Yellow Book (Auditing Standards) Explained

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Yellow Book (Financial Auditing) Explained

The Yellow Book, formally the Generally Accepted Government Auditing Standards (GAGAS), is the name given to the standards promulgated by the Comptroller General (of the Government Accountability Office) for carrying out financial audits of government organizations or programs and business entities that receive financial assistance from the federal government.

A Little More on The Yellow Book

The Yellow Book provides standards for carrying out both financial and performance audits. Performance audits concern evaluating a program or project to determine whether it is meeting efficiency our outcome standards.

The five standards contained in the manual include:

  • Independence of the Auditor
  • Due Care in Carrying Out the Audit
  • Requirements for Continued Professional Education for Auditors
  • Supervision of Auditors
  • Quality Control Standards

The Yellow Book is used by private and public auditors (including the Government Accountability Office, the Inspector General’s Office, and many state and local government auditors).

Organization of the Yellow Book

Chapter 1 ‚Äď Government Auditing: Foundation and Principles
for the Use and Application of Generally Accepted Government
Auditing Standards

Chapter 2 – General Requirements for Complying with
Government Auditing Standards

Chapter 3 ‚Äď Ethics, Independence, and Professional Judgment

Chapter 4 ‚Äď Competence and Continuing Professional Education

Chapter 5: Quality Control and Peer Review

Chapter 6: Standards for Financial Audits

Chapter 7: Standards for Attestation Engagements and Reviews of Financial Statements

Chapter 8: Fieldwork Standards for Performance Audits

Chapter 9: Reporting Standards for Performance Audits

References for Yellow Book

Academic Reasearch on Yellow Book Auditing

  • ¬∑¬†¬†¬†¬†¬†¬† Municipal¬†audit¬†fees: Has increased competition made a difference?, Sanders, G., Allen, A., & Korte, L. (1995). Auditing,¬†14(1), 105. In the course of this research, audit fees were studied and according to this study, the Prior audit fee studies examined mainly the private sector audit market. This paper then extends this research by manufacturing a model of the assists the audit fees for municipalities. Most of the factors used in this model are based on the factors used in the private sector audit fee market. Regression analyses as also used to show the significant portion of the variance in the municipal audit fee which was vividly explained using this model. Statistical result gotten from this model shows the municipal audit market is very competitive.
  • ¬∑¬†¬†¬†¬†¬†¬† Changing the¬†yellow book¬†standards: A blueprint for successful performance¬†audits, McNamee, P. L. (1993). The Journal of Government Financial Management,¬†42(3), 1. This research paper explains the blueprint for successful audit performance in the audit fee market. This research adopts the method of changing the yellow book standard and the empirical result was compared with the former academic hypothesis and then a model was developed which helped to analyze the performance of the audit fee market.
  • ¬∑¬†¬†¬†¬†¬†¬† Competitive bidding, auditor tenure and the extent of single¬†audit¬†findings, Aldhizer III, G. R., & Lampe, J. C. (1997). The Journal of Government Financial Management,¬†46(4), 45. This paper based its findings on the competitive bidding, the extent of the single audit findings and the author tenure in lieu of explaining the correlation of these aforementioned factors to the audit fee market and how they are determinants of the market audit fee.
  • ¬∑¬†¬†¬†¬†¬†¬† Independent¬†audits¬†of conflict minerals reports, Herda, D. N., & Snyder, H. W. (2013). Current Issues in Auditing,¬†7(2), A24-A32. This research work primarily investigates the report of the independent audit of conflict materials.
  • ¬∑¬†¬†¬†¬†¬†¬† Single¬†audit¬†overhaul, Foelster, M. M., & Scott, G. A. (1998). Journal of Accountancy,¬†185(5), 75. According to this research analyses, the single audit overhaul was explained using the results from other researches as a building block to explaining the correlation between the single audit overhaul in the audit fee market.
  • ¬∑¬†¬†¬†¬†¬†¬† The new¬†yellow book: Focus on internal controls, McNamee, P. (1993). Journal of Accountancy,¬†176(4), 83. According to this research, the new yellow book served as the building block on which this research analysis builds its assumptions. This research thesis focuses mainly on the internal control of the market fee audit and the various implications on the economy at large.
  • ¬∑¬†¬†¬†¬†¬†¬† Status Of Government Auditing Standards¬†Yellow Book, Anderson, W. J., Broadus, W. A., & Raaum, R. B. (1989). The CPA Journal,¬†59(6), 28. According to the ideas gotten for the yellow book, this research paper believed the government has several stands and they all depend on the auditing standards. This paper explains the various status of the government auditing standard according to the different factors that influence the market audit fees.
  • ¬∑¬†¬†¬†¬†¬†¬† Common attributes of quality¬†audits, Aldhizer III, G. R., Miller, J. R., & Moraglio, J. F. (1995). Journal of Accountancy,¬†179(1), 61. The various attribute of the quality audit was practically and theoretically explained in this research work. There are various attributes and various forms the audit could take and these forms/attributes totally depend on the quality of the audit as explained in this research analyses.
  • ¬∑¬†¬†¬†¬†¬†¬† The determinants of perceived¬†audit¬†quality and auditee satisfaction in local government, Samelson, D., Lowensohn, S., & Johnson, L. E. (2006). Journal of Public Budgeting, Accounting & Financial Management,¬†18(2), 139-166. According to previous research by other academic scholars, the relationship between audit characteristics and the perception of both audit quality and the auditee‚Äôs satisfaction in the private sector has been explained. This paper, however, proceeded with the research to local government audits where the quality of the audit has been questioned. Note that the local government is the grassroots of an economy. This paper also studies the effect of the auditor‚Äôs size on assumed audit quality and satisfaction. The auditee‚Äôs satisfaction according to this research work was directly related to the positivity in the auditor‚Äôs responsiveness to client, expertise, understanding of the client‚Äôs system and study of internal control.
  • ¬∑¬†¬†¬†¬†¬†¬† How to get action on¬†audit¬†recommendations, Grosshans, W. (1994). The Journal of Government Financial Management,¬†43(1), 17. This paper explains the various methods and steps to follow as regards how to get action on audit recommendation.
  • ¬∑¬†¬†¬†¬†¬†¬† Performance auditing in governments, Dittenhofer, M. (2001). Managerial Auditing Journal,¬†16(8), 438-442. This paper, however, agrees that government function directly from various business organizations. Hence, carrying out operational auditing becomes a necessity to replace the measure of success as observed by the latter via the measurement of profit. This paper, therefore, suggests that unique planning and specialized staffing of government-oriented scope and government management reporting are factors that constitute the performance of the auditing model to be sued by stakeholders and government officials. The audit performances are measured by their efficiency, effectiveness and through the success of the economy.
  • ¬∑¬†¬†¬†¬†¬†¬† The relation between¬†audit¬†pricing and¬†audit¬†contract type: a public sector analysis, Thorne, J., Holmes, S. A., McGowan, A. S., Strand, C. A., & Strawser, R. H. (2001).¬†Journal of Accounting and Public policy,¬†20(3), 189-215. This research used the data obtained from North Carolina local government as an example in determining the extent to which audit contract type is able to explain the variations the audit fee just after the controlled variable was found to be significantly correlated prior to economic studies. This paper adopts the use of a LOGIT regression model which helped to identify the various factors associated with the chances of negotiating a peculiar contract type either via a fixed fee or cost reimbursement. The result of this action points out that the audit fees on average were lower for fixed fee contract than for the cost reimbursement contract.

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