Applicability and Overview of Key Components

Government Auditing Standards (also referred to as the Yellow Book), are issued by the Comptroller General of the United States of the U.S. Government Accountability Office (GAO) and apply to audits of governmental entities, programs, activities, and functions, and of governmental assistance administered by contractors, not-for-profit organizations (NPOs), and other nongovernmental entities, when required by statute or other mandates or when auditors hold themselves out as following those standards. The standards contain requirements and guidance for financial audits, attestation engagements, and performance audits. Government Auditing Standards are periodically revised and updated by the GAO. The most recent revisions were made in 2007.

Entities for which an auditor may need to apply Government Auditing Standards when auditing financial statements include federal, state, and local governments, NPOs, health care organizations, and certain for-profit organizations such as those with mortgage banking, real estate, or student lending and servicing activities. One of the most common ways Government Auditing Standards become applicable is when an entity receives federal funds and is subject to an OMB Circular A–133 audit. Other laws, regulations, agreements, contracts, or other authoritative sources could also require the use of Government Auditing Standards. For example, state and local laws and regulations may require auditors of state and local governments to follow Government Auditing Standards. Federal audit guidelines pertaining to program requirements, such as those issued for Housing and Urban Development programs and Student Financial Aid programs, also may require the use of Government Auditing Standards (see the Other Compliance Audit and Attestation section for more information on these audits).

Government Auditing Standards incorporates the fieldwork and reporting standards of generally accepted auditing standards (GAAS) and the related Statements on Auditing Standards (SASs) issued by the AICPA unless the Comptroller General of the United States excludes them by formal announcement. In conducting audits of financial statements in accordance with Government Auditing Standards,the auditor assumes certain responsibilities beyond those of audits performed in accordance with GAAS. Government Auditing Standards includes general standards, as well as fieldwork and reporting standards that are in addition to those required by GAAS. Those standards are in such areas as independence, competence, quality control systems, audit documentation requirements, audit follow-up, obtaining and reporting the views of responsible officials about findings and planned corrective actions, and report distribution.

Government Auditing Standards also requires additional reporting on internal control over financial reporting, compliance with laws, regulations, and provisions of contracts or grant agreements, fraud, and abuse, which affect audit procedures. Specifically, in addition to an auditor’s report that expresses an opinion or disclaimer of opinion on the financial statements as required by GAAS, Government Auditing Standards requires a written report on internal control over financial reporting and on compliance and other matters.