Thursday, March 1, 2012

GAO Makes Major Changes to 2011 Government Auditing Standards

On December 21, 2011 the GAO issued the final revised 2011 Government Auditing Standards (The Yellow Book). Following is a summary of the major changes to the standards.

• Added a conceptual framework for independence to provide a means for auditors to assess their independence to activities that are not expressly prohibited. The conceptual framework requires auditors to make independence determinations based on facts and circumstances that are often unique to specific audit environments. The conceptual framework achieves further harmonization with AICPA and international standards.

• Removed specific references to personal, external, and organizational impairments, and overarching independence principles (GAGAS 2007). However, the underlying concepts related to these categories have been retained in the new conceptual framework for independence.

• Established requirements for auditors performing nonaudit services for entities they audit, to document their assessment of whether management possesses suitable skill, knowledge, or experience to oversee the nonaudit service (3.33-3.44).

• Revised substantially the guidance on nonaudit services that always impair an auditor’s independence with respect to audited entities and on certain nonaudit services that may be permitted under appropriate conditions (3.45-3.58).

• Added a summary of requirements for documentation necessary to support adequate consideration of auditor independence incorporating requirements applicable under the new conceptual framework (3.59).

• Removed certain SAS and SSAE requirements that were repeated in GAGAS.

• Discussed separately the three categories of attestation engagements, (1) examination, (2) review and (3) agreed-upon procedures. Auditors are not permitted to deviate from the reporting elements prescribed by the AICPA.

• The reporting requirements for fraud now include only those occurrences that are significant within the context of the audit objectives for performance audits.

The numbers in parentheses refer to paragraphs in the 2011 Government Auditing Standards (GAGAS) unless otherwise noted.

The effective date for financial audits and attestation engagements is for periods ending on or after December 15, 2012. The effective date for performance audits is for audits beginning on or after December 15, 2011. Early implementation is not permitted.

No comments:

Post a Comment