Governmental auditor assignments are classified into three main categories: financial audits, attestation engagements, and performance audits, each serving distinct objectives and standards. These audits are essential for ensuring accuracy in financial reporting, providing assurance on specific assertions, and improving program operations and accountability.
Key Insights
- Financial audits are focused on providing opinions on the fairness of financial statements, ensuring conformity with accounting principles, and assessing internal controls and compliance with applicable laws.
- Attestation engagements involve examining, reviewing, or performing agreed-upon procedures to provide assurance on subject matters or assertions, without necessarily being classified as audits.
- Performance audits aim to enhance program efficiency and effectiveness, offering insights for decision-making and accountability by evaluating program results, economy, and compliance with regulations.
This lesson is a preview from our Government Auditor Level I Certificate Program. Enroll in a course for detailed lessons, live instructor support, and project-based training.
This is a lesson preview only. For the full lesson, purchase the course here.
Government auditing work can be grouped into two broad categories: engagements where auditors verify information prepared by others, such as financial statement audits, and engagements where auditors develop and report new information, such as performance audits. The audit objectives drive which type of engagement is appropriate and which standards apply.
Under GAGAS (the Yellow Book), audits are generally classified as financial audits, attestation engagements, and performance audits. Each category has a distinct purpose, reporting approach, and level of assurance.
Financial audits are designed to provide an opinion on whether an entity’s financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework, typically GAAP. When a financial audit is performed under GAGAS, reporting also includes internal control over financial reporting and compliance with laws, regulations, contracts, and grant agreements that could materially affect the financial statements. The goal is generally a clean, unqualified opinion.
When auditors identify errors or omissions in the statements or supporting records, they typically recommend adjustments so the financial statements can be corrected before final reporting. Financial audit opinions commonly include an unqualified, or clean, opinion, a qualified opinion indicating a material issue that is not pervasive, an adverse opinion indicating material and pervasive misstatement, and a disclaimer of opinion issued when sufficient appropriate evidence cannot be obtained or when there is a significant scope limitation.
Financial statement audits provide reasonable assurance, not absolute assurance, that the statements are fairly presented in all material respects in conformity with GAAP or another comprehensive basis of accounting. These audits follow the AICPA Statements on Auditing Standards (SAS) and are addressed in GAGAS paragraph 1.17.
Attestation engagements provide assurance on subject matter or an assertion about subject matter that is the responsibility of another party. In these engagements, auditors examine, review, or perform agreed-upon procedures and report the results, as described in GAGAS paragraph 1.18. The three common attestation types are examinations, which result in an opinion based on sufficient evidence; reviews, which provide a conclusion based on limited procedures; and agreed-upon procedures, which result in a findings report with no opinion or assurance. Attestation engagements follow the AICPA Statements on Standards for Attestation Engagements (SSAE).
In practice, agencies may use attestation engagements to evaluate contractor costs and systems. Examples include incurred cost reviews of annual submissions to determine whether claimed costs are allowable, allocable, and reasonable under the FAR; pre-award surveys that evaluate whether a contractor’s accounting system can properly segregate direct and indirect costs; and business system audits covering areas such as accounting, estimating, and billing for compliance with DFARS requirements.
Performance audits provide objective analysis to help management and oversight bodies improve program performance and operations, reduce costs, strengthen decision-making, and support public accountability. More broadly, they communicate factual information and conclusions based on evidence gathered by the auditor. Performance audit objectives can address program outcomes, economy and efficiency, internal control, compliance, and prospective or cross-cutting analysis, as outlined in GAGAS paragraph 1.21.
Because performance audits can serve many purposes, they may assess program results, the price paid for resources, resource utilization, quality and timeliness of outputs, internal controls, or compliance with laws, regulations, contracts, grants, and other authoritative requirements. They can also evaluate alternatives, identify best practices, and synthesize information across programs or agencies.
For example, a program audit might evaluate whether a program’s objectives are appropriate, whether it achieves intended results, and what factors inhibit performance. It may also determine whether management considered lower-cost or more effective alternatives, whether the program duplicates or conflicts with related efforts, and whether performance measures are valid and reliable.
Economy and efficiency audits often focus on whether an entity follows sound procurement practices, acquires the right resources at a reasonable cost, protects and maintains those resources, and uses staffing, equipment, and facilities efficiently while meeting quality and timeliness expectations. These audits may also examine compliance requirements that significantly affect acquisition and resource use, as well as whether management controls and performance reporting are adequate and reliable.
