Generally Accepted Government Auditing Standards: Definition & Use

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Do you know the difference between the Yellow Book and the Yellow Pages? This lesson will explain the former, how it relates to Generally Accepted Government Auditing Standards and the five basic components it covers.

The Yellow Book

You've probably heard of the Yellow Pages, a phone book of important numbers and addresses for businesses and organizations, but what about the Yellow Book? No, that's not the book that houses the Yellow Pages. The Yellow Book, dubbed as such for its bright yellow cover, is one name for the Generally Accepted Government Audit Standards used by 'auditors of government entities, entities that receive government awards and other audit organizations performing Yellow Book audits.' It is published annually by the U.S. Government Accountability Office.

Let's talk more about this book of auditing standards.

What is Generally Accepted Government Auditing Standards?

The Generally Accepted Government Auditing Standards, sometimes displayed as the acronym GAGAS, provides instruction and guidance for performing audits based on the ideals of competence, integrity, objectivity and independence.

An audit is an examination of business records, ranging from financial details to business processes, generally conducted by an outside auditor. Because auditing is a necessary component of holding an organization accountable, guidelines from the Yellow Book can help auditors provide independent and objective assessments of government programs and operations. Having a set of standards for auditors to follow can help increase public confidence in the audit process and ensure that resources are being used efficiently and ethically.

Both government auditors and certified public accountants (CPAs) use the book to guide their financial and performance audits in a uniform way. The Yellow Book deals with auditors' capabilities, the audit itself and what a professional audit report should look like. Areas that the Yellow Book might help an auditor address include failure to comply with laws, fraud or abuse and problems with an organization's internal controls. Based on these standards, auditors might identify problems such as:

  • Poorly-trained or unqualified employees
  • Fraudulent use of funds by management
  • Improper management of resources

The book addresses five main audit standards. Let's take a look at them below.

GAGAS Standards

The Yellow Book helps an auditor to build a foundation of credibility in their job. By following these five standards, they can complete their job efficiently and with much confidence.

1. Independence: Independence must be maintained by auditors who should have no personal affiliations with the organization being audited. Auditors should avoid any appearance of partiality in the audit process so that it can be completed fairly and objectively. This is why organizations use outside auditors to complete the process.

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