Title: The New GAO Independence Standard: What Auditors Need to Know: Maintain Auditor Independence While Performing Nonaudit Services.
Abstract: In January the GAO amended Government Auditing Standards (the yellow book), significantly tightening its auditor independence provisions. In issuing the new standard, the comptroller general stated that protecting the public interest and ensuring public confidence in the independence of auditors of government financial statements, programs and operations, both in form and substance, were the overriding considerations. The updated standard is required reading for auditors of government entities and of organizations receiving government funds. The GAO originally scheduled the new provisions, Amendment no. 3, Independence, to take effect October 1, but many practitioners said certain of the provisions were ambiguous, especially with respect to nonaudit services. AICPA members and others also worried about the cumbersome nature of some of the new standard's independence safeguards that, for example, mandated separate engagement teams for audit and nonaudit services. In response, the GAO helped in two ways. In July it made the standard effective for all audits pertaining to periods beginning on or after January 1, 2003. At the same time it issued a series of questions and answers (QA the second prohibits auditors from auditing their own work or providing nonaudit services when the services are material or significant to the subject matter of the audit. If a nonaudit service does not conflict with either principle, a firm may perform the service as long as the firm complies with each of the following safeguards: * Personnel providing the nonaudit service cannot plan, conduct or review audit work related to the nonaudit service. Audit and nonaudit work must be performed by separate engagement teams. * The scope and extent of audit work cannot be reduced beyond the level that would be appropriate if the nonaudit work were performed by an unrelated party. * The firm Should document its consideration of the nonaudit service, including its rationale that providing the service does not violate the two overarching principles. …
Publication Year: 2002
Publication Date: 2002-11-01
Language: en
Type: article
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