The audit firm of Waggoner and Allen, LLP, recently received a request to submit a proposal to audit the financial statements of the Williamson County Public School System. The system is funded mostly through property tax assessments of county residents, but it also receives over $15 million in federal financial funding in addition to private foundation gifts. State law requires all county school systems to engage a CPA to conduct an external audit of the school system’s financial statements in accordance with Government Audit Standards. While Waggoner and Allen has never audited a govern mental entity, it is seriously considering submitting a proposal to conduct the audit of the school system. The firm asked you to prepare information to help them make a decision about whether to pursue the engagement.
Please respond with your answers to the following questions:
a. Who issues Government Auditing Standards and what are the most notable differences between those standards and the AICPA auditing standards?
b. What impact, if any, does the receipt of federal financial assistance have on the audit process?
c. How might the auditor’s consideration of materiality and internal control differ from the audit of a commercial enterprise?
d. What types of reports in addition to the report on the audit of the financial statements will Waggoner and Allen need to issue?
e. How might acceptance of this engagement affect training of Waggoner and Allen staff?