RELATING FISCAL AUDITING TO COMPLIANCE AUDITING
Fred M. Oliver
Partner, Salt Lake City Office
Presented before the Midwest State Audit Agencies Professional Development Seminar, Bismarck, North Dakota-May 1973
One of the very significant challenges that has recently come to the forefront in the accounting profession in the United States is the need to delineate clearly the role of the CPA in the performance of audits other than the traditional
examination of financial statements. One of the most important problems
has been the determination of the extent to which generally accepted auditing standards, as developed for guidance of CPAs in conducting financial audits, apply to compliance and performance audits. To the extent that such standards have been determined to be inapplicable, new standards have, of course, had to be developed.
It is in the field of government rather than industry that the effort to develop
standards for such audits has been spearheaded, particularly at the federal level. The basic need of Congress to determine that federal grants to states and local governments are properly spent—specifically, to determine that there has been compliance with the related requirements of each grant or program;
that such funds have been spent with economy, efficiency and effectiveness;
and that the basic goals of the grants are being achieved—requires that compliance and performance audits be performed. Therefore, even though development of standards is difficult, it has been urgent that they be established.
It seems both appropriate and desirable first to discuss briefly the nature of auditing standards and the manner in which they have been developed in the accounting profession to date.
DEVELOPMENT OF GENERALLY ACCEPTED AUDITING STANDARDS
As early as 1917 the American Institute of Certified Public Accountants prepared a memorandum on "Balance Sheet Audits," which was published by the Federal Reserve Board in 1918. This initial publication was revised in 1929 and reissued under the title, "Verification of Financial Statements." In 1936 it was again revised and reissued under the Institute's sponsorship in a