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GAO invites comments on the proposed revisions to Government Auditing Standards, commonly known as the Yellow Book. GAO first issued the standards in 1972. The proposed revisions in the 2023 exposure draft update the Yellow Book to reflect major developments in the auditing and accountability professions and emphasize specific considerations applicable to the government environment. The proposed Yellow Book revision would replace extant chapter 5, “Quality Control and Peer Review,” paragraphs 5.01 through 5.59, and add additional application guidance to chapter 6, “Standards for Financial Audits.”
Some of the major proposed changes from the 2018 revision include the following:
1. Directs audit organizations that are subject to selected standard setters’ quality management standards to comply with those requirements and specific additional Yellow Book requirements to avoid the potential burden of audit organizations designing and maintaining separate systems of quality management.
2. Emphasizes the responsibility of leadership for quality management within an audit organization and requires senior leadership to take an active role in the system of quality management.
3. Adds a quality management risk assessment process and an information and communication component to the framework for the system of quality management.
4. Emphasizes monitoring of the entire system of quality management and includes a new requirement to investigate the underlying causes of identified quality management deficiencies.
5. Promotes scalability of the standard for use by audit organizations differing in size and complexity.
6. Provides for the use of engagement quality reviews, if the audit organization determines that engagement quality review is an appropriate response to address one or more quality risks.
7. Proposes application guidance for key audit matters to provide clarity for financial audits of government entities and entities that receive government financial assistance.
See enclosure I of the 2023 exposure draft for a summary of the major proposed changes.
Process for Revising the Yellow Book
To help ensure that the standards continue to meet the needs of federal, state, and local governments and the public these bodies serve, the Comptroller General of the United States appointed a Comptroller General’s Advisory Council on Government Auditing Standards to discuss and review GAO’s proposed revisions and consider any other necessary changes. The advisory council includes experts from federal, state, and local government; the private sector; and academia. This exposure draft includes the advisory council’s input regarding the proposed changes.
Instructions for Commenting
GAO is requesting comments on this draft from federal, state, and local government officials; managers and auditors at all levels of government; the public accounting profession; academia; professional organizations; public interest groups; and other interested parties. To assist in developing comments, specific questions are presented in enclosure II of the 2023 exposure draft. All comments received from the public will be considered a matter of public record and will be posted on the GAO website.
Please send your comment letters to GAO’s Yellow Book Comments inbox at YellowBookComments@gao.gov no later than April 28, 2023.
For more information, contact James R. Dalkin at (202) 512-9535 or YellowBookComments@gao.gov.