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This Audit Guide provides the latest information on auditing issues affecting entities that are subject to Government Auditing Standards (also referred to as the Yellow Book) and, if applicable, Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. A recent federal study showed that improvements are needed in the audits covered by this Guide so you should ensure you have it as part of your reference tools when performing these audits.
Updated with conforming changes as of August 1, 2008, it includes guidance on planning and performing audits under the July 2007 revision of Government Auditing Standards and OMB Circular A-133, as amended in June 2007. This edition of the guide has also been conformed to reflect the Defining Professional Requirements standards as found in SAS No. 102. Furthermore, it provides guidance on the auditor's responsibilities as set forth in SAS Nos. 112 and 114, including identifying, evaluating, and reporting deficiencies in internal control related to both financial reporting and compliance and the auditor's communications with those charged with governance.
The guide summarizes applicable requirements, guidance, and practices, and delivers "how-to" advice for handling audit issues common to entities reporting under Government Auditing Standards and OMB Circular A-133.
For a topical listing of subject matter by chapter, click on the Table of Contents tab.
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Purpose and Applicability
This Audit Guide (guide) provides guidance (chapters 1-4) on the auditor's responsibilities when conducting an audit of financial statements in accordance with Government Auditing Standards (also referred to as the Yellow Book), issued by the Comptroller General of the United States of the U.S. Government Accountability Office (GAO). This guide has been prepared using the Government Audit Standards, July 2007 Revision.
It also provides guidance (chapters 1 and 5-13) on the auditor's responsibilities when conducting a single audit or program-specific audit in accordance with the Single Audit Act Amendments of 1996 (the Single Audit Act) and Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. This guide was originally issued as Statement of Position (SOP) 98-3, Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards (AICPA, Technical Practice Aids), in March 1998, and updated annually for conforming changes for relevant guidance contained in authoritative auditing standards and other requirements. The AICPA converted SOP 98-3 into an Audit Guide in 2003. That conversion did not supersede the guidance that appeared in SOP 98-3 but only changed its format.
Concerning an audit of financial statements in accordance with Government Auditing Standards, this guide:
Concerning an audit of federal awards in accordance with Circular A-133, this guide:
Further, this guide incorporates guidance from the following documents:
References to Professional Standards
In citing the professional standards, references are made to the AICPA Professional Standards publication. When referencing professional standards, this guide cites section numbers and not the original statement number, as appropriate. For example, SAS No. 54 is referred to as AU section 317.
Effect of PCAOB Standards on Entities Subject to Government Auditing Standards
The Public Company Accounting Oversight Board (PCAOB) establishes standards for audits of issuers, as that term is defined by the Sarbanes-Oxley Act of 2002 or whose audit is prescribed by the rules of the Securities and Exchange Commission (SEC). Other entities are referred to as nonissuers. Although many entities that are subject to Government Auditing Standards are nonissuers, some are issuers. Such issuers may include, for example, lending institutions that participate in federally sponsored loan programs such as housing and education. In December 2007, the GAO issued guidance titled "Guidance on Complying with Government Auditing Standards Reporting Requirements for the Report on Internal Control for Audits of Certain Entities Subject to the Requirements of the Sarbanes-Oxley Act of 2002 and Government Auditing Standards" that recognizes that the use of PCAOB's framework for assessing control deficiencies could result in inconsistencies in reporting internal control deficiencies under the Yellow Book. The GAO guidance facilitates the reporting of internal control deficiencies identified during audits conducted under both PCAOB and Yellow Book standards to ensure the consistency of information included in the Yellow Book report on internal control and to assist auditors in complying with Yellow Book standards. It is available on the Yellow Book Web site at www.gao.gov/govaud.ybk01.htm.
Effective Date
The provisions of this guide are applicable to audits of fiscal years beginning after June 30, 1996, in which the related fieldwork commences on or after March 1, 1998. The provisions of this guide, including conforming changes, that arise from AICPA auditing standards, Government Auditing Standards, the Single Audit Act, and Circular A-133 are effective as of the effective date of those standards and requirements. This guide does not change the effective dates of those standards and requirements. The auditing conforming changes made in this edition of this guide are effective for audits of financial statements for which sufficient appropriate audit evidence to support the opinion is obtained after its issuance, subject to the effective dates of the underlying authoritative pronouncements.
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