AASHTO UAAG-2016 UNIFORM AUDIT & ACCOUNTING GUIDE (Revision 4).pdf

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1、For Audits of Architectural and Engineering (A/E) Consulting Firms American Association of State Highway and Transportation Officials 2016 Edition NSERT NEW INSIDE COVER PAGE 2016 EDITION Copyright 2016, by the American Association of State Highway and Transportation Officials. All Rights Reserved.

2、This book, or parts thereof, may not be reproduced in any form without written permission of the publisher. AASHTO Uniform Audit accordingly, please review the applicable FAR version in conjunction with this Guide. Likewise, illustrations and sample reports either included or referenced herein were

3、derived from various sources and information current at the time the Guide was published. Due to periodic changes in Generally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), and Government Auditing Standards (GAGAS or the “Yellow Book”), users should refer to an

4、y applicable, more current guidance/standards and modify the sample reports accordingly. Note: Please see the AASHTO website for contact information for all state transportation departments. AASHTO Uniform Audit (b) Benefits both the contract and other work, and can be distributed to them in reasona

5、ble proportion to the benefits received; or (c) Is necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown. Allowable Cost Depending on the nature of specific cost items, allowable costs may either be billed directly to cont

6、racts or included as overhead costs; however, FAR 31.201-2 provides that a cost is an allowable charge to a government contract only if the cost is reasonable in amount, allocable to government contracts, compliant with generally accepted accounting principles and standards promulgated by the Cost A

7、ccounting Standards Board (when applicable), compliant with the terms of the contract, and not prohibited by any of the FAR Subpart 31.2 cost principles. Audit A formal examination, in accordance with professional standards, of accounting systems, incurred cost records, and other cost presentations

8、to verify their reasonableness, allowability, and allocability for negotiating agreement fees and for determining allowable costs to be charged to government contracts. Audits include an evaluation of an engineering consultants policies, procedures, controls, and actual performance. Audit objectives

9、 include the identification and evaluation of all activities that contribute to, or have an impact on, proposed or incurred costs related to government contracts. Audit Cycle The series of steps that auditors perform in completing an audit engagement. The procedures performed may vary somewhat, but

10、the Audit Cycle generally includes audit planning, review of the auditees permanent file, preliminary analytical review, audit fieldwork (including entrance and exit conferences), submittal of the draft audit report to the auditee for review and comment, and the issuance of the final audit report. A

11、udit Resolution Process The process that state DOTs and the auditee engage in to resolve audit findings. This process may include the negotiation of a settlement and/or may involve legal counsel and court procedures. Audit Trail A record of transactions in an accounting system that provides verifica

12、tion of the activity of the system. A complete audit trail allows auditors to trace transactions in a firms accounting records from original source documents into subsidiary ledgers through the general ledger and into general-purpose financial statements and billings/invoices prepared and submitted

13、by the engineering consultant. Billing Rates (Hourly Labor Rates) Generally refers to the hourly labor rates invoiced by an engineering consultant for work performed on an agreement. For a cost-plus-fixed-fee agreement (the most common type of agreement), billing rates are determined based on employ

14、ees actual payroll rates. By contrast, for an all-inclusive hourly rate agreement, billing rates are determined based on actual payroll rates with additional amounts included for overhead and net fee (profit). C HAPTER 1/ORGANIZATION OF THIS G UIDE AND D EFINED T ERMS AASHTO Uniform Audit instead, t

15、he S-Corporations income or losses are passed through to its shareholders, who then report the income or loss on their individual tax returns. Cost Center A non-revenue-producing element of a business organization. Cost centers are used to accumulate and segregate costs. Cost Objective An agreement/

16、contract, function or organizational subdivision, or other work unit for which the costs of processes, products, jobs, or projects are accumulated and measured. An “intermediate cost objective” is a cost objective used to accumulate costs that are subsequently allocated to one or more indirect cost

17、pools and/or final cost objectives. Cognizant Audit This concept was developed to assign primary responsibility for an audit to a single entity (the “cognizant agency”) to avoid the duplication of audit work performed in accordance with Government Auditing Standards to obtain reasonable assurance th

18、at claimed costs are accordance with the FAR Subpart 31.2 cost principles. Such audit work may be performed by home-state auditors, a Federal audit agency, a CPA firm, or a non-home-state auditor designated by the home-state auditor. Common Control This exists in related-party transactions when busi

19、ness is conducted at less than arms length between businesses and/or persons that have a family or business relationship. Examples are transactions between family members, transactions between subsidiaries of the same parent company, or transactions between companies owned by the same person or pers

20、ons. Common control exists when a related party has effective control over the operating and financial policies of the related entity. Effective control may exist even if the related party owns less than 50 percent of the related entity. (For further discussion, see Section 8.23.B and Section 11.2.G

21、.1, Example 11-8.) Cost-Plus-Fixed-Fee Agreement An agreement in which all the cost factors, except the fixed fee, are based on the engineering consultants actual allowable costs. The fixed fee is a specific, predetermined amount, as identified in the agreement. C HAPTER 1/ORGANIZATION OF THIS G UID

22、E AND D EFINED T ERMS AASHTO Uniform Audit instead, FCCM is computed as a charge rate based on the following factors: The average annual net book value of the engineering consultants investments in the fixed assets used for allowable business activities (in accordance with the cost principles of FAR

23、 Subpart 31.2), The prorated average Prompt Payment Act Interest Rate4determined by the U.S. Secretary of the Treasury for the accounting period in question, and The engineering consultants direct labor base used to determine overhead rates. (See Section 8.6 for further discussion regarding FCCM.) C

24、ost Principles of FAR Subpart 31.2 These principles establish the framework for determining allowable and unallowable charges against Federal-aid highway program (FAHP) contracts. FAR Subpart 31.2 lists expressly unallowable costs and establishes criteria for determining the allocability and reasona

25、bleness of cost items. Directly-Associated Cost Refers to a cost generated solely as a result of the incurrence of another cost, and which would not have been incurred had the other cost not also been incurred (see FAR 31.001 and FAR 31.201-6(a). If a cost is determined to be unallowable, then its d

26、irectly-associated costs also must be disallowed. Direct Cost Any cost that is identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct

27、 costs of that contract. All costs identified specifically with other final cost objectives of the contractor are direct costs of those cost objectives. Direct costs include labor, materials, and reimbursable expenses incurred specifically for an agreement. All direct labor costs allocable to design

28、 and engineering contracts (regardless of the contract type, e.g., lump-sum versus actual cost) must be included in the direct labor base regardless of whether the costs are billable to a client. Entrance Conference A meeting between the auditor and the auditee during which the purpose and scope of

29、the audit are discussed. Exit Conference A meeting held after the completion of audit field work. The exit conference generally focuses on a discussion of the preliminary audit findings, which are subject to change based on further audit testing, supervisory review, and additional information submit

30、ted by the auditee. Federal-Aid Highway Program (FAHP) Contracts Refers to agreements for the acquisition of supplies and services that are partially or fully funded from Federal sources. “Government contracts” is a more encompassing term, as it includes FAHP contracts and all other contracts with g

31、overnmental entities, including contracts that are fully funded by state or municipal governments. 4Current Treasury rates are available at: www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/rates.htm. C HAPTER 1/ORGANIZATION OF THIS G UIDE AND D EFINED T ERMS AASHTO Uniform Audit that resour

32、ces are used consistent with laws, regulations, and policies; that resources are safeguarded against waste, loss, and misuse; and that reliable data are obtained, maintained, and fairly disclosed in reports. Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs) Business entiti

33、es in which the members (owners) generally are liable only to the extent of their invested capital. LLCs and LLPs usually are taxed as partnerships (no taxation at the corporate level); although some LLCs elect to be taxed like C-Corporations (taxation applies at the corporate level, before the dist

34、ribution of dividends). Lump-Sum (Fixed-Price) Agreement An agreement in which the method of payment for delivered goods and/or services is a fixed amount that includes salaries, overhead, and profit. Once the lump-sum amount is determined, the goods and/or services must be provided regardless of th

35、e engineering consultants actual costs. No adjustments are C HAPTER 1/ORGANIZATION OF THIS G UIDE AND D EFINED T ERMS AASHTO Uniform Audit CAS 401, 402, 403, 23 U.S.C. 112(D) accordingly, engineering consultants generally are required to submit a compliance statement (certification) annually to each

36、 state DOT. C HAPTER 2/ADEQUACY OF A CCOUNTING R ECORDS AASHTO Uniform Audit accordingly, the CPA must not function as a component of the internal control system. As described previously in Section 2.5.A, the engineering consultant should identify, segregate, and disallow unallowable costs as transa

37、ctions occur. Management must not rely on the CPAs end-of-year audit testing as the sole method for detecting unallowable costs. Note: Before accepting FAR audit engagements, CPAs must determine if they have the required specialized knowledge to complete the engagement (see Statement on Auditing Sta

38、ndards No. 105). In cases where a CPAs primary area of expertise does not include the A/E industry and the FAR Subpart 31.2 cost principles, said CPA should engage the services of a qualified specialist to consult with, conduct training, and/or review audit programs and audit reports. CPAs should do

39、cument their qualifications to perform the audit, identify any specialists used in the engagement and must maintain adequate evidence of their professional registration status and results of peer reviews. 2. The CPAs Responsibilities for Fraud Detection The CPA must immediately notify the appropriat

40、e state DOTs of any findings such as those discussed below: GAGAS 4.17c and 5.18b. Auditors must report deficiencies in internal control, fraud, illegal acts, violations of provisions of contracts or grant agreements, and abuse. C HAPTER 2/ADEQUACY OF A CCOUNTING R ECORDS AASHTO Uniform Audit & Acco

41、unting Guide (2016 Edition) 16 | Page GAGAS 4.30 and 5.29. When either of the following circumstances exists, auditors should report directly to parties outside the audited entity with respect to known or likely fraud, illegal acts, violations of provisions of contracts or grant agreements, or abuse

42、: (a) When entity management fails to satisfy legal or regulatory requirements to report such information to external parties specified in law or regulation, auditors should first communicate the failure to report such information to those charged with governance. If the audited entity still does no

43、t report this information to the specified external parties as soon as practicable after the auditors communication with those charged with governance, then the auditors should report the information directly to the specified external parties. (b) When entity management fails to take timely and appr

44、opriate steps to respond to known or likely fraud, illegal acts, violations of provisions of contracts or grant agreements, or abuse that (1) is likely to have a material effect on the financial statements and (2) involves funding received directly or indirectly from a government agency, auditors sh

45、ould first report managements failure to take timely and appropriated steps to those charged with governance. If the audited entity still does not take timely and appropriate steps as soon as practicable after the auditors communication with those charged with governance, then the auditors should re

46、port the entitys failure to take timely and appropriate steps directly to the funding agency. GAGAS 4.31 and 5.30. Auditors should comply with the requirements discussed above even if the auditors have resigned or were dismissed from the audit prior to its completion. GAGAS 4.32 and 5.31. Auditors h

47、ave a professional obligation to obtain sufficient evidence that management of the audited entity appropriately reported findings to outside parties. C. Selection of CPA Firm as Overhead Auditor There are many factors involved in selecting a CPA to perform an overhead audit. The CPA must follow AICP

48、A professional standards and must obtain sufficient, appropriate audit evidence to support the opinion that the indirect cost rate schedule was prepared in compliance with the FAR 31.2 Cost Principles. The following list, although not comprehensive, provides some factors for consideration. The CPA s

49、hould: Meet all GAGAS requirements, including requirements for adequate continuing professional education (CPE) in governmental auditing. Have received favorable peer review reports. Be well versed in GAGAS, the provisions of FAR Part 31 (including the FAR Subpart 31.2 cost principles), Cost Accounting Standards, related laws and regulations (e.g., the Internal Revenue Code, the Federal Travel Regulation, and 23 U.S.C. 112), and the guidelines and recommendations set forth in this Guide. Have adequate experience in applying GAGAS. Have a