Reconciling "Consulting" under GAO & IIA Audit Standards

By McCall, Sam M. | The Journal of Government Financial Management, Fall 2003 | Go to article overview

Reconciling "Consulting" under GAO & IIA Audit Standards


McCall, Sam M., The Journal of Government Financial Management


Many state and local government audit organizations subscribe to Government Auditing Standards, issued by the Comptroller General of the United States, and to Standards for the Professional Practice of Internal Auditing, issued by The Institute of Internal Auditors, Inc. (The IIA). However, the U.S. General Accounting Office's (GAO) new Independence Standard has caused some to question the propriety of continuing to reference both organizations' standards in audit reports. A recent letter from the GAO to The UA provides GAO's views on how The IIA's consulting services relate to independence under the Yellow Book standards.1

THE ISSUE AND DIALOGUE TO DATE

In 1999, The IIA included consulting services within its new definition of internal auditing. Subsequently, in January 2002, GAO's new Independence Standard defined nonaudit services as being synonymous with consulting in the case of non-government auditors who perform audits of government and nonprofit entities under Government Auditing Standards. (Par 3.19) GAO further stated that in certain circumstances it is not appropriate for an audit organization to perform both audit services and selected nonaudit services for the same client. In these circumstances and to remain independent, an audit organization will have to choose which service to provide. While GAO has not defined nonaudit services as synonymous with consulting for governmental auditors, those auditors still need to be concerned with any nonaudit services provided, regardless of how those services are defined or what they are called. This article examines how the GAO and IIA define the term "consulting," identifies similarities and differences, and makes recommendations for consideration.

Dialogue to date between these two organizations has confirmed that consulting as described by The IIA is more related to GAO's performance auditing and "constructive engagements" than to what GAO has described as nonaudit services. In its May 20, 2003 letter to The IIA, the GAO stated that as a result of the recent discussions with representatives from The IIA, "...we concluded that the vast majority of services provided by internal auditors that fall under The IIA's consulting definition and standards, are, in fact, assurance services or "constructive engagements," whereby the internal auditor maintains independence as defined by The IIA standards." GAO views the term "consulting" as problematic in that it provides the connotation that an internal auditor may not be independent. In its May 20, 2003 letter, the GAO recommends that The IIA use the term "constructive engagement" in The IIA standards rather than "consulting" to describe those services performed by internal auditors that facilitate management improvements on a real-time basis without compromising the independence and objectivity of the internal auditor. The good news is that both organizations see work that The IIA describes as consulting as a value-added service that can be performed under the audit standards as long as certain principles and safeguards are observed and applicable audit standards are followed.

THE IIA INCLUDES "CONSULTING" WITHIN THE DEFINITION OF INTERNAL AUDITING

In 1997, The IIA Board of Directors appointed an International Guidance Task Force to address the continued applicability of The IIA standards, some 20 years after their initial issuance. The task force concluded that the nature of the internal auditing profession has changed, outsourcing the internal audit function to external auditors was increasing and internal auditors were being asked by management to provide a higher level of value-added services.2 About this same time, the AICPA's The CPA Letter identified assurance services, technology and management consulting as three of the top five services to be provided by CPAs in the future. While recognizing the potential growth and impact of these new services on the profession, The IIA made it clear from the beginning that all services to be provided by internal auditors would be built around audit standards that emphasized auditor independence and objectivity. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Reconciling "Consulting" under GAO & IIA Audit Standards
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.