Generally accepted auditing standards (GMS) for the audits of non issuers are issued by the AICPA's Auditing Standards Board (ASB) in the form of Statements on Auditing Standards (SAS). The AS B's Statements on Auditing Standards are outlined in Section AU-C of the AICPA Professional Standards and have been described previously. GMS are applicable to all audits.
Generally accepted government auditing standards (GAGAS) are organized as foundations and ethical principles, general standards, standards for financial audits and attestation engagements, and field work and reporting standards for performance audits. GMS are incorporated by reference and additional standards applicable to government expand the auditors' requirements.
Financial statement audits performed according to Government Auditing Standards (the Yellow Book) incorporate GAAS and determine whether the financial statements present fairly the financial position, results of operations, and, where applicable, cash flows in accordance with generally accepted accounting principles.
Engagements can also include audits of financial statements prepared in conformity with a special purpose framework or other comprehensive basis of accounting (OCBOA). Government regulators generally specify the OCBOA to be used in relation to financial assistance provided to organizations. Government audit standards can be used in connection with audits of nonissuers for audits otherwise conducted using AICPA standards, and audits of issuers otherwise conducted using PCAOB standards.
Attestation engagements performed in conformity with Government Auditing Standards (the Yellow Book) incorporate the AICPA's standards for examinations, reviews, and agreedupon procedures by reference and include expanded requirements. Subjects of attestation agreements could include:
Compliance with specified laws, regulations, rules, contracts, or grants.
Effectiveness of internal control over compliance with specified requirements (e.g., bidding etc.).
Presentation of management's discussion and analysis (MD&A).
Reliability of performance measures.
Performance audits provide objective analysis, findings, and conclusions to assist management and those charged with governance and oversight to, among other things, improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability.
Generally accepted government auditing standards (GAGAS) include the following standards for financial audits.
Which of the following statements is a standard applicable to financial statement audits in accordance with Government Auditing Standards?