A single audit is caused by an organization, such as a non-profit, state/local government, or university, expending $750,000 or more in federal awards (grants, loans, contracts) during a single fiscal year. It is a mandatory compliance requirement under the Office of Management and Budget (OMB) Uniform Guidance, not a discretionary review.
What triggers the requirement for a Single Audit? Any non-federal entity that expends $1 million or more in federal funds during its fiscal year is required to obtain a Single Audit (or Program-specific Audit, if applicable.)
IRS audits are triggered by discrepancies the IRS's automated systems catch, like unreported income from 1099s, claiming excessive deductions (charity, business meals, home office) compared to your income bracket, large business losses, math errors, significant income jumps, or claiming hobby losses as business expenses, with higher-income earners generally facing more scrutiny.
Organizations that receive significant federal grant funding should be aware that they are required to complete an annual assurance review known as a single audit. This process is typically conducted by a third-party CPA and is meant to provide oversight on how federal money is being spent.
Inconsistent or inaccurate financial reporting is one of the most frequent reasons for an audit.
Audit findings are typically resolved within six months of an audit report being issued.
A Single Audit, also known as a Uniform Guidance Audit, is a financial reporting and compliance audit focused on entities that expend $1 million or more in federal awards in a fiscal year beginning after October 1, 2024. This is an increase from the $750,000 Single Audit threshold.
A Single Audit includes an audit of both your organization's financial statements and compliance with federal award requirements for those programs identified as major programs—based on application of the risk-based approach and criteria outlined in Title 2 Code of Federal Regulations (CFR) Section 200.518 and .
What happens during an audit? Internal audit conducts assurance audits through a five-phase process which includes selection, planning, conducting fieldwork, reporting results, and following up on corrective action plans.
It's good to be specific, but there's a danger in words such as “everything,” “nothing,” “never,” or “always.” “You always” and “you never” can be fighting words that can distract readers into looking for exceptions to the rule rather than examining the real issue.
The $1 million single audit threshold is effective for federal awards that were issued after October 1, 2024, meaning the new threshold is effective for fiscal years that end on or after September 30, 2025. This is a 33% increase from the previous $750,000 threshold that had been in place since 1997.
The three main types of audits, focusing on who performs them, are Internal Audits (by employees for improvement), External Audits (by independent CPAs for stakeholders), and Government Audits/IRS Audits (by tax authorities). Alternatively, focusing on the purpose, they can be categorized as Financial Audits (financial statements), Compliance Audits (rules/regulations), and Operational Audits (efficiency/effectiveness).
The IRS uses several different selection methods: Random selection and computer screening - sometimes returns are selected based solely on a statistical formula. We compare your tax return against "norms" for similar returns.
Unreported income
The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn't reported on your return, could trigger further review.
Entities that spend federal grant funds are required to submit an audit if they meet the following spending thresholds: $750,000 or more for Fiscal Years starting before October 1, 2024. $1,000,000 or more for Fiscal Years starting on or after October 1, 2024.
Since its initial legislation in 1984, the single audit has been used as a mechanism for ensuring accountability with these federal grants. Despite the consistent goal of accountability, concerns with single audit quality (i.e., whether audits reach appropriate conclusions) persist.
Recognizing red flags such as unexplained losses, irregular transactions, and suspicious accounting practices is crucial for detecting financial fraud before it escalates. Forensic audits provide the in-depth, objective investigation needed to uncover hidden irregularities and safeguard your business.
A questioned cost means an amount, expended or received from a federal award, that in the auditor's judgment is noncompliant or suspected noncompliant with federal statutes, regulations or the federal award's terms and conditions.
While the overall individual audit rates are extremely low, the odds increase significantly as your income goes up (especially if you have business income). According to IRS audit statistics, about 0.4% of total individual returns get audited by the IRS.
A successful internal audit function relies on four fundamental pillars, often referred to as the “4 C's”: Competence, Confidentiality, Communication, and Collaboration. These principles guide auditors in delivering meaningful and impactful results. Let's explore each of these elements in detail.
1) Correspondence Audit
The first of the four types of tax audits are correspondence audits are the most common type of IRS audits. In fact, they comprise roughly 75% of all IRS audits.
The purpose of an audit is the expression of an opinion as to whether the financial statements are fairly presented in conformity with appropriate accounting principles.