Academic journal article Journal of Accountancy

AICPA Raises Concerns about Government Yellow Book Proposal

Academic journal article Journal of Accountancy

AICPA Raises Concerns about Government Yellow Book Proposal

Article excerpt

The American Institute of CPAs, commenting on the July 1993 exposure draft Government Auditing Standards, expressed concern about the added work and associated costs that would result from new requirements to test internal controls and compliance with laws and regulations.

The ED, which revises Government Auditing Standards (known as the yellow book), was prepared by the General Accounting Office (GAO) and the Government Auditing Standards Advisory Council (see "The New Yellow Book: Focus on Internal Controls," by Patrick McNamee, JofA, Oct.93, page 83). The yellow book requirements currently apply to an estimated 75,000 to 100,000 financial statement audits of federal, state and local governmental units and of not-for-profit organizations and other entities that receive federal assistance.

The comment letter, sent to the GAO by John B. Sullivan, chairman of the AICPA auditing standards board, and George A. Scott, chairman of the AICPA government accounting and auditing committee, provided recommendations and suggestions to help minimize confusion and misunderstanding in certain areas that could result from the proposal. The letter also said the AICPA was "pleased that the proposal simplifies some of the current reporting requirements."

More work for auditors. "It's an attempt by the GAO to clarify some of the developments that have occurred since the yellow book's 1988 revision," Scott told the Journal. "However, this draft goes well beyond field-work requirements that currently are in place and represents a substantial expansion of work for auditors, especially in the area of internal controls and compliance." Unlike the 1988 yellow book's, the ED's standards differ significantly from generally accepted auditing standards, Scott said, especially those for assessing internal controls.

Scott added that a primary concern is the expansion of yellow book requirements to audits of not-for-profit organizations and for-profit companies that receive even limited support from the federal government. …

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