The Government Accountability Offices is asking for feedback on a set of proposed changes to Government Auditing Standards, commonly known as the “Yellow Book,” the first revision since 2011.
The GAO originally issued the standards in 1972. The 2017 exposure draft of proposed changes takes into account some of the developments in the auditing, accountability and financial management professions.
Some of the major proposed changes from the 2011 revision include presenting the chapters in a revised format, reorganizing and realigning them, with some of the supplemental guidance from the 2011 appendix either removed from some chapters or incorporated in them.
The standards have been expanded to state that any services performed by auditors related to preparing accounting records and financial statements, other than those defined as impairments to independence, create significant threats to auditors’ independence. Auditors should document the threats and safeguards they apply to eliminate and reduce the threats to an acceptable level, or they should decline to perform the services.
“I’m very proud of GAO’s efforts to modernize the Yellow Book, which was last updated in 2011,” said Gene L. Dodaro, Comptroller General of the United States and the head of the GAO, in a statement. “Our goal is to help auditors of government entities carry out high-quality work that reflects competence, integrity, objectivity, and independence.”
GAO Comptroller General Gene Dodaro
Jim Lo Scalzo/Bloomberg News
The proposed changes further explain the independence requirements of auditors when the engaging party differs from the responsible party, and provide some examples of when this could occur. The proposed standards also further explain the guidance related to professional services in government, with some examples provided.
The requirements for continuing professional education have been revised to promote greater proficiency in generally accepted government auditing standards, or GAGAS. This includes introducing a new four-hour CPE requirement in GAGAS topics, which are required each time a new version of GAGAS is issued. The proposed changes also offer application guidance about the CPE topics required under the 80-hour GAGAS CPE requirements, and detail the exemptions that can be granted to auditors under certain circumstances.
The standards for peer review have been expanded and include new requirements and guidance in different areas. That includes directing audit organizations to comply with the requirements of certain recognized peer review organizations.
The standards have been expanded to define waste and add requirements for reporting or communicating waste that auditors become aware of during audits.
The American Institute of CPAs’ Statement on Standards for Attestation Engagements No. 18, Attestation Standards: Clarification and Recodification, and Statement on Standards for Accounting and Review Services No. 21, section 90 (Review of Financial Statements), have been incorporated into GAGAS for auditors conducting attestation engagements and reviews of financial statements.
The proposed changes have updated the internal control requirements and guidance to align them with the GAO’s revised 2014 Standards for Internal Control in the Federal Government and Internal Control – Integrated Framework, also known as the “Green Book.”
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