Major changes to the Yellow Book is occurring in 2017
The U.S. Government Accountability Office (GAO) invites comments on the proposed changes to Government Auditing Standards, commonly known as the Yellow Book. GAO first issued the standards in 1972. The 2017 exposure draft is a modernized version of Government Auditing Standards that takes into account developments in the auditing, accountability and financial management professions. Some of the major proposed changes from the 2011 revision include the following:
1. Chapters are presented in a revised format; chapters are reorganized and realigned; and supplemental guidance from the 2011 appendix is removed or incorporated.
2. The independence requirements of the auditor when the engaging party differs from the responsible party are further explained, and examples of when this could occur are provided. Also, guidance related to professional services in government is further explained, and examples are provided.
3. Standard is 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 and that auditors should document the threats and safeguards applied to eliminate and reduce the threats to an acceptable level or decline to perform the services.
4. The requirements for continuing professional education (CPE) are revised to promote greater proficiency in generally accepted government auditing standards (GAGAS). This includes (a) introducing a new 4-hour CPE requirement in GAGAS topics, required each time a new version of GAGAS is issued; (b) providing application guidance about the CPE topics required under the 80-hour GAGAS CPE requirements; and (c) detailing exemptions that may be granted to auditors in certain circumstances.
5. The standards for peer review are expanded and include new requirements and guidance on various areas, such as directing audit organizations to comply with the requirements of certain recognized peer review organizations for audit organizations affiliated with such peer review organizations.
6. Standard is expanded to define waste and add requirements for reporting or communicating waste that auditors become aware of during audits.
7. 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), are incorporated into GAGAS for auditors conducting attestation engagements and reviews of financial statements, respectively.
8. Internal control requirements and guidance are updated to align with the revised Standards for Internal Control in the Federal Government and Internal Control – Integrated Framework.
GAO is requesting comments on this draft from federal, state, and local government officials; managers and auditors at all levels of government; the public accounting profession; academia; professional organizations; public interest groups; and other interested parties. To assist in developing comments, specific questions are presented in enclosure II of the 2017 exposure draft. Please associate comments with specific references to question numbers in the enclosure, paragraph numbers in the proposed standards, or both and provide your rationale for any suggested changes, along with suggested revised language. All comments received from the public will be considered a matter of public record and will ultimately be posted on the GAO website.
Please send your comment letters to GAO’s Yellow Book Comments inbox YellowBookComments@gao.gov no later than July 6, 2017. For more information, contact James R. Dalkin at (202) 512-9535 YellowBookComments@gao.gov.
“Financial information should be relevant, timely and reliable to meet the needs of users. National laws and regulations, as well as an entity’s stakeholders, often require an external audit of some elements of the financial information to give users confidence that the information can be trusted. For an external audit to fulfill its objective the users of audited financial statements must have confidence that the auditor has worked to a suitable standard and that “a quality audit” has been performed”
IAASB: A Framework for Audit Quality – Key Elements that Create an Environment for Audit Quality
The term ‘audit quality’ is a complex subject and is frequently used in debates among stakeholders, standard setters, audit firms, SAIs and others in research and policy setting. The IAASB has developed a framework that describes the input, process and output factors that contributes to audit quality for financial statement audits at the engagement, audit firm, and national levels.
This Framework document can be found on the IFAC website www.ifac.org or you can contact PASAI Secretariat for a copy.
This Framework is in the public interest as it will help auditors to fully understand the fundaments of the profession you are working in and encourages SAIs to reflect on how to improve audit quality and better communication information about audit quality.
Always remember to refer to the ISSAIs or ISA’s or GAGAS that refers to Audit Quality throughout the conduct of an audit.