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GAO Issues Proposed 'Yellow Book' Changes

June 9, 2006

The Government Accountability Office has issued proposed changes to Government Auditing Standards, commonly known as the "Yellow Book."  The overall focus includes an increased emphasis on audit quality and ethics, an update of performance audit standards, and modernization of GAGAS to reflect developments in the accountability and audit environments.  In many cases, GAGAS terminology has been revised to be consistent with standards recently adopted by the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants (AICPA).  For example, the definitions of significant deficiency  and material weakness  as defined in AICPA Statement on Auditing Standards (SAS) No. 112 will be incorporated into GAGAS. 

When issued in final form, the 2006 revision will supersede the 2003 revision of the standards.  The GAO anticipates that the standards will become effective for financial audits for fiscal years ending on or after July 1, 2007 and for performance audits beginning on or after July 1, 2007.   For financial audits, certain standards issued by the Auditing Standards Board of the AICPA have earlier effective dates.  For financial audits performed under GAGAS, the effective dates of the new ASB standards will apply.

The draft of the proposed changes is available only in electronic format and can be downloaded from GAO's Yellow Book Web Page. Two helpful enclosures are included--a summary of major changes and questions for commenters. The comment deadline is August 15, 2006. 

NACUBO Resource: Sue Menditto, director, accounting policy.