GAO Releases “Semi-Final” Yellow Book
December Update: It is now final. In mid-December, GAO released the final version of the Yellow Book. Click on the link below to access the standards, as well as a summary of the major changes.
GAO just released a new version of the Yellow Book that “contains the intended content for the final 2011 Revision of Government Auditing Standards. GAO plans to formally issue the 2011 Revision Government Auditing Standards later this year after the AICPA has completed its clarity revisions.”
In the 2011 revision, GAO is establishing a “conceptual framework” for making independence determinations based on each situation’s unique facts and circumstances. Auditors would identify potential risks to independence, evaluate the significance of those threats, and apply safeguards to eliminate the risks if necessary. Rather than issuing a specific list of prohibited activities, GAO offers examples of threats to independence, for example an audit organization having undue dependence on income from a particular entity or a member of the audit team entering into employment negotiations with an audited entity.
The independence section also identifies specific nonaudit services that would impair auditor independence in the government environment. These include, for example, preparing accounting records or financial statements.
Grants management officials may also find the new Yellow Book’s appendix helpful not only in preparing for or conducting an aduit, but also in improving overall organizational operations. As part of their responsibilities, auditors review the organization’s internal controls. In the Yellow Book, GAO provides more than a dozen indicators of internal control problems that can serve as an alert for grants management officials. GAO also offers examples of activities that could indicate fraud or abuse in government-funded programs and activities.
The Yellow Book is only available online at www.gao.gov/yellowbook.