The Government Accounting Office has issued new guidance related to continuing professional education requirements for the "Yellow Book."
Government Auditing Standards (the "Yellow Book") contains standards for audits of government organizations, programs, activities, and functions, and of government assistance received by contractors, nonprofit organizations, and other nongovernment organizations. These standards, often referred to as generally accepted government auditing standards (GAGAS), are to be followed by auditors and audit organizations when required by law, regulation, agreement, contract, or policy. These standards pertain to auditors' professional qualifications, the quality of audit effort, and the characteristics of professional and meaningful audit reports.
What's New Amendment to Paragraph 46 of the Interpretation of Continuing Education and Training Requirements
This notice rescinds portions of par. 46 of the Interpretation of Continuing Education and Training Requirements (April 1991) and issues revised guidance to replace this paragraph. Effective immediately, GAO has deleted inclusion of taxation in the listing of subjects and topics that would always satisfy the 80 hour requirement. GAO is also rescinding the following section of par. 46:
"...instruction in subjects and topics that meet the CPE requirements of licensing bodies (such as state boards of
accountancy) or professional organizations (such as the American Institute of Certified Public Accountants (AICPA)
or the Institute of Internal Auditors) would also satisfy the 80-hour CPE requirement."
Par. 3.45 of the 2003 revision of Government Auditing Standards (GAGAS , states that auditors planning, directing, performing field work, or reporting on an audit or attestation engagement under GAGAS, needs to maintain their professional competence through continuing professional education (CPE). As further discussed in Par. 3.45, each auditor performing work under GAGAS should complete, every 2 years, at least 80 hours of CPE that directly enhance the auditor's professional proficiency to perform audits and/or attestation engagements. (Emphasis added.)
In some cases, auditors must apply professional judgment in determining whether training qualifies under GAGAS. For example, tax services, in general, are not related to the subject matter of audits performed under GAGAS, and, accordingly CPE related to tax would not normally qualify as CPE for purposes of satisfying GAGAS requirements. However, if taxation relates to an objective of an audit conducted under GAGAS, certain training in taxation could possibly qualify as CPE under Yellow Book. For example, auditors employed by the federal Internal Revenue Service or state and local government employees who audit tax revenues may be able to claim GAGAS CPE credits for courses in taxation. Likewise, auditors auditing the financial statements of not-for-profit organizations under GAGAS might also be able to claim GAGAS CPE if knowledge of the relevant tax requirements is an important financial reporting objective that influences reporting for purposes of the financial statements. In such cases, the audit organization should clearly document the rationale for including such training as part of the GAGAS CPE requirement.
In addition to GAGAS CPE requirements, many state licensing bodies and/or professional organizations have also established CPE requirements for auditors. Although many of the training courses auditors take may be used to satisfy various requirements, in some cases certain training may qualify as CPE under one set of requirements but may not qualify as CPE under another. For example, training in public administration or legislative matters may qualify as GAGAS CPE but might not necessarily qualify under requirements established by a licensing body or certain professional organizations. In addition, certain tax training that would qualify as CPE training for state licensing would not qualify as CPE under the 2003 Yellow Book if it does not directly enhance the auditors professional proficiency to perform audits and /or attestation engagements under GAGAS.
The requirements of the 2003 Yellow Book became effective 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. As such, auditors need to consider this change in the CPE requirements when considering compliance with the GAGAS CPE requirements beginning in 2004.
For example, if an audit organization's 2-year period for CPE compliance was for calendar year 2003-2004, CPE taken in taxation during 2003 would generally count for GAGAS CPE requirements because the 1994 requirements were in effect during 2003. In 2004, if the audit organization is in the second year of the 2-year CPE cycle, auditors would use the new requirements for 2004 and apply the new requirements to the remaining number of CPE hours needed in 2004 to comply with the 80 hour requirement. Generally under these rules, course work in taxation will not count towards during 2004.
GAO is in the process of revising the Interpretation of Continuing Education and Training Requirements (April 1991) to reflect the current CPE requirements of the 2003 Yellow Book. The changes announced in this internet notice will be reflected in the updated guidance.