[Federal Register Volume 66, Number 127 (Monday, July 2, 2001)]
[Notices]
[Page 34934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16560]


=======================================================================
-----------------------------------------------------------------------

GENERAL ACCOUNTING OFFICE


Advisory Council on Government Auditing Standards; Government 
Auditing Standards: Independence

AGENCY: General Accounting Office.

ACTION: Notice of document availability.

-----------------------------------------------------------------------

SUMMARY: On May 4, 2001, the U.S. General Accounting office (GAO), on 
the recommendation of the Advisory Council on Government Auditing 
Standards, issued an exposure draft of a proposed revision to 
Government Auditing Standards (also known as the Yellow Book) titled 
Government Auditing Standards: Independence (GAO/GAGAS-ED-4). The 
proposed revision would expand the definition of personal impairments, 
highlight the distinction between external and internal reporting, and 
acknowledge the ways that organizations can be free from organizational 
impairments to independence. Specifically, the exposure draft proposes 
expanding the examples of personal impairments and adding criteria to 
help audit organizations understand whether the provisions of nonaudit 
service affect the subject matter of the audit. The exposure draft 
emphasizes that auditors and audit organizations have an obligation to 
evaluate the circumstances and relationships on each assignment to 
identify situations that could result in an actual or perceived 
impairment to independence, including whether the performance of 
nonaudit services affects the subject matter being audited. The 
exposure draft also recognizes that internal auditors play a vital role 
in government auditing and can be free from organizational impairments 
to independence. However, since internal auditors are responsible to 
management while external auditors are responsible to third parties 
outside the audited entity, a fundamental difference exists between 
internal and external auditors. The exposure draft acknowledges this 
difference by retaining the sections on internal audit in the 1994 
revision of Government Auditing Standards but refocusing the discussion 
to organizational impairment considerations when reporting internally 
to management. In addition, the exposure draft expanded by two ways the 
criteria that define organizations that can report externally. First, 
the exposure draft expands the presumptive criteria by specifying 
additional ways for an organization to be free from organizational 
impairments to independence. If the audit organization meets any of the 
presumptive criteria listed in the exposure draft, it can be considered 
organizationally independent to audit externally. Second, the exposure 
draft recognizes that other organizational structures can provide 
sufficient safeguards to prevent the audited entity from interfering 
with the audit organization's ability to perform the work and report 
the results impartially. If the audit organization meets all the 
statutory protections listed in the exposure draft, it can be 
considered organizationally independent to report externally.

DATES: Comments are accepted through July 30, 2001.

ADDRESSES: A copy of the exposure draft can be obtained on the Internet 
on GAO's Home Page (www.gao.gov). Additional copies of these proposed 
standards can be obtained from the U.S. General Accounting Office, Room 
1100 700 4th Street, NW., Washington, DC 20548, or by calling (202) 
512-6000.

FOR FURTHER INFORMATION CONTACT: Marcia Buchanan, Assistant Director, 
Government Auditing Standards, 202-512-9321.

SUPPLEMENTARY INFORMATION: To facilitate analysis of your comments, it 
would be helpful if you sent them both in writing and on diskette (in 
Word or ASCII format). To ensure that your comments are considered by 
the council in their deliberations, please submit them by July 30, 
2001, to the following address: Government Auditing Standards Comments, 
Independence Exposure Draft, U.S. General Accounting Office, Room 5X16 
(FMA), 441 G Street, NW., Washington, DC 20548. (31 U.S.C. 7501-7507).

Jeffrey C. Steinhoff,
Managing Director, Financial Management and Assurance.
[FR Doc. 01-16560 Filed 6-29-01; 8:45 am]
BILLING CODE 1610-02-M