11-12
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consent of McGraw-Hill Education.
Ch. 11, Solutions, Case 11-15 (Cont’d)
2. Partially. The salary for an entry-level law enforcement officer is allowable.
3. Yes. The hiring of civilian personnel to develop a neighborhood watch appears to
fall under the guidelines and objectives of the Public Safety Partnership and
Community Policing Grants program. The costs should be charged to the non-
11-16.
a. The seven threats found in GAGAS Section 3.14 are as follows:
a. Self-interest threat – the threat that a financial or other interest will
inappropriately influence an auditor’s judgment or behavior.
b. Self-review threat – the threat that an auditor will not appropriately
Chapter 11 – Auditing of Government and Not–for-Profit Organizations
11-13
Ch. 11, Solutions, Case 11-16 (Cont’d)
Three of the seven threats could apply to this situation. Since the accounting firm put
the accounting system in place, the auditor could be in a position of reviewing or
The introductory section typically includes information about the government entity
and the audit. Some governments, primarily those with large, complex audits, require
that a local or minority audit firm be subcontracted for portions of the audit. A section
outlining the details of the audit should also be included. It will cover the scope of
services contained in the proposal (financial audit, single audit, and any additional
The government entity should also specify the required qualifications of the auditing
firm, in terms of experience, staff size, licensing and training, and independence.
References from other government audit clients and results of peer reviews might be
requested. If available, evaluation criteria should be provided within the RFP.
A solution this complete would require some research on the part of the student.
Chapter 11 – Auditing of Government and Not–for-Profit Organizations
11-14
Ch. 11, Solutions, Case 11-16 (Cont’d)
11-17.
a. There are many resources, workshops, articles and books on the topic of audit
committees in general. For governments, in particular, the AICPA has a resource
titled Government Audit Committee Toolkit available at www.aicpa.org. The
Government Finance Officers Association designates formation of an audit
11-15
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consent of McGraw-Hill Education.
Solutions to Exercises and Problems
11-18. Each student should have a different government annual report, so will have different
answers to questions in this exercise. Some time spent in class to allow students to report
on their own answers and to get an idea of the range of the answers of other students is
11-19. 1. d. 6. c. 11. a.
3. a. 8. a. 13. c.
5. d. 10. b.
General Problem Information: Various
11-20. 1. Q 6. DNQ*
3. Q 8. Q
5. DNQ*** 10. Q
* This is basic knowledge an accountant should possess.
** This is to help individual clients, and is not related to government.
11-16
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consent of McGraw-Hill Education.
Ch. 11, Solutions (Cont’d)
11-21. 1. C 5. P
3. A 7. C
4. P 8. P
General Problem Information: Allowable Nonaudit Services
11–22.
a. Total federal awards expended for the year are $17,130,000. Using the
sliding scale for determining the threshold for a Type A program (found in
Chapter 11), it can be determined that the threshold is $750,000, since it is
Chapter 11 – Auditing of Government and Not–for-Profit Organizations
11-17
Ch. 11, Solutions, 11-22 b. (Cont’d)
fourth the number of low-risk Type A programs identified as low-risk. Given
one low-risk Type A program (Program 1), only one Type B program need
11-18
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consent of McGraw-Hill Education.
Ch. 11, Solutions (Cont’d)
11–23.
a. Total federal awards expended for the year are $26,675,000. Using the
and 8. The Type B programs would be Programs 1, 2, 7, 9, and 10, since all
programs not meeting Type A criteria are classified as Type B. Program 9
will not be risk-assessed, as it is less than 25% of the Type A threshold (.25
× $800,250 = $200,062.50).
Chapter 11 – Auditing of Government and Not–for-Profit Organizations
11-19
Ch. 11, Solutions, 11-23 b. (Cont’d)
at least one more program must be selected for audit. Following audit firm
11–24. 1. GAGAS 6. GAAS
3. GAAS 8. GAAS
5. GAGAS 10. GAGAS
General Problem Information: GAAS versus GAGAS standards
11-20
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consent of McGraw-Hill Education.
Ch. 11, Solutions (Cont’d)
11–25. The audit report seems to be a blend of an older version of a standard audit
report and the current unmodified audit report shown in Illustration 11-1.
Some of the changes that would need to be made to bring the Raphael and
VanEyck audit report into conformance with current audit standards
include:
Chapter 11 – Auditing of Government and Not–for-Profit Organizations
11-21
Ch. 11, Solutions, 11-25 (Cont’d)
• Additionally, the report mentions government auditing standards in the