Review of Audit Quality of Certified Public Accountants

Testimony was given on the quality by certified public accountants' (CPA) audits of entities receiving federal funds. GAO found that: (1) CPA did not satisfactorily comply with standards on 34 percent of the governmental audits they performed, making the audit reports less useful in ensuring that federal funds are used for authorized purposes; (2) more than half of the unsatisfactory audits had severe standards violations; (3) the two predominant problems in performing governmental audits were insufficient audit work in testing compliance with governmental laws and regulations and evaluating internal accounting controls, including controls over federal expenditures; and (4) smaller CPA firms had a greater problem than larger firms in satisfactorily complying with standards. In their reviews of CPA audit quality, the inspectors general (IG) identified: (1) problems in 45 percent of the audits they reviewed for quality control; and (2) reporting problems needing correction in one out of four audits. IG did not accept half of these audits, because the required audit work was not performed or the audit documentation was inadequate or unclear.