Compliance Audit: What Is the Auditor Actually Opining On?
Financial statement audits ask whether the numbers are fairly stated. Compliance work asks whether specified requirements were followed.
Compliance objective
Did the entity comply with specified laws, regulations, rules, contracts, or grant requirements?
Financial statement audit
The primary subject matter is the financial statements. Compliance matters can affect the audit, but the opinion is not automatically an opinion on every law.
Direct compliance engagement
When the engagement specifically addresses compliance, procedures and reporting are designed around defined compliance criteria.
Internal control
Internal control over compliance can become especially relevant in government and federal award environments.
The takeaway
Financial statement audit asks whether the numbers are fairly stated. Compliance audit asks whether specified requirements were followed.
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FAQ
Does a normal audit opinion guarantee legal compliance?
No.
Can compliance failures affect financial statements?
Yes.
Can compliance be separate subject matter?
Yes.