Reporting on Internal Control and on Compliance with Laws, Regulations, and Provisions of Contracts or Grant Agreements

GAO-03-673G Government Auditing Standards > Chapter 5 Reporting Standards for Financial Audits > Reporting on Internal Control and on Compliance with Laws, Regulations, and Provisions of Contracts or Grant Agreements

5.08 The standard related to reporting on internal control and compliance for financial statement audits performed in accordance with GAGAS is:

When providing an opinion or a disclaimer on financial statements, auditors should include in their report on the financial statements either a (1) description of the scope of the auditors’ testing of internal control over financial reporting and compliance with laws, regulations, and provisions of contracts or grant agreements and the results of those tests or an opinion, if sufficient work was performed, or (2) reference to the separate report(s) containing that information. If auditors report separately, the opinion or disclaimer should contain a reference to the separate report containing this information and state that the separate report is an integral part of the audit and should be considered in assessing the results of the audit.

5.09 For audits of financial statements in which auditors provide an opinion or disclaimer, auditors should report the scope of their testing of internal control over financial reporting and of compliance with laws, regulations, and provisions of contracts or grant agreements including whether or not the tests they performed provided sufficient evidence to support an opinion on the effectiveness of internal control over financial reporting and on compliance with laws, regulations, and provisions of contracts or grant agreements.

5.10 Auditors may report on internal control over financial reporting and on compliance with laws, regulations, and provisions of contracts or grant agreements in the opinion or disclaimer on the financial statements or in a separate report or reports. When auditors report on internal control over financial reporting and compliance as part of the opinion or disclaimer on the financial statements, they should include an introduction summarizing key findings in the audit of the financial statements and the related internal control and compliance work. Auditors should not issue this introduction as a stand-alone report.

5.11 When auditors report separately (including separate reports bound in the same document) on internal control over financial reporting and compliance with laws and regulations and provisions of contracts or grant agreements, the opinion or disclaimer on the financial statements should state that the auditors are issuing those additional reports. The opinion or disclaimer on the financial statements should also state that the reports on internal control over financial reporting and compliance with laws and regulations and provisions of contracts or grant agreements are an integral part of a GAGAS audit and should be considered in assessing the results of the audit.