In response to a question about "For the Orange"

In response to a question about "For the Orange":

Hi Leita,

Thank you for the interesting article on the differences and commonalities between the yellow book and the red book. As you have highlighted, the yellow book has a different perspective and it definitely conflicts with our more consultative approach with management regarding our work.   From my point of view, the yellow book should be utilized by auditors in which their work will be relied upon by others such as federal agencies and/or auditors.  A prime example is the A-133 audit conducted by the Texas State Auditor’s Office.   I believe that the yellow book was meant for the State Auditor’s Office and not for the internal audit functions at the state agencies and higher education institutions.  In my opinion, the State Auditor’s Office is functioning like an external auditor.  It is interesting that the IIA standards are not even mentioned in their peer review report. http://www.sao.state.tx.us/audit/PeerReviewFY12.pdf

I have always wondered why the Texas Internal Auditing Act required us to follow both the yellow book and red book. Could you enlighten me on the reasoning behind including both IIA Standards and GAGAS in the Texas Internal Auditing Act?

I would definitely like to see the act to be amended to differentiate between the State Auditor’s Office and the internal audit functions across the state when it comes to meeting the yellow book and red book standards.  I realize this is not going to happen with all the other priorities occurring in Austin, but I can always dream. 

Hi Paul -

I agree.  And so does the author of the Act!  At the time, the author was working for the State Auditor's Office and thought that following both made sense.  But now that he is an internal auditor himself, he is very unhappy with his choice.  Now he realizes only the red book should apply to internal auditors.  Notice I'm not mentioning any names. Wouldn't want the rest of the internal audit committee to send a posse after him!

And the Internal Audit Act does not require the SAO to follow the red book.  Only the yellow book.  Yes, they do act like an external auditor.  But that seems appropriate, given the position they are in.  The GAO is the legislative auditor for the federal government and the SAO is the legislative auditor for the state of Texas. 

I wonder how a change could be made?  Who starts that ball rolling?

Thanks for your response!

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Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

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