned important because of a number of reasons. Firstly, it can be seen that they eliminate unnecessary duplication in audit and financial reporting.
Secondly, they also reduce compliance costs when it comes to non-federal entities. In the same manner, they also use stakeholder feedback to inform about the relevant changes.
Subject of the Single Audit
Single Audit Is conducted on an annual basis. It can be seen that the audit period is regarded as the entity’s fiscal year. There is a bifurcation in the types of programs that are conducted, predominantly on the grounds of realizing that Type A programs are defined as programs that have expenditures greater than $300,000.
In this aspect, the percentage of coverage rules are also defined as 50%, and 25% depending on total federal expenditures that are based on the underlying entity’s status.
In this regard, the subject of a single audit is defined as the state and local governments and nonprofit organizations. However, in this regard, each of the entities is supposed to spend an amount greater than $500,000 in federal awards in a fiscal year.
Reports included in a Single Audit:
The reports that are included in a single audit mainly include Schedule of Expenditures of Federal Awards (SEFA), Report on Controls and Compliance of Entity, Report on Controls and Compliance of Major Federal Programs, Schedule of Findings and Questioned Costs (known and likely questioned costs in excess of $10,000) and Summary Schedule of Prior Audit Findings.