The ALGA Peer Review Committee has been monitoring the status of GAO’s proposed GAGAS revisions and is actively involved in working on several other initiatives related to peer review. This article takes a look at a few.
GAGAS “Yellow Book” Revisions
As you probably know, the US Government Accountability Office (GAO) released an exposure draft of the proposed revisions to GAGAS and comments were due back to GAO in August 2006. They’ve had a chance to review the 2,100 comments received from ALGA and 116 other responders, and recently held an audio seminar to discuss the proposed changes.
The audio seminar was sponsored by AGA, NASACT and ALGA and presenters included GAO’s Marcia Buchanan, Jeanette Franzel, Jeffrey Steinhoff and Austin City Auditor Steve Morgan who also sits on the Comptroller General’s Advisory Council on Government Auditing Standards. During the audio conference, presenters discussed GAO’s efforts to modernize and transform the accountability profession and highlighted key proposed revisions and analysis of comment letters for the 2007 GAGAS. Listeners also heard the reasons for the proposed changes and what they will mean for government auditors, as well as the timing for release and implementation of the new Standards.
ALGA members should be sure to go to www.gao.gov to review the proposed GAGAS revisions. Among the significant proposed changes is the addition of a chapter on the Auditor’s Ethical Responsibilities. The proposed Standards recognize that it is essential that government auditors observe overarching ethical concepts in the performance of their professional responsibilities.
Another proposed change relates to moving “non-audit services” from personal impairments to organizational impairments and creates three distinct categories of non-audit services; (1) non-audit services that do not impair auditor independence, (2) non-audit services that would not impair independence if supplemental safeguards are complied with; and (3) non-audit services that impair independence.
The proposed revisions also state that audit organizations should make the results of external peer reviews public and proposes new peer review timeframes based on risk and underlying quality assurance systems. An interesting concept proposed in the revision provides for new peer review timelines depending on certain circumstances. For instance,
- If the most recent peer review opinion is adverse or modified, the audit organization would be subject to peer review within 18 months; or
- Every three years if the audit organization has an unmodified peer review opinion and does not meet the enhanced quality assurance criteria for a five year cycle, or does not choose a five-year cycle; or finally
- Every five years if the audit organization has an unmodified peer review opinion and meets the enhanced quality assurance criteria.
Another interesting change comes in the form of additional wording related to the “We conducted this audit in accordance with GAGAS” statement. GAO has added a few additional sentences to clarify what it actually means to make the statement that a performance audit complies with GAGAS. The proposed new report wording if accepted as proposed will say…
“We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence that provides a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.”
Additional revisions were made to the Financial Audit and Attestation Standards included in Chapters 4, 5, and 6 as well as Performance Audit Standards in Chapters 7 and 8.
The proposed release date for the revised Standards is scheduled for the end of December 2006, with an effective date of July 1, 2007. At the time of this writing, GAO staff was scheduled to present the final draft of the revised Standards to the Advisory Council on Government Auditing Standards on November 17, 2006 so the proposed revisions are not quite inked in yet. Once the “Yellow Book” revisions are finalized, the ALGA Peer Review Committee will revise the current Peer Review Guide to reflect GAO’s changes.
ALGA Red Book Peer Review
ALGA’s Red Book Quality Assurance Review recently received the blessing of the Institute of Internal Auditors. After a review of ALGA’s peer review process, the IIA stated that they found the process “to be consistent with The IIA methodology as documented in the Quality Assessment Manual.” This means audit shops conducting audits using IIA’s International Standards for the Professional Practice of Internal Auditing (ISPPIA) or the “Red Book” can now use the ALGA Quality Assurance Process to assess compliance with “Red Book” Standards. The ALGA Peer Review Committee is working with Member Services to “spiff up” the guidebook for conducting ALGA Red Book reviews and the new guide is expected to be released at the Annual Conference in Memphis (June 2007).
Pre-Conference Workshop on Peer Review revamped for 2007Annual Conference in Memphis
The Peer Review Committee is revamping the popular pre-conference peer review workshop so that information presented will reflect changes made to the Standards over the past several years. The workshop will also include discussion on common peer review management letter comments and areas where we’ve encountered differences in interpretations or opinions (now affectionately known as “sticky wickets”).
Proposed Audio Conference on Peer Review
The Peer Review Committee in conjunction with the Education Committee is developing an audio seminar similar to the pre-conference peer review workshop. The audio conference will focus on ALGA’s peer review process, updates on revisions to the Standards, discussions on “sticky wickets” and other related topics. We recognize that many ALGA members are unable to attend the annual conference for a variety of reasons, so for those unable to attend, we’re working to bring the workshop to you. Look for more information on the Peer Review Audio Seminar soon on the ALGA website at www.governmentauditors.org or in a future issue of the LGAQ.
Also, just a reminder that the peer review workshop is also currently available on-line and members receive 6 CPE hours for completing the on-line course. The self study on-line course uses a video of the live workshop presentation at the May 2004 conference. It also uses the same overheads and case studies used in the conference workshop, but the on-line course adds review questions for each section of the course and includes a final exam (both of which are necessary to meet self-study CPE requirements.) But the biggest difference is that you can take this course at your own pace, from your own computer. The cost for the on-line course is $120. For more information or to log-on and take the course, go to the ALGA Website at www.governmentauditors.org.
Members of the Peer Review Committee welcome your comments, questions and input. Please don’t hesitate to contact any of us.
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Peer Review