Page 370 - Encyclopedia of Business and Finance

eobf_G 7/5/06 3:03 PM Page 347

Government Auditing Standards

Financial audits. These audits are completed primarily to internal control, and obtaining sufficient evidential mat-
provide reasonable assurance about whether financial ter. Additional standards of GAGAS relate to the follow-
statements are presented fairly in all material respects in ing: auditor communication, consideration of previous
conformity with generally accepted accounting principles audits’ results, detection of material misstatements, devel-
(GAAP), or with a comprehensive basis of accounting, opment of elements of a finding, and audit documenta-
other than GAAP. Additionally, auditing compliance with tion.
regulations is included in this category.
REPORTING STANDARDS
Attestation examination. As noted in the guidance,
Reporting standards incorporate the four reporting state-
“attestation engagements can cover a broad range of finan-
ments of the Auditing Standards Board. Those statements
cial or nonfinancial subjects and can be a part of a finan-
cial audit or performance audit.” require that:
1. Financial statements are presented in accordance
Performance audits. Such audits include systematic with generally accepted accounting principles
examination of relevant evidence to provide an independ-
2. Any change in consistency is reported, even if audi-
ent assessment of the performance of a government organ-
tor approved of such change
ization, program, activity, or function.
3. Disclosures are informative and are reasonably ade-
Engagements that are combinations. A government quate
audit may be a combination of the foregoing types. For 4. There is an expression of opinion
example, external auditors conduct audits of government Additionally, these standards also require reporting:
contracts and grants with private-sector organizations
where financial, attestation, and performance objectives • Auditors’ compliance with GAGAS
are audited. Furthermore, an audit engagement may be
• Internal control and compliance with laws, regula-
extended to include nonaudit activities for which the tions, and provisions of contracts or grant agree-
assurance is not equivalent to that provided as a result of
ments
an audit.
• Deficiencies in internal control, fraud, illegal acts,
violations of provisions of contracts or grant agree-
GENERAL STANDARDS FOR ALL
ments, and abuse
ENGAGEMENTS
The introduction to Chapter 3 on general standards • Views of responsible officials
states: “These general standards concern the fundamental • Privileged and confidential information
requirements for ensuring the credibility auditors’
• Issuance and distribution details
work.… These general standards provide the underlying
framework that is critical in effectively applying the field
work and reporting standards” (p. 27). GENERAL, FIELD, AND REPORTING
General standards require that the audit entity be STANDARDS FOR ATTESTATION
organizationally independent and that the individual EXAMINATIONS
auditors assigned to an engagement maintain independ- In addition to the general standards for all engagements,
ence in attitude and in appearance and use professional the Yellow Book’s attestation standards accept the AICPA’s
judgment in both planning and performing audits. Staff general standard for attestation examinations that relates
assigned to perform an audit should collectively possess to criteria which must be available for the completion of
adequate professional competence for tasks assigned. such an engagement. Additionally, there are the following:
Moreover, the audit organization must have an appropri-
ate internal quality control system that is evaluated by Field standards. The AICPA’s attestation field standards
external peer reviewers. related to examinations that require planning and obtain-
ing sufficient evidence are accepted as field standards for
FIELD STANDARDS FOR FINANCIAL GAGAS. The subjects of GAGAS field standards are:
AUDITS auditor communication; consideration of results of previ-
The field standards of GAGAS incorporate the three field ous audits and attestation engagements; internal control;
standards as established by the AICPA’s Auditing Stan- detection of fraud, illegal acts, violations of contracts and
dards Board, which relate to planning, understanding grant agreements and abuse; development elements of

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 347