GAO Proposes Changes to Audit Standards
The proposed audit standards, which are known as the "yellow book," are organized into three sections: financial audits, attestation engagements and performance audits. The first two sections are directed at auditors with a financial audit background and the required knowledge of generally accepted auditing standards (GAAS) issued by the American Institute of CPAs (AICPA). The third section avoids use of terminology drawn from financial audits.
There are two types of proposed changes: (1) Proposed changes made for consistent application of GAGAS, and (2) Proposed changes in requirements to strengthen or streamline GAGAS. Among other things, the changes would:
- Require that audit organizations have a human capital management system.
- Specifically state that auditors should have knowledge of GAGAS applicable to the work they are assigned, the specific environment in which the audited entity operates, and the subject matter under review.
- Require that auditors be proficient in the AICPA Statements on Standards for Attestation Engagements when performing attestation engagements and that public auditors be licensed CPAs or work for a licensed CPA firm if engaged to perform an attestation engagement.
- Require that CPE directly contribute to the auditor's professional proficiency to perform work under GAGAS.
- Require that an audit organization prepare documentation to demonstrate compliance with its policies and procedures for its system of quality control.
- Require organizations conducting external peer reviews to have received an unqualified opinion on the review of their organization's system of quality controls.
- Expand what is included in the peer review report.
- Require that audit organizations establish policies and procedures for custody and retention of audit documentation.
Comments are due by April 30, 2002. A marked-up version of the exposure draft that shows potential changes will be available soon on GAO’s web site .