[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1773.32]

[Page 987]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1773--POLICY ON AUDITS OF RUS BORROWERS--Table of Contents
 
                  Subpart D--RUS Reporting Requirements
 
Sec. 1773.32  Report on compliance and on internal control over financial reporting.

    As required by GAGAS, the CPA must prepare a written report 
describing the auditors testing of compliance with applicable laws, 
regulations, contracts, and grants, and on internal control over 
financial reporting and present the results of those tests. This report 
must be signed by the CPA and must include, as a minimum:
    (a) The scope of the CPA's testing of compliance with laws and 
regulations and internal control over financial reporting including 
whether or not the tests performed provided sufficient evidence to 
support an opinion on compliance or internal control over financial 
reporting and whether the CPA is providing such opinions;
    (b) If conditions believed to be material weaknesses considered to 
be reportable conditions are disclosed, the report should identify the 
material weaknesses that have come to the CPA's attention;
    (c) If no reportable instances of non-compliance and no reportable 
conditions were found, the CPA must issue a report as illustrated in RUS 
Bulletin 1773-1.
    (d) If material instances of non-compliance and reportable 
conditions are identified, the CPA must issue a report as illustrated in 
RUS Bulletin 1773-1.
    (e) Other nonmaterial instances of noncompliance should not be 
disclosed in the report on compliance and on internal control over 
financial reporting, but should be reported in a separate communication 
to the board of directors, preferably in writing. All such 
communications must be documented in the workpapers and submitted to RUS 
in compliance with Sec. 1773.21.
    (f) If the CPA has issued a separate letter detailing immaterial 
instances of noncompliance, the report on compliance and on internal 
control over financial reporting must be modified to include a statement 
such as:

    We noted certain immaterial instances of noncompliance, which we 
have reported to the management of (borrower's name) in a separate 
letter dated (month, day, year).

    (g) If the CPA has issued a separate letter to management to 
communicate other matters involving the design and operation of the 
internal control over financial reporting, the report on compliance and 
on internal control over financial reporting must be modified to include 
a statement such as:

    However, we noted other matters involving the internal control over 
financial reporting that we have reported to the management of 
(borrower's name) in a separate letter dated (month, day, year).

    (h) The report must contain the status of known but uncorrected 
significant or material findings and recommendations from prior audits 
that affect the current audit objective.

[63 FR 38723, July 17, 1998, as amended at 66 FR 27836, May 21, 2001]