U.S. COMMODITY FUTURES TRADING COMMISSION 


OFFICE OF INSPECTOR GENERAL 


Three Lafayette Centre 


1155 21st Street, NW, Washington, DC 20581 


Teleohone: (2021 418-5110 


March 6, 2017 

Hubert Sparks 

In spector General 

Appalachian Regiona l Commission Office of Inspector General 

1666 Connecticut Avenue, NW 

Washington, DC 20009 

Dear Hubie, 

Attached is the External Modified Audit Peer Review Report ofthe Appalachian 

Regional Commission Office ofthe Inspector General, (OIG Report: 16-0 -01). 

This peer review was conducted in accordance with Generally Accepted 

Government Auditing Standards and the Council ofthe Inspectors General on 

Integrity and Efficiency Guide for conducting modified peer reviews. 

We thank you and a ll of your staff that we dealt with for your assistance and 

cooperation during the conduct of the review. If you have a ny questions, please 

contact Miguel Castillo at (202) 418-5084 or mcastillo@cftc.gov. 

S.incerely, 

Inspecto

o; ~ r General 

U.S. Commodity Futures Trading Commission
 

 

 

 

 

	 

U.S. COMMODITY FUTURES TRADING COMMISSION 

OFFICE OF INSPECTOR GENERAL 

Three Lafayette Centre
 

1155 21st Street, NW, Washington, DC 20581
 

Telephone: (202) 418-5110
 

TO: Hubert Sparks 

Inspector General 

Appalachian Regional Commission Office of the Inspector

General 

FROM:	 Miguel A. Castillo, CPA, CRMA 

Assistant Inspector General for Auditing

DATE:	 March 6, 2017

SUBJECT: System Review Report - External Modified Audit Peer Review

Discussion Draft Report of the Appalachian Regional 

Commission Office of the Inspector General 

 (OIG Report: 16-O-01) 

We have reviewed the system of quality control for the audit organization of 

the Appalachian Regional Commission (ARC) Office of the Inspector General 

(OIG) in effect for the three years ended September 30, 2016. A system of 

quality control encompasses ARC OIG’s organizational structure and the 

policies adopted and procedures established to provide it with reasonable 

assurance of conforming to Generally Accepted Government Auditing 

Standards (GAGAS). The elements of quality control are described in 

GAGAS. ARC OIG is responsible for establishing and maintaining a system 

of quality control that is designed to provide ARC OIG with reasonable 

assurance that the organization and its personnel comply with professional 

standards and applicable legal and regulatory requirements in all material 

respects. Our responsibility is to express an opinion on the design of the 

system of quality control and ARC OIG’s compliance therewith based on our 

modified review. 

Our review was conducted in accordance with GAGAS and the Council of the 

Inspectors General on Integrity and Efficiency (CIGIE) Guide for Conducting 

Modified Peer Review of the audit organizations of federal offices of 

Inspector General. During our review, we met with ARC OIG personnel and 

obtained an understanding of the nature of the ARC OIG audit organization, 

and the design of ARC OIG’s system of quality control sufficient to assess 

the risks implicit in its audit function. Based on our assessments, we 

selected audits and attestation engagements, collectively referred to as 

"audits", and administrative files to test for conformity with professional 

standards and compliance with ARC OIG’s system of quality control. The 

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audits selected represented a reasonable cross-section of ARC OIG’s audit 

organization. Prior to concluding the peer review, we reassessed the 

adequacy of the scope of the modified peer review procedures and met with 

ARC OIG management to discuss the results of our review. We believe that 

the procedures we performed provide a reasonable basis for our opinion. 

In performing our review, we obtained an understanding of the system of 

quality control for the ARC OIG audit organization. In addition, we tested 

compliance with ARC OIG's quality control policies and procedures to the 

extent we considered appropriate. These tests covered the application of 

ARC OIG's policies and procedures on selected audits. Our review was 

based on selected tests; therefore, it would not necessarily detect all 

weaknesses in the system of quality control or all instances of 

noncompliance. 

There are inherent limitations in the effectiveness of any system of quality 

control, and, therefore, noncompliance with the system of quality control 

may occur and not be detected. Projection of any evaluation of a system of 

quality control to future periods is subject to the risk that the system of 

quality control may become inadequate because of changes in conditions, 

or because the degree of compliance with the policies or procedures may 

deteriorate. Appendix A to this report identifies scope and methodology, and 

a list ARC OIG audits peer reviewed. 

In our opinion, the system of quality control for the audit organization of 

ARC OIG in effect for the year ending September 30, 2016 has been suitably 

designed and provides ARC OIG with reasonable assurance of performing 

and reporting in conformity with applicable professional standards in all 

material respects. Audit organizations can receive a rating of pass; pass 

with deficiencies; or fail. ARC OIG has received an external peer review 

rating of “pass”. However as an observation, we note ARC OIG transmittal 

letters need to clearly delineate responsibilities between the ARC OIG and 

contractor reports. Therefore, we make the following suggestion for 

inclusion in the transmittal letters. 

“In connection with the contract, we reviewed [contractor’s] report and 

related documentation and inquired of its representatives. Our review, as 

differentiated from an audit in accordance with U.S. generally accepted 

government auditing standards, was not intended to enable us to express, 

and we do not express, opinions on report findings. [Contractor] is 

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responsible for the attached report dated [Month, Day, Year] and the 

conclusions expressed in the report. However, our review disclosed no 

instances where [contractor] did not comply, in all material respects, with 

U.S. Generally Accepted Government Auditing Standards.” 

Appendix B to this report identifies ARC OIG response to our suggested 

statement for inclusion in transmittal letters. In addition to reviewing its 

system of quality control to ensure adherence with GAGAS, we applied 

certain limited procedures in accordance with guidance established by 

CIGIE related to ARC OIG's monitoring of audits performed by independent 

public accountants (IPAs) under contract where the IPAs served as the 

auditor. It should be noted that monitoring of audits performed by IPAs is 

not an audit and, therefore, is not subject to the requirements of GAGAS. 

We also note ARC OIG audit organization utilizes inspections and 

evaluations to address ARC management and headquarters issues such as 

implementation of applicable regulations and grant program objectives. The 

purpose of our limited procedures was to determine whether ARC OIG had 

controls to ensure IPAs performed contracted work in accordance with 

professional standards. However, our objective was not to express an 

opinion and accordingly, we do not express an opinion, on ARC OIG's 

monitoring of work performed by IPAs. 

Cc: A. Roy Lavik, Inspector General 

Judith A. Ringle, Deputy Inspector General and Chief Counsel 

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Appendix A 

Scope and Methodology

We tested compliance with the ARC OIG audit organization's system of 

quality control to the extent we considered appropriate. ARC OIG did not 

perform audits or attestation engagements but rather only reviews. It is 

ARC OIG's current policy not to perform audit or any other work under 

Generally Accepted Government Auditing Standards (GAGAS). ARC OIG 

management contract independent public accountants (IPAs) to conduct 

financial statements audits, attestation engagements, and other GAGAS 

engagements. Therefore, we did not test compliance with certain ARC OIG's 

system of quality controls, but note ARC OIG utilizes inspections and 

evaluations to address ARC management and headquarters issues. 

We reviewed the ARC OIG's monitoring of audits performed by IPAs where 

the IPA served as the principal auditor during the period October 1, 2015 

through September 30, 2016. During the period, ARC OIG management 

contracted for the audit of its agency's Fiscal Year 2015 financial 

statements (OIG Report Number: 16-04) and ARC OIG monitored the IPA's 

work. ARC OIG also contracted for certain other types of engagements that 

were to be performed in accordance with GAGAS. 

We visited the ARC OIG office in Washington DC. 

ARC OIG Audits Peer Reviewed

ARC OIG does not perform audits or attestation engagements. Thus, we 

tested compliance with relevant aspects of ARC OIG's system of quality 

controls. 

Contract Audits Peer Reviewed

OIG Report 

Number 

16-04 

16-11

16-14

16-15

16-29

Grant Number (if applicable) 

Name of Audit/Grant 

FY 2015 Financial Statements Audit 

IT Security Evaluation

Applications, Approvals and Obligations

KY-17957 

University of Pikeville KY College of 

Optometry 

NC-17980 

Rutherford County Comprehensive

Applied Sciences 

Date Issued

11/30/2015

03/22/2016

03/31/2016

05/19/2016

09/12/2016

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Appendix B
 

ARC OIG Response to “Suggestion” statement in transmittal letter(s)

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