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A compliance audit consists in obtaining sufficient appropriate audit evidence to form an opinion and report at the level specified in the governmental audit requirement on whether an entity complied in all material respects with the applicable compliance requirements; and identifying audit and reporting requirements specified in the governmental audit requirement that are supplementary to General Accepted Auditing Standards and Government Auditing Standards, if any, and perform procedures to address those requirements.
Examples of compliance audits
- Single Audits
- Entities that receive federal funds including states, local governments, and not-for-profit organizations (NPOs), are subject to audit requirements commonly referred to as “single audits” under the Single Audit Act of 1984, as amended in 2011. The Single Audit Act, the Act, was enacted to standardize the requirements for auditing federal programs. The Act provides that grantees are subject to one audit of all of their federal programs versus separate audits of each federal program, hence the term “single audit.”
- Employee benefit plans audits
- Audits of the financial statements of employee benefit plans that are subject to the financial reporting requirements of Employee Retirement Income Security Act of 1974 (ERISA).
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- Student Financial Aid (SFA) compliance audits
- SFA audit objectives are to determine and report whether:
- The institution's basic financial statements are fairly presented, in all material respects, in accordance with generally accepted accounting principles (GAAP) for USA institutions or, foreign country requirements;
- The institution maintained internal control and complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on the financial statements; and
- The institution maintained internal control and complied, in all material respects, with specified compliance requirements in Section II of the SFA guide.
- Housing Urban Development (HUD) Audits
- HUD requires an audit that consists of two components: a financial statement audit of the entity and a compliance audit of the entity’s major HUD programs.
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