Complying with GAGAS

Requirements: Complying with GAGAS

2.02

GAGAS uses two categories of requirements, identified by specific terms, to describe the degree of responsibility they impose on auditors and audit organizations:

2.02a
  1. Unconditional requirements: Auditors and audit organizations must comply with an unconditional requirement in all cases where such requirement is relevant. GAGAS uses must to indicate an unconditional requirement.
2.02b
  1. Presumptively mandatory requirements: Auditors and audit organizations must comply with a presumptively mandatory requirement in all cases where such a requirement is relevant except in rare circumstances discussed in paragraphs 2.03, 2.04, and 2.08. GAGAS uses should to indicate a presumptively mandatory requirement.6
2.03

In rare circumstances, auditors and audit organizations may determine it necessary to depart from a relevant presumptively mandatory requirement. In such rare circumstances, auditors should perform alternative procedures to achieve the intent of that requirement.

2.04

If, in rare circumstances, auditors judge it necessary to depart from a relevant presumptively mandatory requirement, they must document their justification for the departure and how the alternative procedures performed in the circumstances were sufficient to achieve the intent of that requirement.

2.05

Auditors should have an understanding of the entire text of applicable chapters of GAGAS, including application guidance, and any amendments that GAO issued, to understand the intent of the requirements and to apply the requirements properly.7

2.06

Auditors should consider applicable GAO-issued GAGAS interpretive guidance in conducting and reporting on GAGAS engagements.8

Application Guidance: Complying with GAGAS

2.07

GAGAS contains requirements together with related explanatory material in the form of application guidance. Not every paragraph of GAGAS carries a requirement. Rather, GAGAS identifies the requirements through use of specific language. GAGAS also contains introductory material that provides context relevant to a proper understanding of a GAGAS chapter or section. Having an understanding of the entire text of applicable GAGAS includes an understanding of any financial audit, attestation, and reviews of financial statement standards incorporated by reference.9

2.08

The need for auditors to depart from a relevant presumptively mandatory requirement is expected to arise only when the requirement is for a specific procedure to be performed and, in the specific circumstances of the engagement, that procedure would be ineffective in achieving the intent of the requirement.

2.09

The application guidance provides further explanation of the requirements and guidance for applying them. In particular, it may explain more precisely what a requirement means or is intended to address or include examples of procedures that may be appropriate in the circumstances. Although such guidance does not in itself impose a requirement, it is relevant to the proper application of the requirements. “May,” “might,” and “could” are used to describe these actions and procedures. The application guidance may also provide background information on matters addressed in GAGAS.

2.10

Interpretive guidance is not auditing standards. Interpretive guidance provides guidance on the application of GAGAS and recommendations on the application of GAGAS in specific circumstances.

  1. See para. 2.19 for additional documentation requirements for departures from GAGAS requirements↩︎

  2. See https://www.gao.gov/yellowbook for GAGAS amendments.↩︎

  3. See https://www.gao.gov/yellowbook for GAGAS interpretive guidance.↩︎

  4. See paras. 2.13, 6.01, and 7.01 for discussion of standards incorporated by reference.↩︎