An adverse opinion is one in which the auditor states that the financial
statements are not fairly presented in conformity with generally accepted
The systematic examination of the assertions of a third party to evaluate
conformance to some norm or benchmark.
A clean or unqualified opinion is one in which the auditor can state,
without reservation, that the financial statements are fairly presented
in conformity with generally accepted accounting principles.
Disclaimer of Opinion:
An auditor's report that states that the auditor is unable to offer an
opinion on the fair presentation of all or a portion of the financial
Economy and efficiency audits:
Audits conducted to determine if governments are performing their duties
in the most economical and efficient manner possible.
Auditors who are independent, both in fact and appearance of the entities
Financial Statement audits:
Audits designed to provide users of financial statements with assurance
concerning their reliability.
An internal control weakness or instance of noncompliance reported in
conjunction with an audit performed in conformity with Generally Accepted
Government Auditing Standards. Findings are normally composed of 5 elements:
Criteria, Condition, Cause, Effect, and Recommendation.
Generally Accepted Accounting Principles
Criteria used by auditors to determine if financial statements are fairly
Generally Accepted Auditing Standards
Auditing Standards established by the Auditing Standards Board of the
American Institute of Certified Public Accountants. All financial statement
audit engagements must follow GAAS.
Generally Accepted Government Auditing Standards (GAGAS):
Auditing standards established by the U. S. General Accounting publication
Government Auditing Standards, also known as the "Yellow Book".
GAGAS for financial statement audits incorporate the field work and reporting
standards of GAAS.
Government Auditing Standards:
A 1988 publication of the U. S. General Accounting Office that sets "generally
accepted government auditing standards". This publication is often
known simply as the "Yellow Book".
Auditors who are employees of the entities they audit and report to management.
Internal Control Structure:
The policies and procedures established by management to ensure the integrity
and comprehensiveness of the data collected by the accounting system for
use in internal and external financial reports, as well as the overall
"control environment" in which the government operates.
A letter obtained by the auditor from a government's legal counsel to
corroborate management's treatment of pending litigation in the financial
statements and in notes to the financial statements.
A letter from the auditor to management describing internal control weaknesses
or compliance violations discovered in the course of a financial statement
Management representation letter:
A letter obtained by the auditor from management acknowledging management's
responsibility for the financial statements and asserting that the information
they contain is complete.
A potential error is considered to be "material" (i.e., important,
significant) to the financial statements if it could have the effect of
changing a reader's impression of the government's financial position,
results of operations, or cash flows. In making judgments concerning a
potential error's "materiality", auditors consider both its
qualitative and quantitative impact.
Areportable condition that could have a significant effect upon the fair
presentation of the financial statements.
A private sector term used to describe economy and efficiency audits.
A term used to refer to both economy and efficiency audits and program
Audits aimed at establishing whether government programs and activities
are meeting their stated goals and objectives.
A qualified opinion is one in which the auditor expresses reservations
about the fair presentation of the financial statements in conformity
with generally accepted accounting principles.
Grant-related charges whose allowability has been questioned by an auditor.
A significant deficiency in internal controls discovered by the auditor
in the course of a financial statement audit.
Segregation of duties:
An internal control procedure whereby no one individual is placed in a
position of being able to both commit and conceal an irregularity.
Under the Single Audit Act of 1984, an audit that is specifically designed
to meet the needs of all federal grantor agencies. Single audits must
be performed in accordance with generally accepted auditing standards
and the provisions of the Office of Management and Budget's Circular A-133,
Audits of States, Local Governments, and non-profit organizations.
An unqualified or "clean" opinion is one in which the auditor
can state, without any reservation, that the financial statements are
fairly presented in conformity with generally accepted accounting principles
An informal name for the U. S. General Accounting Office's publication
Government Auditing Standards, which sets generally accepted government