What are Government Auditing Standards?

Government auditing standards have many aliases:

• Yellow Book Standards
• Generally accepted government auditing standards
• GAGAS
• GAO auditing standards

So hopefully, you are in the right spot!

Let me answer the following questions for you so that you can get a better understanding of the standards:

1. Who wrote them?
2. Who are they for?
3. What do they say?
4. Why do we need them?
5. Where can I find them?
6. How do I implement them?
7. Are the government auditing standards the best standards?

1. Who wrote the government auditing standards?

Government auditing standards were written by the Government Accountability Office also known as the GAO. The GAO is the legislative auditor for the US Congress and they audit federal agencies and programs.

2. Who are they for?

The GAO initially wrote the government auditing standards for their own use to make sure their audits were high quality. But because the GAO is a government entity, they made the standards available to the public who paid for the development of the standards.

Other government auditors and lawmakers recognized that the standards were good and either adopted them (in the case of government auditors) or required their use (in the case of lawmakers).

For instance, a Texas law requires that auditors of state agencies and universities comply with the government auditing standards. The federal lawmakers mandate the use of the government auditing standards when auditors verify compliance with federal grant terms and conditions.

The government auditing standards can be adopted and used by anyone… but just because they exist does not mean they have to be used by auditors working in government. A policy, law, or contract needs to call them into play… like the Texas law.

3. What do they say?

The latest version of the government auditing standards is over 200 pages long! So it covers a lot of ground. Here is just a sample of the things it says to give you a sense of the tone and the breadth of the document: 

3.08 A distinguishing mark of an auditor is acceptance of responsibility to serve the public interest. (I once dated an auditor with a rather interesting distinguishing mark, but I digress :))

3.19 Auditors and audit organizations should avoid situations that could lead reasonable and informed third parties to conclude that the auditors and audit organizations are not independent and thus are not capable of exercising objective and impartial judgment on all issues associated with conducting the engagement and reporting on the work.

5.16 The audit organization should establish policies and procedures to provide reasonable assurance that auditors who are performing work in accordance with GAGAS meet the continuing professional education (CPE) requirements, including maintaining documentation of the CPE completed and any exemptions granted.

6.17 When auditors identify findings, they should plan and perform procedures to develop the criteria, condition, cause, and effect of the findings to the extent that these elements are relevant and necessary to achieve the audit objectives.

8.40 If it is determined that internal control is significant to the audit objectives, auditors should obtain an understanding of such internal control.

8.90 Auditors must obtain sufficient, appropriate evidence to provide a reasonable basis for addressing the audit objectives and supporting their findings and conclusions.

4. Why do we need government auditing standards?

We need auditing standards to uphold the professional reputation of auditors because an auditor’s reputation is everything.

If the users of the audit results don’t quite believe the auditor because the auditor isn’t objective or the work is sloppy, the audit was a complete waste of time and money for the user and the auditor (not to mention the public who is paying for the audit to be performed!).

5. Where can I find the government auditing standards?

The GAO generously shares the very latest government auditing standards on their website. You can also buy a hard copy for less than $20 on Amazon.

6. How do I implement the standards?

Complying with government auditing standards and implementing all of the wisdom they contain is no small feat because the standards do cover so many different facets of performing an audit and leading an audit team.

I suggest you start with reading the standards themselves and maybe getting a little help understanding what the standards mean by reading “The Yellow Book Interpreted.”

Then I suggest that you undertake a deeper study of the general requirements of the Yellow Book (independence, competence, quality control…) and then focus on audit reporting, audit planning, and evidence gathering and documentation.

You will also want to have a good understanding of the Green Book, which is another document  the GAO publishes that focuses on internal controls.

Because the document is so comprehensive and touches on just about every aspect of auditing, the learning will never cease!

7. Is the Yellow Book the best audit standard?

Off the top of my head, I know of about a half-dozen audit standards. They all essentially say the same thing, because they are compendiums of audit wisdom and they tend to borrow nuggets of wisdom from each other.

But I do like how the whole government audit standard is in one master document. Other standards, the IIA standards for instance, have layers of documents that constitute their whole body of audit guidance. That is a little messy to work with.

And I love how the government auditing standards allow you to perform any kind of audit you can imagine. You can do a performance audit, a compliance audit, a financial audit all using the government auditing standards. This is a plus over other standards because other standards either focus on financial audits (in the case of AICPA standards) or performance audits (in the case of the IIA).

So while I hesitate to call it the best, it is darn good! Chapter 8 is particularly fabulous… as far as audit standards go, anyway!

To learn more:

Enjoy the self-study bundles on the Yellow Book standards for financial auditors or performance auditors available here on YellowBook CPE.com