Question

Dupage Water District is a not-for-profit entity that received federal financial assistance during the year. The District engaged an auditor for the annual audit of its financial statements. In compliance with Government Auditing Standards, the auditor also designed his audit of the District to provide reasonable assurance of detecting material misstatements resulting from illegal acts. What additional requirements does the auditor have with regard to the entity’s compliance?

1. None.
2. The auditor must design the audit to provide reasonable assurance of detecting noncompliance with terms of grants and contracts.
3. The auditor must design the audit to provide reasonable assurance of detecting all misstatements resulting from illegal acts.
4. The auditor must design the audit to provide reasonable assurance of detecting any fraud.

Answer 1

b The auditor must design the audit to provide reasonable assurance of detecting noncompliance with terms of grants and contracts.

B is the correct since, being a non profit organization, receiving the FEDRAL financial assistance, auditor is required to check whether all the compliance with terms of assistance has been met with. All ither points mentioNed are a part of normal audit which will be carried out otherwise as well. Additionally the auditor will be required to meet (b) part.