In today’s world, transparency and accountability are at the center of all public activity and operations. That’s why government audit is needed to make all processes transparent and accountable. In doing so, government agencies are able to maintain the social and political status quo.
The federal government awards grants, loans, and interest subsidies to corporations, institutions, and non-profit organizations yearly. All these awards are subject to compliance audit requirements to ensure that public funds are being used appropriately.
This month, we’ll be highlighting the different types of government audits and the various steps involved. This way, you can know what to expect should you ever be audited.
Consultation services are advisory in nature and remain somewhat detached from the auditing process. The purpose of such services is to add value or streamline the auditing process. This will minimize any risk to your business. Audits can be very disruptive to standard operations and proper consultation can lower this disruption.
Assurance services are comprehensive assessments of the different operational and financial systems of the organization in question. These services affirm the independence of the process by providing an objective review. In such a review, consultants look at:
- Reliability of the financial and operational systems
- Safeguarding of crucial assets
- Clarify and completeness of the policies
- Compliance with federal law and other governing bodies
Lastly, the services also ensure that the organization in question achieves the complete scope of their financial goals and objectives.
Special investigations refer to the search for any unethical or underhanded business practices that compromise the integrity of an organization. The auditing firm will look into any misconduct or irregularities within the company’s operating procedures.
These investigations set the groundwork for any legal follow-up to the unethical practices. They also substantiate whether the allegations are true, and gather any evidence for following up with the proper authorities.
These operations involve the formulation of plans of action to follow up after any of the above-reported conditions. These plans depend on the result of the audits. Such follow-ups take care of any financial or operational processes that need correction.
Types of Government Audits
Government audits are objective and are based on authentic financial statements and documents. There are two main types of government audits.
Financial audits are the most popular type of audit, and as the name suggests, such audits center on an organization’s finances. There are two types of financial audits.
The first type of audit, the financial statement audit, is an in-depth look at an entity’s financial statements. Auditors investigate whether the financial statements have logic and whether they abide by accounting principles. They also identify any inconsistencies with financial records and statements.
The other type of audit, called an audit of financial affairs, is an audit of the financial operations of a particular organization. It checks whether these financial operations comply with all legal requirements.
A management audit is a comprehensive audit that looks at the use and distribution of financial resources and the performance of key administrators in the organization. These look into whether the administrators or officials are handling funds appropriately and gauge their overall performance. This audit also investigates any fraudulent activity or unethical practices amongst organizational officials.
Features of a Government Audit
The auditing process is logical and systematic. There are six characteristic features of any audit.
Systematic. The auditing process is sequential and comprised of logical steps. The steps are structured and organized to ensure efficiency.
Subject Matter. An audit can center on a single subject matter or multiple concerns, depending on the subject of the audit.
Concerned Parties. A typical audit involves three parties: the shareholders, managers, and auditors. The process does not work without all parties present.
Evidence. At the core of every auditing process is the evidence. This is what substantiates the reports that will be delivered at the conclusion of the audit. This evidence does not always have to be in the form of financial documents or records.
Auditing Criteria. The auditor must carry out the auditing process in line with certain criteria and standards as prescribed by the governing body. For government audits, the yellow book outlines standards and procedures.
The Opinion. Any good auditing process concludes with an opinion from the auditor about the assurance of financial statements. For management auditing, they must opine on the confidence of the officials in question.
These features of audits determine the objective, as well as the effectiveness, of the audit. Depending on the type of audit, the audit process could be quite lengthy and very disruptive. It’s a good idea to make prior arrangements so that the audit doesn’t interfere with very crucial company operations.
Audits Enhance Transparency and Accountability
A government audit is not an intrusion of privacy into sensitive data or personal information. Contrary, it’s a way to ensure the transparency of financial transactions and the operations of an organization. An audit is nothing to worry about unless you have engaged in underhanded dealings.
For an audit to be comprehensive and effective, you need the right auditor to do your budding. If you need expedient and comprehensive auditing services, then contact us today and we’ll take care of you.