Relationship Between Gagas And Other Professional Standards
The Yellow Book recognizes the value of other professional standards. Incorporated in this volume are the fieldwork and reporting standards and related statements on auditing standards for financial audits as declared by the Auditing Standards Board of the , unless specifically excluded in the guidance in the Yellow Book. The AICPA general standard on criteria, and the fieldwork and reporting standards and related statements for attestation engagements, are also included, unless excluded specifically .
What Do They Say
The latest version of the government auditing standards is over 200 pages long! So it covers a lot of ground. Here is just a sample of the things it says to give you a sense of the tone and the breadth of the document:
3.08 A distinguishing mark of an auditor is acceptance of responsibility to serve the public interest. )
3.19 Auditors and audit organizations should avoid situations that could lead reasonable and informed third parties to conclude that the auditors and audit organizations are not independent and thus are not capable of exercising objective and impartial judgment on all issues associated with conducting the engagement and reporting on the work.
5.16 The audit organization should establish policies and procedures to provide reasonable assurance that auditors who are performing work in accordance with GAGAS meet the continuing professional education requirements, including maintaining documentation of the CPE completed and any exemptions granted.
6.17 When auditors identify findings, they should plan and perform procedures to develop the criteria, condition, cause, and effect of the findings to the extent that these elements are relevant and necessary to achieve the audit objectives.
8.40 If it is determined that internal control is significant to the audit objectives, auditors should obtain an understanding of such internal control.
Government And Nonprofit Compliance With Yellow Book Requirements
Is your government or nonprofit subject to the Yellow Book requirements? If yes, and your audits are not performed accordingly, you might suffer the loss of grants or be in violation of state law. This is true even if you are not aware of the requirements.
What is the Yellow Book?
The Yellow Book is issued by the U.S. Government Accountability Office and has requirements in addition to those required by the American Institute of CPAs . Other names for the Yellow Book are generally accepted governmental auditing standards and Government Auditing Standards .
Most audits performed in the United States are done in accordance with the AICPA audit standards . Additionally, the Yellow Book requirements apply to many governments and nonprofits. Think of the Yellow Book requirements as a layer of audit standards that sits on top of the AICPA requirements.
When your entity is audited in accordance with the AICPA and the GAO audit standards, your audit package will contain two reports:
- An opinion regarding the fairness of the financial statements in accordance with generally accepted auditing standards
- A Yellow Book report that provides information about internal control findings and noncompliance with laws and regulations, if any
Yellow Book Applicability
So how do you know if the Yellow Book standards apply to your organization?
First, if you are a local government in Georgia, you must comply with Yellow Book requirements. Georgia Code section 36-60-8 states:
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What Is The Yellow Book
- Performance audits can be used to improve program performance, reduce costs, and help organizations make better decisions.
- Financial audits provide an independent assessment of whether an organizations reported financial information is presented fairly in accordance with recognized criteria.
- Attestation engagements cover a broad range of financial or nonfinancial objectives. The auditor issues an examination, a review, or an agreed-upon procedures report.
How Do I Get It?
- Questions about the content of this post? Contact .
The Guidance You Need
Understand the concepts and standards of generally accepted government auditing standards so that you can perform Yellow Book audits. Baseline
Gain an excellent baseline of information for understanding the Yellow Book, with guidance found in the 2018 revision of Government Auditing Standards.
With guidance related to independence and peer review, increase your knowledge of the requirements and application guidance related to the following:
- Foundation and principles for the use and application of generally accepted government auditing standards
- General requirements for complying with the Yellow Book
- Ethics, independence, and professional judgment
- Competence and continuing professional education
- Quality control and peer review
- Standards for financial audits
- Standards for attestation engagements and reviews of financial statements
- Fieldwork standards for performance audits
- Reporting standards for performance audits
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Be Prepared: Yellow Book Redlines Are Here
In July 2018, the U.S. Government Accountability Office issued Government Auditing Standards, 2018 Revision . Government Auditing Standards go by several names, including Yellow Book, Generally Accepted Government Auditing Standards and Government Auditing Standards . While there were many changes proposed in the exposure draft, the final 2018 revision did not end up including many of the proposals.
The GAO received more than 1,700 comment letters in response to its April 2017 exposure draft. The 2018 revision supersedes the 2011 GAS revision as well as 2005 Government Auditing Standards: Guidance on GAGAS Requirements for Continuing Professional Education and 2014 Government Auditing Standards: Guidance for Understanding the New Peer Review Ratings.
At first glance
One of the first things a reader will notice is that chapters are in a new format. Requirements are boxed off and followed by application material, with more boxes of requirements followed by more application material. This will help users understand what are deemed requirements by Yellow Book and what is meant to help them in implementing those requirements. While requirements and application material separation are similar to the AICPAs Auditing Standards, the layout and look is different. In addition, the numbering is different in Yellow Book.
Changes to audit guidance
Peer review revision
Government Auditing Standards: 2018 Revision Technical Update April 2021
GAO-21-368GSkip to Highlights
The Yellow Book provides standards and guidance for auditors and audit organizations, outlining the requirements for audit reports, professional qualifications for auditors, and audit organization quality control. Auditors of federal, state, and local government programs use these standards to perform their audits and produce their reports.
The 2018 revision of the Yellow Book is effective 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.
The technical updates to the 2018 revision of the Yellow Book are effective upon issuance.
Yellow Book revisions undergo an extensive, deliberative process, including public comments and input from the Comptroller General’s Advisory Council on Government Auditing Standards. GAO considered all comments and input in finalizing revisions to the standards.
For more information, contact James R. Dalkin at 512-9535 or . Visit our Yellow Book website for more information on applicable updates and alerts.
The 2018 Yellow Book is also available in a digital format.
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Gaqc Web Event Archive
This Governmental Audit Quality Center practice aid, in the form of a presentation, informs the reader of the key players in the single audit process. The presentation slides provide a summary of the single audit ecosystem and covers the following:
the basis of authority of the single audit and details about what the key players do in the process
the responsibilities of state and local government and not-for-profit entities as recipients
details about the responsibility of CPA firms and
Revised Auditing Yellow Book Standards
The GAO recently released some new versions of the Auditing Yellow Book standards of the government. The yellow book has been reorganized and a new version has been made that aims to make things easier for the auditors with professional standards. The new standards have evaluated the threat to the independence of auditors.
The revised version of the GAO, yellow book was made in July 2018, in which new important regulations were made that should be known by all the auditors performing audits under the statements of GAS. There is other information too that will help the CPAs and prove to be valuable.
The yellow book 2018 is said to be going into effect after JUNE 30, 2020, and the performance audit on 1 July 2019. Auditors must consider these rules when making a judgment, not before the due date as early implementations are not allowed, about the non-audit impact on the services with independence. Read below to understand further.
If the auditor is conducting the single audit of the federal awards then it must be conducted under the OMBs uniform guidance along with the GAS. Many audits do not follow the GAS as all the rules and regulations in the UG of OMB are so detailed. There are other places too where GAS must be followed like a not-for-profit company makes any request in its local agencies or various states like HUD.
Auditing Yellow Book: The Gold Standard For Public Sector Auditing
The yellow book is a rule book that has all the rules and standards to conduct auditing in the public sector, which is . All the newest standards and updates of rules are written in it that help the governmental auditors and the CPAs to conduct audits with these rules.
It includes both the financial and the performance audit guidance in it. Some of the audit standards, that are essential for Auditing Yellow Book, are independent of a business, and how it takes care of it, supervision, CPE, and control. These are some of the main audit standards that are seen.
This Auditing Yellow Book is also called GAGAS, generally accepted by government auditing standards of audits by a lot of people. You must be wondering why the yellow book?
Well, in easy words, this yellow book helps the auditors conduct audits on both the financial and performance statements of a company as per the GAGAS. Not only that, this yellow book helps to assess the compliance issues and the internet controls. If any audit is required by the government, then that is done by the yellow book standards.
Nonaudit Services And Independence
The most significant change to the standards relates to how auditors evaluate the nonaudit services they perform and whether the performance of those services creates significant threats that require safeguards to reduce those threats to an acceptable level. When nonaudit services are performed, an evaluation should be made to determine if the service creates a threat to independence. This evaluation should be documented and follow the existing GAS independence framework, which continues to be a part of the 2018 revised Yellow Book. To summarize the requirements of the independence framework, the first step is to identify any threats, including the performance of nonaudit services. The next step is for the auditor to evaluate the significance of the threat and consider the skills, knowledge, and experience of the persons at the entity charged with overseeing the service. If the threat is considered significant, then a safeguard must be implemented.
The standards clarify other nonaudit services frequently performed by auditors that automatically impair independence such that no safeguard could possibly be applied to eliminate this threat. In these cases auditors must either refuse to perform the nonaudit service or resign from the audit. The following is a list of those services that automatically impair independence:
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How Is The Yellow Book Used
The Yellow Book provides standards for carrying out both financial and performance audits. Performance audits concern evaluating a program or project to determine whether it is meeting efficiency our outcome standards. The five standards contained in the manual include:
- Independence of the Auditor
- Due Care in Carrying Out the Audit
- Requirements for Continued Professional Education for Auditors
- Supervision of Auditors
- Quality Control Standards
The Yellow Book is used by private and public auditors .
The Impact Of The Public Company Accountability Oversight Board
With the passage of the Sarbanes-Oxley Act of 2002 and the subsequent establishment of the Public Company Accountability Oversight Board , a process of evaluating current auditing guidance and developing new guidance began. The comptroller general of the noted: “As the PCAOB promulgates auditing standards for audits of these entities, GAO will continue to closely monitor the actions of both standard setting bodies and will issue clarifying guidance as necessary on the incorporation of future standards by either standard setting body” .
In mid-2005, for example, GAO provided guidance that allowed auditors to prepare GAGAS reports on internal control based on the definition of “material weakness” contained in PCAOB’s Auditing Standard No. 2Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.
see alsoGovernment Accounting Government Accountability Office
The Authority Of Government Auditing Standards
The includes standards to guide all audits of governmental units, irrespective of the level of the unit, as well as guidance for reviews and agreed-upon procedures. The comptroller general noted:
These standards are broad statements of auditors’ responsibilities. They provide an overall framework for ensuring that auditors have the competence, integrity, objectivity, and independence in planning, conducting, and reporting on their work.
Single Audit/yellow Book Audits
If your company or organization receives a federal award you may be required to have an annual audit in accordance with the Office of Management and Budgets . The types of audits that may be required are:
- Single Audit also known as the OMB Uniform Guidance, is a rigorous, organization-wide audit or examination of an entity that expends $750,000 or more of Federal assistance received for its operations. Usually performed annually, the Single Audits objective is to provide assurance to the federal government regarding as to the management and use of such funds by a recipient. The audit encompasses both financial and compliance components. Single audits must be submitted to the Federal Audit Clearinghouse along with a data collection form, Form SF-SAC. In conjunction to any Single Audits conducted, a Yellow Book audit is also required.
- Program Specific Audit A program-specific audit is an audit of an individual federal program . This is a cost-effective audit for non-federal entities in that only one audit is performed in lieu of multiple audits of individual programs. The grantor agency may or may not allow this type of audit.
BSB Steps to help Ensure a Quality Audit:
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Reporting Standards For Performance Audits
In yellow book chapter 8, all the information of the reports, like the form of reports, contents, a reason to issue the report, and distribution, is set forth. Along with the IRO report issuance, the proper evidence must be provided for the conclusion and findings to support them, and this is a must-to-have.
Why Do We Need Government Auditing Standards
We need auditing standards to uphold the professional reputation of auditors because an auditors reputation is everything.
If the users of the audit results dont quite believe the auditor because the auditor isnt objective or the work is sloppy, the audit was a complete waste of time and money for the user and the auditor .
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Gagas Amendments & Interpretive Guidance
At this time, there are no amendments or interpretive guidance for the 2018 revision of Government Auditing Standards.
Yellow Book revisions undergo an extensive, deliberative process, including public comments and input from the Comptroller General’s Advisory Council on Government Auditing Standards. GAO considers all Yellow Book comments and input from the Comptroller General’s Advisory Council on Government Auditing Standards when finalizing revisions to the standards. Read more in our 2018 Yellow Book press release.
Preparing Financial Statements In Their Entirety
Paragraph 3.88 of the 2018 Yellow Book provides that preparing financial statements in their entirety from a client-provided trial balance or underlying accounting records creates significant threats to independence. Firms should consider whether, in substance, the firms financial statement preparation services reach the threshold of in their entirety.
Even if the firm concludes that the financial statement preparation services do not meet that threshold, providing preparation of accounting records and financial statement services still requires the firm to evaluate and then document the evaluation of threats to independence under Paragraph 3.89. That is, the firm should evaluate the significance of threats and, when threats are significant, apply safeguards to eliminate or reduce the threat to an acceptable level. The firm should consider the significance of the assistance provided to the subject matter of the audit and consider the following:
Paragraph 3.95 states that providing clerical assistance is unlikely to create a significant threat however, Paragraph 3.89 requires documentation of the evaluation.
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Organization Of The Yellow Book
Chapter 1 Government Auditing: Foundation and Principles for the Use and Application of Generally Accepted Government Auditing Standards Chapter 2 – General Requirements for Complying with Government Auditing Standards Chapter 3 Ethics, Independence, and Professional Judgment Chapter 4 Competence and Continuing Professional Education Chapter 5: Quality Control and Peer Review Chapter 6: Standards for Financial Audits Chapter 7: Standards for Attestation Engagements and Reviews of Financial Statements Chapter 8: Fieldwork Standards for Performance Audits Chapter 9: Reporting Standards for Performance Audits
About The Yellow Book
The Yellow Book is used by auditors of government entities, entities that receive government awards, and other audit organizations performing Yellow Book audits. It outlines the requirements for audit reports, professional qualifications for auditors, and audit organization quality control. Auditors of federal, state, and local government programs use these standards to perform their audits and produce their reports.
The 2018 revision of the Yellow Book is only effective 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. For financial audits, attestation engagements, and performance audits performed under a prior revision of the Yellow Book, see the 2011 Revision. For further questions about Yellow Book effective dates and implementation, please call 512-9535 or e-mail .
The 2021 technical updates to the 2018 revision of the Yellow Book are effective upon issuance.
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