An examination of the effect of the single audit act on small CPA firms

Richard J. Irvine, Louisiana Tech University


The problem was a study of how CPA firms were implementing auditing procedures for single audits that were in accordance with professional auditing standards as defined by the GAO and AICPA. Small CPA firms were selected as the research setting because the GAO reported that small CPA firms were more prone to audit quality problems.

A case study and interviews were selected as the methodology for the study. A qualitative study was used because the GAO acknowledged the absence of an absolute measure of audit quality. Ten small CPA firms were selected to participate in the study. Data were collected by questionnaires and by personal interviews. A demographics questionnaire was used to collect data to ascertain that each participating firm met the study's criterion of a small firm. Interview guides were used to collect data related to management practices and auditing procedures for the planning and supervision, internal control, and compliance components of a single audit. Questions used on these data collection instruments were developed from the audit quality control review guides that are used by the Regional Inspectors General in their quality control reviews of audit reports and audit work papers.

The study provided evidence that eight firms had reported audit management practices and audit procedures that appeared to be consistent with professional standards. One of the two remaining firms reported an audit management practice that was considered to be inconsistent with professional standards for the internal control component of a single audit. The tenth firm reported management practices and auditing procedures that were found to be inconsistent with professional standards for all three components of a single audit.

The conclusion of the study was that, given the management objective of maintaining the firm's practice in accordance with professional standards, small CPA firms can utilize available sources of information and training to deliver an audit report and compile a set of audit work papers that can pass the audit quality control systems of the Regional Inspectors General.