Government Auditing Standards: Amendment No. 3: Independence, Issue 3

Front Cover
David M. Walker
DIANE Publishing, 2002 - Business & Economics - 56 pages
This amendment substantially changes the previous standard to better serve the public interest and to maintain a high degree of integrity, objectivity, and independence for audits of government entities. While this new amendment deals with a range of auditor independence issues, the most significant change relates to the rules associated with non-audit, or consulting services. Included as Appendix I is a version of the standard which shows the deletion of language appearing in the 1994 Yellow Book with a strikeout, and presents the new or amended language with bold and italics. Also contains a list of members of the Comptroller General's Advisory Council on Government Auditing Standards.
 

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Page 6 - In all matters relating to the audit work, the audit organization and the individual auditor, whether government or public, should be free both in fact and appearance from personal, external, and organizational impairments to independence.
Page 1 - The two overarching principles in the standard for nonaudit services are that: • auditors should not perform management functions or make management decisions, and • auditors should not audit their own work or provide nonaudit services in situations where the amounts or services involved are significant or material to the subject matter of the audit. Both of the above principles should be applied using a substance over form doctrine.
Page 26 - To achieve maximum independence such auditors and the audit organization itself not only should report to the highest practicable echelon within their government but should be organizationally located outside the line-management function of the entity under audit.
Page 28 - This standard places responsibility on each auditor and the audit organization to maintain independence so that opinions, conclusions, judgments, and recommendations will be impartial and will be viewed as impartial by knowledgeable third parties.
Page 43 - ... acknowledges responsibility for the design, installation, and internal control over the entity's system and does not rely on the auditors' work as the primary basis for determining (1) whether to implement a new system, (2) the adequacy of the new system design, (3) the adequacy of major design changes to an existing system, and (4) the adequacy of the system to comply with regulatory or other requirements. However, the audit organization should not operate or supervise the operation of the entity's...
Page 7 - The audit organization needs to be alert for personal impairments to independence of its staff members. Personal impairments of staff members result from relationships and beliefs that might cause auditors to limit the extent of the inquiry, limit disclosure, or weaken or slant audit findings in any way. Auditors are responsible for notifying the appropriate officials within their audit organizations if they have any personal impairments to independence. Examples of personal impairments of individual...
Page 11 - These services generally differ from financial audits, attestation engagements, and performance audits in that auditors may (1) provide information or data to a requesting party without providing verification, analysis, or evaluation of the information or data, and therefore the work does not usually provide a basis for conclusions, recommendations, or opinions on the information or data...
Page 14 - Before performing nonaudit services, the audit organization should establish and document an understanding with the audited entity regarding the objectives, scope of work, and product or deliverables of the nonaudit service. The audit organization should also establish and document an understanding with...
Page 17 - Providing basic accounting assistance limited to services such as preparing draft financial statements that are based on management's chart of accounts and trial balance and any adjusting, correcting, and closing entries that have been approved by management; preparing draft notes to the financial statements based on information determined and approved by management; preparing a trial balance based on management's chart of accounts; maintaining depreciation schedules for which management has determined...
Page 28 - ... should avoid situations that could lead reasonable third parties with knowledge of the relevant facts and circumstances to conclude that the auditor is not able to maintain independence and, thus, is not capable of exercising objective and impartial judgment...

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