An auditor is performing a compliance audit of a government entity. The auditor identifies a material instance of noncompliance with a grant requirement. The entity has corrected the noncompliance and the grantor agency has waived any penalties. How should the auditor report this finding?

Answer options:

The finding need not be reported since it was corrected and waived.

The auditor should issue an adverse opinion on compliance.

The auditor must include the finding in the Schedule of Findings and Questioned Costs.

The auditor should report it only in the management letter.

How to approach this question

Single Audit Reporting: Material Noncompliance = Finding. It goes in the 'Schedule of Findings and Questioned Costs'.

Full Answer

C.The auditor must include the finding in the Schedule of Findings and Questioned Costs.✓ Correct

Under Government Auditing Standards and the Uniform Guidance, material noncompliance must be reported in the auditor's Schedule of Findings and Questioned Costs, even if corrected. The waiver affects the liability, not the fact that noncompliance occurred.

Common mistakes

Thinking 'No Harm, No Foul' (Option A). In government auditing, the rule violation itself is the issue.

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