Generally Accepted Government Auditing Standards

Generally Accepted Government Auditing Standards
Name	Generally Accepted Government Auditing Standards
Abbreviation	GAGAS
Established	1972
Issuing body	Government Accountability Office
Also known as	Yellow Book
Jurisdiction	United States federal, state, and local audits

Generally Accepted Government Auditing Standards provide a framework for performing high-quality audits of public entities, programs, activities, and resources. Originating from standards developed by the Government Accountability Office and influenced by professional organizations such as the American Institute of Certified Public Accountants and the Association of Certified Fraud Examiners, these standards guide auditors working with entities like the United States Congress, Department of Health and Human Services, and Department of Defense. They inform accountability mechanisms used by bodies including the Office of Management and Budget, the Federal Reserve, and state auditors in places such as New York (state), California, and Texas.

Background and History

GAGAS trace roots to guidance promulgated by the Government Accountability Office in the 1970s amid oversight reforms driven by events like the Watergate scandal and legislative responses such as the Budget and Accounting Act of 1921 reinterpretations. Early iterations reflected input from the American Institute of Certified Public Accountants, the Institute of Internal Auditors, and the National Association of State Auditors, Comptrollers and Treasurers. Subsequent revisions responded to crises and reforms involving entities including the Securities and Exchange Commission, the Federal Emergency Management Agency, and the Internal Revenue Service, and were influenced by reports from the Congressional Budget Office and investigations related to the Iran–Contra affair. Amendments have paralleled initiatives like the Sarbanes–Oxley Act of 2002 and guidance from the Office of Personnel Management on audit quality.

Core Principles and General Standards

The standards emphasize principles of independence, objectivity, and competence applied across engagements by auditors from organizations including the Government Accountability Office, state audit offices in Florida, Ohio, and Georgia (U.S. state), and external firms such as the Big Four accounting firms (e.g., Deloitte, PricewaterhouseCoopers, Ernst & Young, KPMG). General standards require qualifications, continuing professional education influenced by curricula like those at Harvard University, Johns Hopkins University, and Georgetown University, and quality control systems comparable to frameworks from the Public Company Accounting Oversight Board and the International Auditing and Assurance Standards Board. Ethical expectations draw on codes from the American Institute of Certified Public Accountants and the Association of Government Accountants.

Field Work Standards

Field work guidance addresses planning, supervision, and evidence collection during audits of programs administered by agencies such as the Environmental Protection Agency, Social Security Administration, and Department of Education. Auditors are instructed to apply risk assessment methodologies similar to those used by Federal Reserve Board examiners and to document procedures consistent with standards from the International Organization for Standardization and the Committee of Sponsoring Organizations of the Treadway Commission. Coordination with investigative bodies like the Federal Bureau of Investigation or the Department of Justice may be necessary in fraud-related engagements.

Reporting Standards

Reporting standards require clear, objective communication of findings and recommendations to stakeholders including the United States Congress, state legislatures such as the California State Legislature, and oversight entities like the Office of Inspector General offices within agencies such as the Department of Homeland Security. Reports must consider disclosure requirements reflected in statutes like the Freedom of Information Act and align with expectations from courts such as the United States Court of Federal Claims when audit evidence informs litigation. Presentation standards intersect with practices used by publications at institutions like the Brookings Institution and the Urban Institute.

Types of Audits and Applications

GAGAS apply to financial audits of entities including the Pension Benefit Guaranty Corporation, performance audits of programs like those at the Centers for Medicare & Medicaid Services, and attestation engagements for entities such as municipal authorities in Chicago, Houston, and Philadelphia. They guide audits supporting compliance with laws like the Clean Air Act, grant reviews involving the National Institutes of Health, and examinations connected to emergency responses by the Federal Emergency Management Agency and disaster recovery efforts in regions such as Puerto Rico and Louisiana after hurricanes.

Implementation, Oversight, and Compliance

Implementation relies on audit organizations such as the Government Accountability Office, state audit offices, and private firms registered with bodies like the Public Company Accounting Oversight Board. Oversight mechanisms include peer reviews coordinated by groups like the National State Auditors Association and enforcement actions from agencies such as the Securities and Exchange Commission when financial reporting is implicated. Compliance programs often involve instrumenting quality control systems modeled after standards from the International Federation of Accountants and training partnerships with universities including Pennsylvania State University and University of Texas at Austin.

Criticisms and Reforms

Critics including scholars at the American Enterprise Institute and the Heritage Foundation have argued that GAGAS can impose burdens on small jurisdictions such as counties in Iowa and towns in Vermont, while watchdogs like Public Citizen and whistleblowers who engaged with the Office of Special Counsel have highlighted challenges in enforcing independence. Reform proposals have drawn on comparative models from the United Kingdom's audit commission history, recommendations by the National Academy of Public Administration, and legislative initiatives debated in the United States Congress.

Category:Auditing standards