The following descriptions relate to an independent CPA rm that includes among its audit clients municipalities, school

The following descriptions relate to an independent CPA firm that includes among its audit clients municipalities, school districts, and not-for-profit organizations, all of which receive federal financial assistance. Each description presents a possible violation of Government Auditing Standards (summarized in Table 16-1). For each description indicate the specific standard at issue and tell why there might be a violation.
1. Each year the managing partner appoints a committee of three of its partners to evaluate the quality of the work performed by the firm. The firm is not otherwise reviewed by independent parties.
2. When the firm conducts a financial examination, its primary objective is to determine whether the auditee's financial system is properly designed, the system is operating as intended, and the resultant financial records can be relied upon. Accordingly, the department does not test explicitly for fraud or other illegal activities.
3. The firm has a formal program of continuing professional education. To eliminate the need to pay for the staff to attend outside courses, it brings in outside experts to conduct forty hours per year of training. Each year the training is directed to a specific area. This year's area was changes in the federal tax code; last year's was ''how to market the firm.''
4. The firm periodically assigns members of its staff on a temporary basis to government and not-for-profit audit clients. The staff members typically serve as financial consultants or as acting financial administrators.
5. The firm may not test compliance with certain federal grant provisions if the grant was examined by the client's internal auditors and no violations were detected.
6. In its single audit of a client's federally assisted program, the firm detected numerous instances of noncompliance with applicable federal regulations. Inasmuch as none of the violations were either serious or material, the firm reported them to the client in its ''management letter'' but did not mention them in its compliance report to federal officials.
7. As part of all financial audits of federal funds recipients, the auditors carefully assess the adequacy of internal controls. They do not, however, prepare a specific report on internal controls or address them in the standard audit report.