In general, financial audits are primarily concerned with providing reasonable assurance about whether the financial statements of an organization, project, individual, or entity are presented fairly in all material respects in accordance with Generally Accepted Accounting Principles and whether the organization, project, individual, or entity has complied with laws and regulations for those transactions and events that may have a material effect on the financial statements. State statutes mandate that the California State Auditor annually conduct California's Single Audit and that it comply with government and industry auditing standards.
The Single Audit encompasses an audit of California's financial statements, review of internal controls over financial reporting and compliance with federal program requirements, and additional tests of compliance with federal and state laws and regulations at the entity level and at the major federal program level. California's single audit is performed in accordance with the Single Audit Act, provisions of OMB Circular A-133, the Government Accountability Office's Generally Accepted Government Auditing Standards, and the American Institute of Certified Public Accountant's Statements on Auditing Standards. The Single Audit satisfies the federal requirements for an independent financial audit and compliance audits of federal programs which is a condition for the State to receive over $76 billion in federal funds each year.
Also, contracts involving the expenditure of public funds greater than $10,000, entered into by any state, local, or public entity, are subject to an audit by the California State Auditor's Office for a period of three years after final contract payment per California Government Code, Section 8546.7. Every public contract must contain a provision stating that the contracting parties shall be subject to examination and audit; however, failing to include such a provision does not preclude the California State Auditor from conducting the audit.
In addition, the Legislature may direct the California State Auditor, through statute or by request from the Joint Legislative Audit Committee, to conduct other financial-related audits of state, local, or other public entities that may provide different levels of assurance and scopes of work.