Revision on its way
Last Monday, I saw Marcia Buchanan, the project manager for the Yellow Book at the GAO. She was conducting a full day seminar for the Alaska Legislative Auditor and they let me sit in.
Marcia imagined that the proposed revision would be out by the 18th. Like NOW. I am watching for it every day. But, I was able to get a preview of what the proposed revision might include. Note that this is a proposed revision and it won’t be final until they get our comments and then issue the final version in the spring.
With that said, the main change to the Yellow Book will surround the general standard of independence. Independence has been a confusing, messed up section since the GAO started tweaking it earlier this decade. One thing that the GAO always allowed – somehow – was that auditors in public practice could both draft and audit the financial statements. The new standard refers to an AICPA Code of Conduct clause that makes this unacceptable. Interesting that the GAO is using the AICPA’s own writing against the members of the AICPA, in a way.
Marcia said that she shocked one of the members of the AICPA ethics board by calling forth his own standard prohibiting a CPA from working with a client that didn’t have the ability to create its own financials. He didn’t even know it was there. I have been very concerned about this practice for a long time. Blessing the financial statements that you just created goes against the basic premise of what auditors do.
We are supposed to be an objective third party that verifies that a subject matter is OK. If we create the subject matter, we are no longer objective.
More when the exposure is exposed! Redundancy is good in business writing!