Terminology and Requirements
Certain laws, regulations, and contracts require auditors to follow generally accepted government
auditing standards. GAGAS are also widely used in audits of
• State and local government programs.
• Entities receiving government financial assistance.
The terms GAS and GAGAS are often used interchangeably, however, in this course, the terms
Government Auditing Standards (the Standards), GAGAS, and Yellow Book are used
interchangeably.
For financial audits, GAGAS incorporates the AICPA's standards for field work and reporting,
but GAGAS exceeds these standards in addressing issues particularly relevant in governmental,
not-for-profit, and other applicable sectors.
Brief History of the Government Auditing Standards
Beginning with the implementation of the federal programs in the mid-1960s, both the number
and the dollar amount of government programs and services increased substantially. This
increase brought with it a demand for full accountability from those entrusted with public funds
and the responsibility for managing government programs and services properly.
Origin of the Standards
In 1969, the Comptroller General of the United States held a series of meetings with a group of
state auditors and federal officials. These meetings identified a need to improve government
auditing. One of the areas identified was the absence of formal government auditing standards.
In July 1969, the GAO initiated plans for an audit standards work group charged with the
objective of developing government auditing standards.
In 1970, the audit standards work group started the survey and research work on which the
original 1972 Standards were based. The work group included representatives from the GAO,
federal departments and agencies, state and local government auditors, and professional
organizations including the AICPA. Assistance was also provided by academics and public
interest groups. In June 1972, the Comptroller General issued the original version of the Yellow
Book, entitled
Standards for Audits of Governmental Organizations, Programs, Activities &
Functions.
Yellow Book Revisions
In 1979, the GAO started a project to revise the Standards. Based on comments and suggestions
the GAO had received since the Standards were originally issued, a draft of proposed revised
Standards was prepared and released for comment in August 1980. Comments received were
analyzed and evaluated for appropriate consideration in arriving at the final draft Standards. The
1981 revision of GAGAS was signed by the Comptroller General on February 27, 1981.
In November 1985, the GAO started a project to clarify, update, and revise the 1981 revision of
the Yellow Book. In December 1985, the Comptroller General appointed an Auditing Standards
Advisory Council (ASAC) to advise him and the GAO on revising the Standards. The ASAC
comprised members from federal, state, and local governments; public accounting; academia;
and other special interest groups.
On March 16, 1987, an exposure draft was released for comment and was sent to audit officials
at all levels of government and members of the public accounting profession, academia,
professional organizations, and public interest groups. Comments received were analyzed and
evaluated, and appropriate changes were made in the final draft. The final revised Standards
were released in August 1988, superseding the 1981 revision.
In July 1993 an exposure draft was released proposing changes to the 1988 Yellow Book
revision. A revision, entitled Government Auditing Standards: 1994 Revision, was released on
June 6, 1994. Its provisions were effective for
• Financial audits of periods ending on or after January 1, 1995.
• Performance audits beginning on or after January 1, 1995.
After the issuance of the 1994 revision of the Yellow Book, three amendments were issued as
follows:
• Amendment No. 1: Documentation Requirements When Assessing Control Risk at
Maximum for Controls Significantly Dependent Upon Computerized Information
Systems, issued May 1999
• Amendment No. 2: Auditor Communication, issued July 1999
• Amendment No. 3: Independence, issued January 2002
• The effective dates of the amendments were:
• Amendment No. 1: This Amendment became effective for financial statement audits of periods
ending on or after September 30, 1999.
• Amendment No. 2: This Amendment became effective for financial statement audits of periods
ending on or after January 1, 2000.
• Amendment No. 3: Because of the breadth of changes in the new standards, the standards became
applicable to all audits for periods beginning on or after January 1, 2003.
In June 2003, the GAO released an omnibus revision to the Yellow Book. The standards became
applicable for financial audits and attestation engagements of periods ending on or after January
1, 2004, and for performance audits beginning on or after January 1, 2004.
In July 2007, the GAO issued an omnibus revision to the Yellow Book. The 2007 Yellow Book
became applicable for financial audits and attestation engagements for periods beginning on or
after January 1, 2008, and for performance audits beginning on or after January 1, 2008. Early
implementation was permissible and encouraged.
The 2007 revision contained the following fundamental changes that reinforced the principles of
transparency and accountability, and provided the framework for high quality government audits
that add value.
• A heightened emphasis on ethical principles as the foundation, discipline, and structure
behind the implementation of the standards, including a description of five key ethical
principles that should guide the work of those who audit government programs and
operations.
• A clarified and streamlined discussion of the impact of professional services other than
audit services (nonaudit services) and their impact on audit independence.
• Updated financial auditing standards based on recent developments in financial auditing
and internal control, increased transparency surrounding restatements and significant
concerns, uncertainties, or other unusual events that could have a significant impact on
the financial condition or operations of a government entity or program.
• Enhanced performance auditing standards that elaborate on the overall framework for
high-quality performance auditing, including the concepts of reasonable assurance and its
relationship to audit risk and the levels of evidence used to support audit findings and
conclusions.
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