Sneak Preview: GAO Reconsidering Its Approach on Proposed GAGAS Interpretation

February 12, 2014 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from an article in the Single Audit Information Service.) After hearing concerns in recent months about its interpretations to the Generally Accepted Government Auditing Standards, also known as the Yellow Book, the Government Accountability Office is no longer considering a prior interpretation related to independence and is reviewing a second interpretation related to peer reviews.

GAO produces GAGAS. GAGAS provides a framework for conducting government audits and is used by auditors of federal programs or government agencies. GAO can issue interpretative publications related to the Yellow Book. Such interpretative publications — or “interpretations” — are recommendations on the application of the Yellow Book in specific circumstances and provide additional guidance on the application of the standards. The interpretations are not auditing standards, but carry the same level of authority as the auditing standards in the Yellow Book. The interpretations must be approved by the Advisory Council on Government Auditing Standards. If approved, the interpretations would be included on the GAO website.

During a recent conference call with the advisory council and stakeholders, GAO’s James Dalkin said than one interpretation it proposed last spring relating to independence has been dropped. Attempting to address confusion about whether the GAGAS independence requirements were the same for performance audits as they were for attestation engagements, the interpretation previously stated that “attest and performance audit independence requirements are parallel.” “Our advisory groups had indicated that this really was imbedded in the Yellow Book itself so were sufficiently covered in that area,” he said.

The remaining interpretation relates to a proposed interpretation of the peer review of audit organizations. Chapter 3.96 in the Yellow Book requires audit organizations to receive an external peer review every three years by a peer review team. The peer review team would use its professional judgment in determining a rating for the audit organization. There are three ratings in the Yellow Book — pass, pass with deficiencies, or fail. Dalkin said that there may be cases, however, where the peer review team has comments that do not reach the level of a deficiency, but the reviewer still may want to communicate those concerns to the organization being reviewed.

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