GAO issues revised government auditing standards

Changes to the Yellow Book reinforce the principles of transparency and accountability.

Revised standards issued by the U.S. Government Accountability Office (GAO) are designed to provide a framework for high-quality governmental audits, which include audits of government entities and entities receiving government awards.

In a transmittal letter to the standards, U.S. Comptroller General Gene Dodaro stated that the new generally accepted government auditing standards (GAGAS) reinforce the principles of transparency and accountability for auditors as they provide objective analysis and information in service to the public.

Also known as the "Yellow Book," the revision supersedes the 2011 revision of the standards. The changes include:

  • Presentation of all chapters in a revised format that differentiates requirements from application guidance.
  • New treatment of supplemental guidance from the appendix of the 2011 version of the standards, which is either removed or incorporated into the individual chapters.
  • Expansion of the independence standard to state that preparing financial statements from a client-provided trial balance or underlying accounting records generally creates significant threats to auditors' independence. The revision also states that auditors should document the threats and safeguards applied to eliminate and reduce threats to an acceptable level — or decline to perform the services.
  • Modification of the peer review standard to require that audit organizations comply with their respective affiliated organization's peer review requirements and GAGAS peer review requirements. Additional requirements are provided for audit organizations not affiliated with recognized organizations.
  • The addition of a definition for waste and related examples.
  • Specific considerations for when internal control is significant to the audit objectives for performance audits.

The revision takes effect for financial audits, attestation engagements, and reviews of financial statements for periods ending on or after June 30, 2020, and for performance audits beginning on or after July 1, 2019. Early implementation is not permitted.

Effective with the implementation dates for the 2018 revision of the Yellow Book, the GAO is retiring Government Auditing Standards: Guidance on GAGAS Requirements for Continuing Professional Education and Government Auditing Standards: Guidance for Understanding the New Peer Review Ratings.

SPONSORED REPORT

2018 financial reporting survey: Challenges and trends

Learn the top reporting challenges that emerged in a survey of more than 800 finance, accounting, and compliance professionals across the world, and compare them with your organization's obstacles.

PODCAST

How the skill set for today’s CFO is changing

Scott Simmons, a search expert for large-company CFOs, gives advice for the next generation of finance leaders and more, including which universities are regularly producing future CEOs and CFOs.