GAQC Alert No. 331

GAQC Alert
GAO Proposes Changes to Yellow Book and Other Updates
April 6, 2017
GAQC Alert #331
In This Alert
Proposed Yellow Book Revisions
Free Audit Documentation Toolkit
Single Audit Certificate
Register for GAQC Required Webcast
Now is the time to register for the 2017 GAQC Annual Update Webcast scheduled for May 2, 2017, from 1:00 PM – 3:00 PM (Eastern). See GAQC Alert #330 for more information about this annual required event.
Additional Resources
GAQC Alerts

Archived GAQC Web Events

Audit Practice Aids and Tools

HUD Information
Dear Center Members
This GAQC Alert provides you with updates on an assortment of audit topics including proposed revisions to the 2011 edition of Government Auditing Standards (also known as the Yellow Book or GAGAS). After reading this GAQC Alert you will:
  Gain information about the Government Accountability Office (GAO) Yellow Book exposure draft (ED) and how to comment;
  Become aware of a new free AICPA Audit Documentation Toolkit; and
  Get the latest on the AICPA Single Audit Certificate program which is nearing its one year anniversary.
Proposed Yellow Book Revisions
Yesterday, the GAO proposed revisions to the 2011 edition of Government Auditing Standards which would affect multiple areas of the standards including competence, continuing professional education (CPE), auditor independence, quality control, and internal control. No proposed effective date is provided. Instead, GAO states that the effective date, as well as transition guidance to help officials and auditors implement the revised standards, will be included when the Yellow Book is issued in final form. Access the ED.

In the enclosure to the ED which describes the proposed changes, GAO states that the Yellow Book revisions are intended to reinforce the principles of transparency and accountability and provide the framework for high-quality government audits. The ED proposes revisions to reflect changes and developments in the auditing, accountability, and financial management professions while emphasizing specific considerations applicable to the government environment.

Summary of Key Proposed Changes
  The format of the standards has been revised to differentiate requirements from application guidance.
  The chapters have been restructured. For example, there is now a separate chapter on Ethics, Independence, and Professional Judgment and separate chapter on Competence and CPE.
  The ED further explains the independence requirements of the auditor when the engaging party differs from the responsible party. Examples are also provided for when this situation might occur.
  The independence requirements are expanded to state that any services performed by auditors relating to preparing accounting records and financial statements (other than those prohibited by the Yellow Book) create significant threats to auditors' independence and that auditors should document the threats and safeguards applied to eliminate and reduce threats to an acceptable level or decline to perform the service.
  The internal control requirements and guidance have been revised to align with the Standards for Internal Control in the Federal Government (Green Book) and Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
  The requirements for CPE have been revised to require a new 4-hour requirement in GAGAS topics each time a new version of GAGAS is issued. Additionally, application guidance is provided concerning the topics required by the 80-hour GAGAS CPE requirements and to incorporate some of the guidance from the separate GAO CPE guidance document addressing common CPE questions.
  The peer review requirements are expanded to provide requirements and guidance for organizations affiliated with recognized organizations' peer review programs (e.g., AICPA or National State Auditor's Association) and those not affiliated with recognized organizations' peer review programs.
  Among the quality control changes, audit organizations will need to, at least annually, obtain written affirmation of compliance with policies and procedures on independence from all audit organization personnel required to be independent. Additionally, requirements are added and guidance is provided for engagement performance, documentation, and reporting, including requirements for policies and procedures pertaining to the review and supervision of engagement work performed by the engagement team.
  The financial audit requirements are expanded to address waste. Auditors will be required to perform audit procedures to ascertain the potential effect on the audit objectives if they become aware of waste that could be quantitatively or qualitatively significant to the audit objectives. Auditors will also need to report findings of waste when they conclude based on sufficient, appropriate evidence that instances of waste have occurred that have a material effect, either quantitatively or qualitatively, on the financial statements. Finally, auditors are required to communicate findings of waste in writing to audited entity officials when the auditors detect potential instances that do not have a material effect on the financial statements but warrant the attention of those charged with governance.
  The chapter on attestation engagements is updated to incorporate Statement on Standards for Attestation Engagements No. 18, Attestation Standards: Clarification and Recodification, and Statement on Standards for Accounting and Review Services No. 21, section 90 (Review of Financial Statements), as well as to introduce the concept of waste described in the previous bullet.
  The performance audit chapters are revised to, among other things, further explain that management assertions are not required when conducting a performance audit in accordance with GAGAS, discuss suitable criteria, and to introduce the concept of waste previously described for financial audits.
As we work to develop comments on the ED, the Governmental Audit Quality Center (GAQC) will be further analyzing the proposed revisions and their effect on governmental audits. We will also be monitoring activity in this area and will communicate important information through future member communications.

How to Provide Comments

The ED provides a series of questions for commenters and instructions for submitting comments directly to GAO. We encourage all members to review the ED and provide comments to GAO by the comment deadline of July 6, 2017. However, if you would like for the GAQC to consider your comments for inclusion in the AICPA's comment letter, we need to receive your comments at by Friday, May 12, 2017.
Free Audit Documentation Toolkit
Through its enhanced oversight project, the AICPA Peer Review Program has identified a lack of adequate audit documentation as a common audit issue. In response, the AICPA has developed a toolkit to help firms comply with audit standards related to documentation. The toolkit can be found on the Audit Documentation Resources Web page. It includes working paper templates (including the GAQC dual-purpose sampling working paper illustration), a tool for evaluating Service Organization Control (SOC) 1 reports in employee benefit plan financial statement audits, frequently asked questions about documentation, and more.
Have You Earned Your Single Audit Certificate?
AICPA's exam-based Single Audit Certificate program is now approaching its one year anniversary. Many of our members have taken one or both of the single audit exams and earned their digital badge(s). Taking these certificate exams, which have a focus on the Uniform Guidance audit requirements, will help you demonstrate your skills in conducting these specialized engagements. Now is a great time to consider exploring this certificate program as you begin gearing up for your 2017 single audits.

As a refresher, the Single Audit Certificate program was developed by the AICPA in collaboration with the GAQC and leading experts in performing single audits. Exams are offered at both the Intermediate and Advanced levels. You can take one or both of the exams. Your choice!

When you successfully pass one or both of the single audit exams, you will be awarded a digital badge to certify your accomplishment. Your digital badge will have a unique URL that can be shared electronically via social media, in your email signature, in proposals, and more. Learn more about what a digital badge is and how to access and use them.
*     *     *     *     *     

AICPA Governmental Audit Quality Center
Stay Informed

To stay abreast of these and other relevant events, visit the GAQC Web site. Also, we welcome any suggestions or questions.  Please send them by e-mail to

GAQC members may only reproduce and distribute GAQC e-alerts internally within the firm or State Audit Organization to other Center member personnel as part of the organization's professional services. For information about permission to copy any part of these documents for redistribution or inclusion in other work, please click on the copyright notice at the bottom of the page or phone the AICPA copyright permission hotline 919-402-4031

©2017 Association of International Certified Professional Accountants.
AICPA Online privacy policies and copyright information.
AICPA, 1211 Avenue of the Americas, New York, NY 10036

To change your email address and preferences at any time click here.
To unsubscribe from AICPA GAQC emails send an email to
Read our privacy policy.
Association of International Certified Professional Accountants, 220 Leigh Farm Road, Durham, NC 27707-8110