How the yellow books new independence standards impact. The author summarizes the most significant changes in the new yellow book, with particular focus on the new standards for evaluating threats to auditor independence. The 2018 yellow book is effective for financial audits, attestation. Accountants who work with nonprofit organizations say thats also exactly the kind of help theyll be barred from giving their audit clients if the accounting arm of the federal government, the general accounting office gao, adopts changes to the independence standards in the government auditing standards, the socalled yellow book, that were. In addition to financial audits, the yellow book standards cover performance audits, which evaluate the performance of a program or project against defined objectives, such as objectives for efficiency and. The yellow book is the annual publication by the gao of the generally accepted governmental auditing standards. Gao releases proposed changes to yellow book auditing.
The 2011 yellow book is available on the yellow book section of the gao web site. At this time, there are no amendments or interpretive guidance for the 2018 revision of. This webinar will highlight the new format of the 2018 yellow book, provide a quick refresher on some of the key aspects of the yellow book and dive into some of the critical changes and clarifications made by the 2018 yellow book impacting internal auditors including independence with a specific focus on impact to internal audit and inspector general shops, continued professional. Chapter 3 ethics, independence, and professional judgment perhaps the most impactful changes in the 2018 yellow book standards are in the area of auditor independence. The yellow book contains a conceptual framework for. Information contained on this page is subject to change without notice. This course will cover the major changes auditors need to know when performing audits under gagas aka yellow book or government auditing standards. Federal and state auditors look to gao to provide standards for internal.
Identifying deficiencies in single audits the cpa journal. The biggest and most useful change is that requirements are now. Yellow book revisions update independence guidance journal of. When you log into this website with your aicpa member user account, the sectioncredential discount will be automatically applied during checkout. The 2018 yellow book is here and there are several key changes. There is a small cost associated with accessing this version of the practice aid, which is to be used in conjunction with the wraparound material in the free flat pdf. Government auditing standards yellow book practice aids. The yellow book covers federal entities and those organizations receiving federal funds. The yellow book is used by auditors of government entities, entities that receive. Developing a riskbased internal audit plan, may 2020. A threat to independence is not acceptable if it either a could impact the auditor s ability to perform an audit without being affected by influences that compromise professional judgment or b could expose the auditor or audit organization to circumstances that would cause a reasonable and informed third party to conclude that the. This aicpa practice aid titled, 2011 yellow book independence non audit services documentation practice aid, is intended to help auditors performing audits under the 2011 edition of government auditing standards referred to as the 2011 yellow book to comply with its independence rules. These occur when the auditor has also prepared some of the accounting for the fund. Components of a single audit financial statement audit gaas conducted in accordance with.
In general, the iia encourages auditors to be helpful to consult as well as provide assurance services. The iia divides the internal auditors world up into assurance and consulting. A new look and additional chapters help the reader of the yellow book understand the key requirements. The template, yellow book independencenonaudit services documentation practice aid supplement, can then be easily saved and used as part of the audit documentation. Gain an understanding of the basics of omb circular a3, when it is applicable, and what it requires of the auditor. The gao has established independence requirements under government auditing standards, otherwise known as the yellow book. Here is a summary of steps an auditor should undertake to be prepared for conducting an audit in the single audit environment. New gao yellow book clarifies independence requirements. First, the institutes ethical code forbids auditors to provide nonaudit services to audit clients if that would present a threat to independence for. Ghandar says to watch out for these six threats to smsf auditor independence. You probably caught that reference to nonaudit services as you read that last quote from the yellow book. It is important to note that yellow book independence requirements must be met before nonaudit services are performed in the year, or for the year, being audited. Back log in to save to my learning log in to commentreflect like.
Well then switch gears and cover the uniform guidance. Beach retreat the new yellow book standards maryland. If a nonaudit service is allowed under aicpa interpretation 10, then the conceptual framework does not need to be applied. The government accountability office gao published a revised version of the generally accepted government auditing standards gagas, also known as the yellow book, which includes substantive changes to the independence rules when a firm performs bookkeeping or financial statement preparation services for a client. Exposure draft the governmental accountability office gao has released proposed changes to the governmental auditing standards gagas better known as yellow book. Generally accepted government auditing standards or yellow book ske skill, knowledge, or experience gao government accountability office ssars statements on standards for. Changes of preparation for single audits and other audits that follow gagas potential increases in costs of audit and nonaudit services 7 other 2018 yellow book changes. Auditors cannot prepare financial statements from clientprovided trial balances or accounting records as this. Primary yellow book changes 5 updated independence included a conceptual framework focused on converging where practical incorporated clarified sass fewer differences added documentation requirements additional documentation in independence focus on nonaudit services made minor changes for performance audits. The gao discourages consulting work and calls this sort of work nonaudit services. There are other changes in the 2018 revision of the yellow book that mainly relate to the auditors responsibilities with regards to cpe, and identifying fraud, waste, and abuse. In issuing the new standard, the comptroller general stated that protecting the public interest and ensuring public confidence in the independence of auditors of government financial statements, programs and operations, both in form and substance, were the. The gao strongly warns auditors that engaging in nonaudit services could ruin their independence on audits.
This book has always featured a bright yellow cover. By issuing comment letters, gao promotes the development of high quality. The new 2018 yellow book is effective for years ending june 30, 2020. How the new 2018 yellow book impacts your audit eide bailly llp. Implementation guidance and supplemental guidance are restricted to iia members only.
In large firms, this threat can be addressed by separating the. Government auditors are required to objectively evaluate government operations, gather sufficient, appropriate evidence, and report the result. However the independence documentation would fall under gas requirements. Independence will always be impaired if management does not have ske. Getting a handle on 2018 revisions to the yellow book. Compliance audit update 2017 unc school of government. Independence standards will start july 1 for the june 30th year ends. Auditors should, however, consider the independence provisions of. This session will provide an update to professional standards presented in the 2018 revision of government auditing standards, also known as the yellow book and generally accepted government auditing standards gagas, as it related to major changes from the prior yellow book. View the 2011 yellow book view the 2018 yellow book. Government accountability office website general information. Understand the major changes in the 2018 yellow book. The yellow books standards and guidance for auditors and audit organizations provide critical information for federal, state, and local government programs regarding audit reports, professional qualifications for auditors, and audit organization quality control.
Government auditing standards, commonly known as the yellow book. Adds requirements for auditor independence and continuing professional. If an auditor provides more than one nonaudit service, the yellow book standards require the auditor to consider the aggregate effect of. The revised standards also known as the yellow book, or gas were restructured by the gao to separate the standards requirements from the application guidance see the sidebar restructured yellow book. There are changes to nonaudit services you need to understand. Although the 2018 yellow book changed the rules regarding auditor independence, it did not change the responsibility of management with. Government accountability office gao issued a revised version of government auditing standards gas, often referred to as the yellow book. Understanding the changes to yellow book independence. Yellow book continuing education requirements are governed by the u.
Despite using the term some 85 times, gagas do not contain an official definition of nonaudit services, though from context we can safely infer that any service not considered to be an integral part the audit is considered nonaudit by default. Yellow book revisions update independence guidance. The gao keeps the discussion going by addressing a variety of nonaudit services specifically. This means if your auditor is performing a nonaudit service in october 2012, such as drafting your cafr for the june 30, 2012 year end, and you will retain your auditor for the. Changes to independence standard financial audits since the the 2018 version of the yellow book expands the independence standards by identifying significant threats to independence created during the performance of nonaudit services. The yellow book update and new independence standards.
The yellow book was most recently revised by the gao in december 2011. Areas of focus will include the updated independence requirements, form and organization of the guidance as well as quality control. Thoroughly understand the requirements of the new yellow book and how they relate to the aicpa and single audit requirements. To do this, auditors rely on these standards to provide a framework for conducting highquality audits with competence, integrity, objectivity, and. Impact of the 2018 yellow book on your audit function. Independence guidance for government audit organizations 25. For complete and current information, refer to the u. Leadership responsibilities for quality within the audit organization 82 independence, legal, and ethical requirements 82 initiation. Here they are going beyond the aicpa independence standards. Notforprofit section members receive the online version free and save 20% on text. In this session, well dive into the new government auditing standards yellow book 2018 which will be effective june 30, 2020.
The 2018 yellow book goes into effect for financial audits, attestation. In addition, cpa firms who perform local government financial audits that include an a3 single audit must follow yellow book standards. Well discuss an overview of the yellow book changes, independence and nonaudit services, uniform guidance and the single audit, including the challenges with procurement, the 2019 compliance supplement and more. Yb yellow book key changes made in the 2018 yellow book. Because even though technically the new yellow book is not yet effective, if you are performing a calendar yearend audit under the 2011 yellow book, and also considering performance of nonaudit services, you need to be in compliance with the new independence requirements at the beginning of the audit periodthat is, january 1, 2012. The new yellow book requirements related to performing and reporting on financial audits and how those requirements affect the audit in areas like internal control. Every year the gao publishes a book that contains all of its updated rules and standards for conducting audits in the public sector. The revised standards also known as the yellow book, or gas were restructured by. Most cpas are aware that if they perform nonaudit services for attest clients under u.
What makes internal auditors mad about the yellow book. Key takeaways and learning objectives for this session include. Provision of non audit services to audit clients icaew. Nonmembers may purchase supplemental guidance from the iia bookstore. Added to the yellow book independence standards for clarification is a statement par. How the existing arrangements provide safeguards against the provision of nonaudit services compromising independence. Issued by the us government accountability office in its yellow book required of auditors in a single audit of organizations that expend more than 750,000 federal resources in any year states may also require yellow book audits of their local governments. Updating government auditing standards the 2018 yellow book. Key 2018 yellow book independence rule changes 2018 yellow book independence guidance for government audit organizations 15 recognizes that audit organizations in government entities frequently provide services that differ from the traditional professional services a firm provides these types of services are often provided. Auditing standards yellow book as a followon to a 2017. Early implementation of the new standards is not permitted, but auditors might want to consider. If the auditor cannot sufficiently overcome the threat to his or her independence, the auditor cannot write the financial statements and conduct the audit.