What Is An Audit?

The Association of Government Accountants encourages all chapters to prepare annual financial statements and have them audited by another chapter or knowledgeable professional.
What is an audit? The AICPA defines an audit as an in-depth review of an entity's accounting data summaries. It also involves tests of financial statement line items, such as assets or liabilities, and tests of individual account balances. An external auditor, otherwise known as a certified public accountant (CPA), performs financial tests to gather "sufficient and competent evidential matter." "Evidential matter" is proof upon which a CPA bases his/her audit opinion. "Evidential matter" is "competent" when it is relevant to the process, segment or business unit under review.
What is the objective of an audit? The objective of a financial statement audit is to provide an opinion, based on the assertions of management, as to the amounts and disclosures reported by the entity. The auditor must gather supporting evidence from management, customers, creditors, etc. to support an opinion on those financial statements.
Which entities must have an audit? All governments are required by the State of Michigan to have an audit performed by a CPA and submitted to the Department of Treasury within 6 months of the government's fiscal year end. Nonprofit entities do not have an overall requirement for an audit by the State, but may be required to have audited financial statements as a provision of grant agreements, or by expending $500,000 or more in federal awards in any given fiscal year. The State Attorney General's Office has provided additional considerations on whether a nonprofit entity, like the West Michigan Chapter of the AGA, is required to have an audit. These considerations are based on the net of total support, less restricted grants from foundations and government grants.
The West Michigan Chapter of the AGA does not currently meet these thresholds and is not required to have a formal audit conducted. However, to demonstrate our commitment to fiscal transparency, the Chapter Executive Committee has submitted its records to an independent member of the AGA for an in-depth review of the amounts and tracing of the summary data to subledgers, bank statements and reconciliations. etc. This procedure does not qualify as an audit in accordance with GAAS (generally accepted auditing standards), nor does it qualify as an audit in accordance with GAGAS (Government Auditing Standards). Please keep this in mind when reviewing the "audits" posted to the chapter's website.