Accountants subject to the new auditor independence rules issued by the General Accounting Office (GAO) earlier this year have been given a small reprieve. The rules affect auditors on engagements that must comply with Government Auditing Standards, commonly referred to as the "Yellow Book." These rules apply to audits of government entities, government contractors, and federally funded organizations.

The new Yellow Book rules include guidelines for separating auditors from performing management functions, making management decisions, and auditing their own work. The rules were scheduled to apply to audits beginning on or after October 1, 2002. The GAO has extended the effective date, which is now set for January 1, 2003.

It has come to the attention of the GAO that some audit firms, particularly smaller organizations and those located in remote areas, were not aware of the new guidelines or had questions that had not yet been answered.

To accommodate these organizations, the GAO has extended the effective date for the new independence rules to nonaudit services contracted for by June 30, 2002, provided the work is completed by June 30, 2003. In addition, the GAO has published a document, "Government Auditing Standards: Answers to Independence Standards Questions," which is currently available on the Internet and will be available in print within two weeks. This document clears up much confusion surrounding the new rules.

Nonaudit services that are allowed under the new guidelines include providing routine advice to an audited entity and its management to assist in activities such as establishing internal controls or implementing audit recommendations; answering technical questions; providing training; providing tools and methodologies such as best practice guides, benchmarking studies, and internal control assessment methodologies; collaborating with others to strengthen professional standards; developing audit methodologies; and providing legal/accounting opinions or other assistance to a legislative body.