Audits of Small Business Investment Companies

GAO discussed a certified public accounting (CPA) firm audit of a small business investment company (SBIC) that owed the Small Business Administration (SBA) $28.5 million when it filed for bankruptcy in August 1989. GAO found that: (1) the SBA Office of Inspector General (OIG) properly allowed the CPA firm to review an OIG draft report; (2) OIG properly handled its SBIC investigations; (3) the CPA firm followed generally accepted auditing standards in conducting its SBIC audit, and appropriately qualified its audit report; (4) generally accepted auditing standards were not adequate to detect SBIC problems; and (5) had made recommendations addressing improvements to auditing standards.