Which step is included in a risk-based approach for determining major programs?

In the context of a risk-based approach for determining major programs during an audit, the correct answer focuses on the identification of both low-risk type A programs and high-risk type B programs. This approach allows auditors to prioritize their efforts based on the inherent risks associated with different programs.

Type A programs typically consist of larger federal awards based on set thresholds, which generally attract more scrutiny due to their size. However, by acknowledging that not all type A programs are necessarily high-risk, auditors can categorize and assess the risk of programs accurately. Conversely, type B programs, which are typically smaller awards, can present their own risks that may not be immediately apparent. By identifying high-risk type B programs and low-risk type A programs, auditors can deploy resources more effectively, targeting those programs that warrant closer examination due to their potential for improper use of federal funds.

This strategy enhances the efficiency and effectiveness of the audit process, ensuring that the focus remains on areas with the highest risk of non-compliance or financial discrepancies. The consideration of both types contributes to a comprehensive assessment of the entity's compliance with federal requirements, integral to fulfilling the auditor's responsibilities.