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Cases 620:1 (Selection of Auditors) Gotham City is a medium-sized government with a general fund budget of $100 million, multiple enterprise funds, two component units, and federal financial award expenditures that average $15 million a year with one to three major programs in a typical year Gotham has issued an audit request for proposal (RFP) and received six proposals (summarized below) Size Governmental Expertence Single Audit Experience Proposed Fees Comments Regional Extensive, but school districts only Education related $ 100.000 + $ 7,000 each Good reputation. All school districts in the state have the same year end as Gotham. after 1 MFAP National Broad range of governments, many larger and more Extensive $98, 000 + $ 20, 000 for Good reputation, Firm is household name, Below partner and manager, engagement team is new to government. Will service audit complex than Gotham Single Audit from Metropolis 200 miles away. C Regional Very limited None $75,000 Excellent local office reputation. Personable partner who knows several council members. Firm needs to diversify practice and la willing to commit resources to learn governmental auditing. D Small Numerous small cities Limited, as most clients do not $85,000 + $15,000 for Good reputation. Most existing clients have same year end. Loca meet threshold Single Audit Large Several counties, a few cities and a school district. Extensive $95, 000 + $6,000 each Good reputation. Recently lost school district audit to firm "A" freeing capacity. Counties have a year end 3 months after Gotham. Local after 15 MFAP Regional Variety of governments Extensive $93, 000 + $7,000 after 1st Good reputation and solid engagement team. Misspelled "Gothan" in the proposal. MFAP Gotham City has a charter requirement that requires it to issue its financial statements within 4 months of year end, which is unusually fast for government. Gotham has also accepted a new federal program that has a reputation for complex compliance requirements. Required Assuming all proposing firms have good peer reviews and no negative enforcement actions from any regulatory body, analyze the pros and cons of each proposing firm and select the three top firms to be interviewed by the city council audit committee. Discuss any additional procedures you may employ as part of the selection process. C20-2 (Evaluating Single Audit Findings and Questioned Costs) A recent single audit report for the County of Ashton contains the following: "I. Summary of Auditor's Results" (see below). Based on the content of this chapter, information contained in the AICPA website (www.sicpacorp) and these excerpts from the county's Single Audit Report, analyze and respond briefly to the following questions. Part 1: Financial Statement Audit (GAGAS). Refer to items 1-3 in the county's Schedule of Findings and Questioned Costs that follows: a. Which of these is based primarily on the AICPA audit standards? The GAO auditing standards? b. What are significant deficiencies in internal controls? What are material weaknesses? C. How could the auditor properly render an unmodified opinion on the financial statements if there are material weaknesses in internal controls over financial reporting, significant deficiencies and material weaknesses in internal control over major programs, and several modified opinions on major program compliance