New Statements on Auditing Standards and the …
New Statements on Auditing Standards and the Yellow Book
2018 Yellow Book
NASACT Emerging Leaders Conference April 2020
Session Objective
This presentation covers the 2018 Yellow Book and highlights key areas that will impact 2020 audits.
2
Consideration of Independence in the Yellow Book
? GAGAS's practical consideration of independence consists of four interrelated sections: ? General requirements and application guidance ? Conceptual framework for making independence determinations ? Independence and nonaudit services ? Documentation (para. 3.17)
3
Independence General Requirements
? Independence of Mind ? Independence in Appearance (para. 3.21)
? Statutory instances where independence is impaired (para. 3.25) ? Example: requirement for auditors to serve in official roles that conflict with indepence requirements (e.g., voting member of management committee with no safeguards). ? Modified GAGAS compliance statement.
4
Conceptual Framework for Independence
? Auditor's should apply the conceptual framework at the audit organization, engagement team, and individual auditor level to: ? Identify threats to independence; ? Evaluate the significance of the threats identified, both individually and in the aggregate; ? Apply safeguards as necessary to eliminate the threats or reduce them to an acceptable level. (para. 3.27)
5
Conceptual Framework for Independence
6
Categories of Threats to Independence
? Self-interest threat ? Self-review threat ? Bias threat ? Familiarity threat ? Undue influence threat ? Management participation threat ? Structural threat (para. 3.30)
7
Safeguards to Independence Threats
? Safeguards are actions or other measures, individually or in combination, that auditors and audit organizations take that effectively eliminate threats to independence or reduce them to an acceptable level.
? Safeguards vary depending on the facts and circumstances (para. 3.49)
? Examples of safeguards are listed in paragraphs 3.50 and 3.69. These provide a starting point and is not an exhaustive list.
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