What is a HUD Audit Guide?
The HUD audit guide is a document designed to help independent auditors audit for-profit organizations that fall under the U.S. Department of Housing and Urban Development (HUD) jurisdiction. It usually has two major parts: the financial statement and compliance of an entity’s major HUD programs.
Although it is mandatory to use and follow the HUD audit guide, it is recommended that auditors customize the procedures according to the circumstances of the audited entity. When the auditor makes changes like audit inclusions and exclusions, including justifications in the report is required.
In this article you will learn more about:
7 Required Content of the HUD Audit Report
According to the guide, seven critical contents should be included in the HUD audit report. Below are some important details and report examples for each of the content.
#1: Financial Statements and Supplementary Information
Auditors are expected to report all the financial statements and supplementary information of all entities that have HUD programs. Understanding internal controls and carefully planning the procedures are required to effectively carry out tests and make a comprehensive report about an entity’s financial statement.
The financial information should also be according to the guidelines set by the American Institute of Certified Public Accountants. The specific section is AU-C Section 725, which sets the requirements and responsibilities of the auditor when reporting supplementary information of a financial statement.
#2: Internal Control Over Financial Reporting and on Compliance
A sufficient understanding of internal controls is required to write about the financial statements correctly. That is why it is required to put in detailed information about an entity’s internal control. This way, government bodies that will review the submitted HUD audit requirements can fully understand the financial statements’ circumstances.
Aside from that, the auditor is required to describe the testing methods done to test the internal controls and their compliance with all the applicable laws, grants, and contract agreements. The report should also contain enough evidence that an entity’s internal controls are adequate and complies with all the legal requirements.
Auditors are also required to put in the objectives of the audit like:
- Identifying the deficiencies and weaknesses of an entity’s internal controls.
- Knowing all the instances of non-compliance with any laws, regulations, contracts, and grant agreements have a material effect on the audit.
- Searching for any abuse of the financial systems and internal controls.
#3: Compliance With Requirements That Could Have a Direct and Material Effect on Each Major HUD Program
Another one of the HUD audit requirements is that the auditor should express in the report anything that could have a direct and material effect on any major HUD programs.
One of the things that can have such an effect is non-compliance with laws and regulations. Another one is the deficiencies and weaknesses in an entity’s system controls.
When an auditor finds anything that can cause these effects, the auditee should respond to each finding. Then the auditee’s response will be included in the schedule of findings, questioned costs, and recommendations.
#4: Schedule of Findings, Questioned Costs, and Recommendations
In a HUD audit report, the schedule of findings refers to a list made by the auditor that contains all the weaknesses and deficiencies that can cause direct and material effects on any major HUD program. On the schedule of findings, the auditor should indicate if the corrective action status has not started, is in progress, or has been completed.
Questioned costs refer to an amount or cost that has been included as a finding by the auditor. Usually, questioned costs are from fines caused by violations, purchases made without proper documentation, or purchases that have very questionable costs.
Recommendations are written corrective actions by the auditor for the auditee. It contains a series of suggestions to correct the finding, prevent recurrences, or remedy the current result.
#5: Management Letter
The following essential information required by the HUD audit guide is the management letter. A management letter contains all the non-material non-compliance to an entity’s management.
The letter’s purpose is to inform the entity’s management regarding their vulnerabilities and significantly involve the management in resolving these vulnerabilities. The management will then need to assess these findings and take action.
#6: Schedule of the Status of Prior Audit Findings, Questioned Costs, and Recommendations
This schedule is prepared by the auditee and contains the audit findings from the previous year and will be included in the HUD audit report. According to the HUD audit guide, the schedule of the preliminary conclusions should consist of not only the findings but also the current status.
The auditor’s role is to carefully examine and question the submitted schedule of prior findings by the auditee. When examining, the auditor should inquire about any relevant detail to the findings and make follow-ups on findings that were still not corrected. Any findings that were not fixed will be included in the findings for the current audit year.
#7: Corrective Action Plan
The corrective action plan (CAP) is a critical component of the HUD audit report prepared by the auditee. This action plan contains all the planned corrective actions with specific details, such as a list of tasks and subtasks to achieve completion and the scheduled specific date on which corrective actions will be finished.
The corrective action plan can also contain an auditee’s disagreements with the findings. And any disagreement needs to have a full explanation from the auditee to support their claims. Disagreements can also be made to recommendations, but the auditee needs a complete description and a proposed alternative action plan.
Create HUD audit reports faster and easier with a digital application
With Lumiform’s digital app, you can create forms that suit you and update them whenever you want. HUD review processes can involve a lot of paperwork. Switching to digital forms makes your review process and report writing easier. All data is instantly stored securely in the cloud, and you can access it whenever you want.
Use a digital solution like Lumiofrm’s app and desktop software to make your job easier. Streamline your processes and better share information with organizations under review. Lumiform’s digital forms management system allows you to:
- Create an unlimited number of digital templates with the form builder. Lumiform also allows you to convert existing HUD documents into a digital form.
- HUD audits can also be scheduled, notifications are sent to your mobile devices.
- Get started digitally right away by accessing over 12,000 free downloadable templates. You can also edit these to your needs.
- Prepare corrective actions during your audits. Track their status at any time via the dashboard.
- Experience real-time data collection and perform detailed analytics with your collected data.
- Create HUD Audit reports automatically when you conduct property visits and inspections or record data from clients. Then send them immediately to your clients.
- Save all your digital documents securely in the cloud, preventing unauthorized people from gaining access.
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