At the American Institute of Certified Public Accountants’ (AICPA) Government Accounting and Auditing Update conference in Washington, D.C., James Dalkin, director of GAO’s financial management and assurance team, told attendees that GAO expects to meet with the 18-member Advisory Council on Government Auditing Standards next spring to address the comments to the exposure draft and any potential changes GAO may suggest for the draft. Dalkin anticipated the final issuance of the revised Yellow Book, which was last updated in 2011, to be released around July 2018.

GAO received 94 public comments to the exposure draft. “We’re going over the comments and lining them up,” Dalton said. “We have comments that completely support a position we have, and then we’ll get another letter that goes completely against what we have. It will be a bit of a challenge to work through that and come up with the best version possible.” Regardless, he gave “thanks to everyone who put in their time and effort to write the comment letters to us, and we will spend a lot of time going through them and considering the next steps to the process.”

In the exposure draft, GAO officials proposed to reorganize and realign the chapters in the Yellow Book and attempted to clarify what is considered an audit requirement as opposed to audit guidance. The draft, in Chapter 1, addresses the types of GAGAS engagements, and Chapter 2 contains general requirements for complying with GAGAS. Ethical principles and independence requirements are combined into a single chapter (Chapter 3), as are competence and continuing professional education (CPE) requirements (Chapter 4). Chapter 5 covers quality control and peer review. In addition, supplemental guidance that was included in the appendix in the 2011 version is either removed from or incorporated within the proposed document.

The exposure draft expands the current independence standard to state that auditors should conclude that any services related to preparing accounting records and financial statements create significant threats to auditors’ independence, and should document the threats and safeguards applied to eliminate and reduce them to an acceptable level or should decline to perform the services.

Dalkin said that GAO received “mixed feedback” on this revision as some certified public accountants argued that doing “perfunctory work” on a financial statement should not be deemed a significant threat. However, “as of now, that is presumed to be a significant threat so you would need to document” it as a threat. “We’re going to talk to our council about that to see where we want to go.”

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