CPA Audit Quality: Improved Controls Are Needed To Ensure Quality Audits of Federal Loan Programs

Highlights

GAO reviewed the Department of Agriculture's (USDA), the Department of Housing and Urban Development's (HUD), and the Small Business Administration's (SBA) controls for ensuring that certified public accountants (CPA) conduct high-quality audits of their loan programs.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Agriculture	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should issue written procedures requiring loan program officials to follow up on late audit reports, specify action to be taken when the reports are late, and improve controls to ensure that those procedures and actions are taken.	Closed – Implemented The Farmers Home Administration (FmHA) has issued written procedures to address all the provisions of this recommendation.
Department of Housing and Urban Development	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should issue written procedures requiring loan program officials to follow up on late audit reports, specify action to be taken when the reports are late, and improve controls to ensure that those procedures and actions are taken.	Closed – Implemented The recommendation applied to three HUD programs. The recommendation was implemented for one of the programs, but will not be implemented for the other two programs. The HUD Office of the Inspector General has closed the recommendation because it is no longer significant enough to remain open.
Small Business Administration	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should issue written procedures requiring loan program officials to follow up on late audit reports, specify action to be taken when the reports are late, and improve controls to ensure that those procedures and actions are taken.	Closed – Not Implemented SBA believes that existing regulations are adequate.
Department of Agriculture	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should provide CPA with complete and current written audit guidance to use in the conduct of loan audits.	Closed – Implemented FmHA published an audit guide in December 1989.
Department of Housing and Urban Development	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should provide CPA with complete and current written audit guidance to use in the conduct of loan audits.	Closed – Implemented The recommendation applied to two HUD programs. The recommendation was implemented for one program, but will not be implemented for the other program. The HUD Office of the Inspector General has closed the recommendation because it is no longer significant enough to remain open.
Small Business Administration	The Secretaries of Agriculture and Housing and Urban Development and the Administrator, SBA, should provide CPA with complete and current written audit guidance to use in the conduct of loan audits.	Closed – Not Implemented The SBA OIG has been unsuccessful in getting approval from SBA management to issue written guidance.
Department of Agriculture	The Secretary of Agriculture and the Administrator, SBA, should implement procedures to review the quality of CPA audits of loan programs.	Closed – Implemented The Agriculture Inspector General has instituted a quality review program.
Small Business Administration	The Secretary of Agriculture and the Administrator, SBA, should implement procedures to review the quality of CPA audits of loan programs.	Closed – Implemented The SBA Inspector General has instituted a quality review program.
Department of Agriculture	The Secretary of Agriculture and the Administrator, SBA, should require that audits of participants in loan programs be performed in accordance with generally accepted government auditing standards (GAGAS).	Closed – Implemented REA began requiring GAGAS audits in December 1991. FmHA requires GAGAS audits.
Small Business Administration	The Secretary of Agriculture and the Administrator, SBA, should require that audits of participants in loan programs be performed in accordance with generally accepted government auditing standards (GAGAS).	Closed – Not Implemented The SBA OIG has been unsuccessful in getting approval from SBA management to require that audits of participants in loan programs be performed in accordance with GAGAS.

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Topics

Auditing and Financial Management

AccountantsAccounting errorsAudit reportsAuditing proceduresAuditing standardsHousing programsInternal controlsMortgage programsNoncomplianceSmall business loans