Which auditing process is required under the Single Audit Act?

The Single Audit Act requires entities that receive federal funding to undergo compliance-based audits. These audits evaluate whether the entity is adhering to the requirements of federal regulations and the terms of the federal awards it has received. The focus of the audit is not solely on financial reporting in accordance with Generally Accepted Accounting Principles (GAAP) but also on compliance with applicable laws and regulations, which are crucial for ensuring appropriate use of federal funds.

Thus, selecting the need for a GAAP-based opinion from an auditor highlights an important but separate aspect of the audit process under the Single Audit Act. While financial statements should be presented fairly per GAAP, the Single Audit specifically mandates a compliance-based approach to verify that funds were used appropriately and in line with federal guidelines. The distinction is important since the Single Audit is unique in its combined focus on both financial statements and compliance, particularly for entities that expend a significant amount of federal funds.