Comptroller General of the United States, Government Auditing Standards.
Chapter 2: Types of Government Audits
2.4 Financial audits include financial statement and financial related
audits.
a. Financial statement audits provide reasonable assurance about
whether the financial statements of an audited entity present fairly
the financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles.1 Financial statement audits also include audits of financial
statements prepared in conformity with any of several other bases of
accounting discussed in auditing standards issued by the American
Institute of Certified Public Accountants (AICPA).
b. Financial related audits include determining whether (1) financial
information is presented in accordance with established or stated
criteria, (2) the entity has adhered to specific financial compliance
requirements, or (3) the entity's internal control structure over
financial reporting and/or safeguarding assets is suitably designed and
implemented to achieve the control objectives.
[NOTE 1: Three authoritative bodies for generally accepted
accounting principles are the Governmental Accounting Standards Board
(GASB), the Financial Accounting Standards Board (FASB), and the
sponsors of the Federal Accounting Standards Advisory Board (FASAB).
GASB establishes accounting principles and financial reporting
standards for state and local government entities. FASB establishes
accounting principles and financial reporting standards for
nongovernment entities. The sponsors of FASAB--the Secretary of the
Treasury, the Director of the Office of Management and Budget, and the
Comptroller General--jointly establish accounting principles and
financial reporting standards for the federal government, based on
recommendations from FASAB.]
2.5 Financial related audits may, for example, include audits of the
following items:
a. Segments of financial statements; financial information (for
example, statement of revenue and expenses, statement of cash receipts
and disbursements, statement of fixed assets); budget requests; and
variances between estimated and actual financial performance.
b. Internal controls over compliance with laws and regulations, such
as those governing the (1) bidding for, (2) accounting for, and (3)
reporting on grants and contracts (including proposals, amounts billed,
amounts due on termination claims, and so forth).
c. Internal controls over financial reporting and/or safeguarding
assets, including controls using computer-based systems.
d. Compliance with laws and regulations and allegations of fraud.
2.6 A performance audit is an objective and systematic examination of
evidence for the purpose of providing an independent assessment of the
performance of a government organization, program, activity, or
function in order to provide information to improve public
accountability and facilitate decision-making by parties with
responsibility to oversee or initiate corrective action.
2.7 Performance audits include economy and efficiency and program
audits.
a. Economy and efficiency audits include determining (1) whether the
entity is acquiring, protecting, and using its resources (such as
personnel, property, and space) economically and efficiently, (2) the
causes of inefficiencies or uneconomical practices, and (3) whether the
entity has complied with laws and regulations on matters of economy and
efficiency.
b. Program audits include determining (1) the extent to which the
desired results or benefits established by the legislature or other
authorizing body are being achieved, (2) the effectiveness of
organizations, programs, activities, or functions, and (3) whether the
entity has complied with significant laws and regulations applicable to
the program.
2.8 Economy and efficiency audits may, for example, consider whether
the entity
a. is following sound procurement practices;
b. is acquiring the appropriate type, quality, and amount of
resources at an appropriate cost;
c. is properly protecting and maintaining its resources;
d. is avoiding duplication of effort by employees and work that
serves little or no purpose;
e. is avoiding idleness and overstaffing;
f. is using efficient operating procedures;
g. is using the optimum amount of resources (staff, equipment, and
facilities) in producing or delivering the appropriate quantity and
quality of goods or services in a timely manner;
h. is complying with requirements of laws and regulations that could
significantly affect the acquisition, protection, and use of the
entity's resources;
i. has an adequate management control system for measuring,
reporting, and monitoring a program's economy and efficiency; and
j. has reported measures of economy and efficiency that are valid and
reliable.
2.9 Program audits2 may, for example
a. assess whether the objectives of a new, or ongoing program are
proper, suitable, or relevant;
b. determine the extent to which a program achieves a desired level of
program results;
c. assess the effectiveness of the program and/or of individual
program components;
d. identify factors inhibiting satisfactory performance;
e. determine whether management has considered alternatives for
carrying out the program that might yield desired results more
effectively or at a lower cost;
f. determine whether the program complements, duplicates, overlaps,
or conflicts with other related programs;
g. identify ways of making programs work better;
h. assess compliance with laws and regulations applicable to the
program;
i. assess the adequacy of the management control system for
measuring, reporting, and monitoring a program's effectiveness; and
j. determine whether management has reported measures of program
effectiveness that are valid and reliable.
[NOTE 2: These audits may apply to services, activities, and
functions as well as programs.]
