New Yellow Book Impacts Auditors Preparing Tribal Financial Statements


New Yellow Book Impacts Auditors Preparing Tribal Financial Statements

July 29, 2018

The Government Accountability Office (GAO) recently issued a new version of the Generally Accepted Government Auditing Standards (GAGAS), commonly known as the Yellow Book. This how-to manual for auditors provides a framework for conducting audits of tribal governments and other entities that receive federal funds. More than 570 federally recognized tribes receive approximately $19 billion in annual funding from the federal government. 

These federal programs cover areas ranging from education to healthcare to cultural preservation, all of which require an annual audit if the federal funds are $750,000 or more in a fiscal year. The 2018 revision makes changes to the types of non-auditing services that could be threats to auditor independence – some of which tribes receive from their auditors. 

Key Changes Impacting Tribes:

  • Independence: Expands the independence standards to state that non-audit services such as an auditor preparing financial statements from a tribe or other entity’s trial balance or underlying records can create a threat to auditor independence. It also states that auditors should “document the threats and safeguards applied to eliminate and reduce threats to an acceptable level or decline to perform the service.” 
  • Waste and Abuse: Defines waste and abuse and re-characterizes what an auditor's responsibility is if they detect waste or abuse. It also expands information in the application guidance to highlight how to report if internal control deficiencies could result in waste or abuse. 
  • Structure: Modifies the format to contain text with direction by including the requirements and application guidance on how to meet those requirements. 
  • Peer Review: Adds clarification that auditors should comply with their affiliated organization’s peer review – such as the AICPA – and follow additional baseline GAGAS requirements. 

The 2018 Yellow Book is effective for financial audits, attestation engagements, and reviews of financial statements for periods ending on or after June 30, 2020, and for performance audits beginning on or after July 1, 2019. Early implementation is not permitted.

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