The Office of Management and Budget has revised its guidelines for the minimum requirements for audits of federal financial statements. OMB issued [Bulletin 06-03] today outlining the changes, which include redefining some terms to align them more closely with their private-sector meanings.
The changes, which OMB drafted in coordination with inspectors general, apply to audits of financial statements of all executive departments, agencies and government corporations.
The bulletin changes the definitions of several terms used in financial management and auditing to bring them more in line with private-sector terminology.
The current definition of material weakness, which will hold for financial reporting periods ending before Dec. 15, is the use of internal controls that do "not reduce to a relatively low level" the risk that errors or fraud could occur and not be quickly detected. The term is now defined as any significant deficiency or combination of significant deficiencies that leads to a "more than remote" chance that a material misstatement of financial results could occur and not be detected.
“American taxpayers deserve a government that is both responsive and accountable," said Clay Johnson, OMB's deputy director for management. "The new federal auditing guidelines reinforce the importance of proper accounting and reporting practices to ensure that we properly reduce wasteful spending in government and take care of the taxpayers’ money.”