Jan 13, 2021

Single Audits Compliance Season Is Upon Us: Are You Ready?

Yuliya Ostapenko, CPABy Yuliya Ostapenko, CPA

Once upon the time, there were no compliance audits as we know them today. Some CPAs find the world of single audits to be dry and weary; others enjoy the clarity of the rules and perceived simplicity of the conclusion-making process. The reality is that, just like anything else in the accounting world, compliance audits are guided by a set of rules that only seems to be getting more and more complex every year. One cannot wake up one day and say, “I think I will go ahead and accept that client’s project to do single audit because I am a CPA and I have experience performing financial audits. After all, how hard can this be compared to other audits?” That logic is faulty: it can be pretty complex. Furthermore, the end result of that audit becomes public information. Clients need to get it right, and we, their trusted CPAs, need to get it right. We need to make this process thoughtful, organized, and meaningful for our clients and ourselves. So, where do you start and what are the critical considerations in performing a compliance audit?

The first step is to become familiar with the Uniform Grant Guidance. There is no denying that you may find this document to be boring, much like any other regulatory document. However, becoming familiar with it will give you a good understanding of the compliance issues that need to be addressed in a very organized and structured way.

CPA training others on single auditsNext, you must focus on obtaining appropriate training for the professionals who will be working on the engagement. It is critical to ensure that every member of the team is trained on all the relevant aspects of single audit they will be working on. Some members of the engagement team may require more in-depth training on various nuances, reporting, and quality review aspects of a single audit engagement.

Finally, the team performing a compliance audit must follow the rules and procedures set up in the annual Office of Management and Budget compliance supplement. This document does not leave much room for professional judgement that those performing financial audits are used to. It dictates the objectives of the testing and suggests the procedures to accomplish them. Younger team members may be eager to show their initiative and critical thinking abilities and decide to do things differently, so it is imperative to ensure that they understand that compliance audits require a different mindset.

The COVID-19 pandemic brought about yet another challenge to our profession and our clients: CARES Act funding. Not only did this federal funding bring single audit requirements to organizations that may never have had a single audit in the past, but also some compliance considerations to be audited are very unique. I recently sat through a two-hour session that summarized various CARES Act compliance requirements, and at the end of it I felt like I was back in my first year in public accounting. One example of the challenges with this funding is the determination of the timing on when the award was received and in which fiscal year of the organization it needs to be audited. At the end of December 2020, an addendum to the compliance supplement addressing this federal funding audit requirements was finally issued. It introduced a number of new considerations, from the compliance requirements to be tested to the extended single audit filing deadlines.

New challenges lay ahead for our profession as the global health crisis continues to impact our clients and the federal support they receive. CPAs should not underestimate the effort required for our clients to adhere to all the compliance requirements of federal support funding: they are complex and subject to increased public scrutiny.

Get the necessary training to understand the new regulations and consider attending PICPA’s upcoming single audit programs. Use the resources available from the PICPA and other organizations that support the public accounting profession, and partner with others who can help you get the job done well. Be the trusted CPA partner your clients need.

Yuliya Ostapenko, CPA, is director of assurance specializing in the nonprofit sector for CLA Philadelphia. She can be reached at yuliya.ostapenko@claconnect.com.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.