Findings from a Decade of Single Audits: The Implications of Organizational Structure, Auditors, and Threshold Changes

• In Event: Nonprofit and Governmental Auditing

Abstract

Single audits are the most comprehensive of audits, requiring additional tests of internal controls and compliance with grant provisions when expenditures of federal awards exceed a specified threshold (currently $500,000). In this study, we examine the differential results of single audits for two types of entities – governmental and nonprofit, and three types of auditors – government, Big 4 accounting firm, and other, over the 2001 – 2010 period. This period included a change in threshold and was characterized by significant changes in the accounting profession. In the first stage of our study, we find fewer instances of qualified audit opinions, internal control deficiencies, and questioned grant costs among nonprofit entities. In response to these findings, we next examine the implications of auditor selection and threshold changes in explaining these differences. We find evidence of differences by auditor type that may suggest decision-making biases and/or differences based on risk assessment that have implications for the policy-making process. These findings are particularly significant as the Office of Management and Budget (OMB) embarks upon another threshold increase which would significantly reduce the number of annual single audit filings, with a disproportionate share of the decrease among nonprofit filers.

Authors

• Tammy R Waymire, Northern Illinois University

• Thomas Zachary Webb, Mississippi State University

• Timothy D West, Northern Illinois University