New Yellow Book Impacts Auditors Preparing Tribal Financial Statements
July 30, 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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