Sneak Preview: Revised 2024 GAGAS Implements New Quality Management Process
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Government Accountability Office on Feb. 1 released its revised version of the Government Auditing Standards (GAGAS), which mirrors other international auditing standards by establishing a quality management process for responsible auditing that incorporates a “risk-based,” rather than a “policies-based” approach.
GAO amended chapter 5, which is now retitled “Quality Management, Engagement Quality Reviews, and Peer Review,” compared to “Quality Control and Peer Review” in the now superseded 2018 version. It also added application guidance to chapter 6, “Standards for Financial Audits.” “This latest update enhances and modernizes the standards to perform high-quality audit work with competence, integrity, objectivity and independence using a proactive and risk-based approach,” said U.S. Comptroller General Gene Dodaro. “Implementation of these standards leads to greater accountability of government spending and improved services and operations.”
The revised GAGAS, also referred to as the Yellow Book, is effective for financial audits, for performance audits, attestation engagements and reviews of financial statements for periods beginning on or after Dec. 15, 2025. Further, a system of quality management that complies with GAGAS is required to be designed and implemented by Dec. 15, 2025, and an audit organization should complete its evaluation of the system of quality management by Dec. 15, 2026. Early implementation is permitted. Early implementation is permitted; otherwise auditors should continue to comply with the 2018 version until Dec. 15, 2025.
The revisions were necessitated after the American Institute of Certified Public Accountants’ (AICPA) Auditing Standards Board (ASB) and the International Auditing and Assurance Standards Board (IAASB) updated their respective quality management standards in June 2022. When conducting a GAGAS engagement, audit organizations that currently comply with the quality management standards of ASB or IAASB, as well as those of the Public Company Accounting Oversight Board, should continue to follow those standards, along with certain provisions of GAGAS (chapter 5.07).
The revised GAGAS is applicable to audit organizations conducting audits and attestation engagements of government entities. “The revision emphasizes the responsibility of an audit organization’s leadership to proactively manage quality on its engagements, and requires a risk-based process for designing, implementing and operating its system of quality management, [and] considers that the nature, extent and formality of an audit organization’s system of quality management will vary based on its circumstance” (e.g., size, number of offices and geographic dispersion, knowledge and experience of its personnel, nature and complexity of its engagement work, and cost-benefit considerations), GAO explains in the 2024 revision.
A system of quality management for engagements performed in accordance with GAGAS, as stated in chapter 5.02, is to provide the audit organization with reasonable assurance that it and its personnel: (1) fulfill their responsibilities in accordance with professional standards and applicable laws and regulations; and (2) perform and report on engagements in accordance with such standards and requirements.
(The full version of this story has now been made available to all for a limited time here.)
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