GAO Revises Government Auditing Standards

The Government Accountability Office is making changes to Government Auditing Standards, commonly known as the Yellow Book.

In a newly released letter, GAO managing director of financial management and assurance Jeanette M. Franzel outlined some of the major changes proposed in the exposure draft.
The proposed changes update Government Auditing Standards, also known as GAGAS, to reflect major developments in the accountability and audit profession and emphasize specific considerations applicable to the government environment. The major changes in the proposed revision were made to consolidate and reorganize the foundation and ethical principles for government audits and the standards for use and application of GAGAS, and to add a conceptual framework approach for independence.

The GAO also wanted to update the financial audit standards to reflect recent updates to the auditing standards issued by the American Institute of CPAs, where applicable, and to more clearly identify the GAGAS requirements and guidance that supplement AICPA requirements for financial audits. In addition, the GAO wanted to consolidate the financial audit standards into a single chapter, and further clarify application of the attestation engagement standards to clearly distinguish the requirements related to each type of attestation work.

The new standards also aim to update the performance audit standards to limit the fraud reporting requirement to occurrences that are significant within the context of the audit objectives, with a requirement to communicate other instances of fraud in writing to those charged with governance, and revise the discussion of validity as an aspect of the quality of evidence. The changes are also designed to clarify language throughout the document.

A draft of the proposed changes can be downloaded from the GAO’s Yellow Book Web Page at http://www.gao.gov/govaud/ybk01.htm. Comments on the proposed standards should be sent to yellowbook@gao.gov  by Nov. 22, 2010.