As a result of the Clarified Auditing Standards and the issuance of the 2011 revision of Government Auditing Standards, the 2013 edition of the GAS/A-133 Audit Guide has been extensively rewritten. While this has far-reaching implications for auditors, governmental entities and not-for-profits who receive federal financial assistance should also be aware of what these changes mean for them.
Chapter 2 of the guide on Independence has been comprehensively rewritten. Performing non-audit services for a client – like assisting with the preparation of financial statements – can impair independence. Management has certain responsibilities in designating capable employees to oversee these services and must accept responsibility for the work in order for the auditor to issue an opinion. Likewise, the auditor independence is impaired if other management functions are performed. In a nutshell, the auditor is not allowed to audit his/her own work.
There are a number of report changes that went into effect at the end of 2012. Fiscal year governments and not-for-profits will see these changes this year. The new reports will appear difference in appearance, with headings and subsections, but the biggest changes for clients is the specific wording about what management’s responsibilities are and what responsibility the auditor bears. Long gone are the days when small and mid-sized cities, towns, villages and school districts could say, “well, the auditor did this”, or “the auditor made this entry” – those responsibilities have always belonged to management, and now the reports specifically detail that fact.