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  • What are the five ethical principles according to GAGAS?

    The five principles below are outlined by GAGAS to ensure that the auditor is serving the public interest while conducting their work with integrity and objectivity. The five ethical principles are: 1) Serving the public interest – The auditor should conduct their work with the public’s best interest in mind. Remember, you are a key line of defense in protecting the capital markets from error & fraud in a company’s financial statements! 2) Integrity – The auditor should conduct their work with an objective attitude and provide an anecdotal report that is considered nonpartisan and nonideological with regard to the audited entities and users of the audit report. 3) Objectivity – Will include independence of mind and appearance when providing audit reports. Furthermore, the audit work conducted should be done with an attitude of impartiality, and free from conflicts of interest (i.e. threats to independence like financial interests). 4) Proper use of government information, resources, and position – Government information, resources, and positions are to be used for official purposes and not inappropriately for the auditor’s personal gain or in a manner contrary to law or detrimental to the legitimate interests of the audited entity or the audit organization. This concept includes the proper handling of sensitive or classified information or resources. 5) Professional behavior – The auditor should act ethically and follow all professional standards and not be in put a position where the auditor’s credibility can be questioned.

  • What is GAGAS?

    GAGAS is an acronym for “Generally Accepted Government Auditing Standards. GAGAS provides the audit standards that should be followed for governmental audits. GAGAS is regulated by the Government Accountability Office (GAO). GAGAS is also commonly referred to as the “Yellow Book”.

  • Under GAGAS, what are the threats to independence that the auditor should be aware of?

    Generally Accepted Government Accounting Standards (GAGAS) will sustain the same independence requirements as the AICPA Code of Professional Conduct which in turn, indicates that similar threats to independence will exist. Per the GAGAS framework, the auditor should meet the following requirements as they pertain to independence: a) Identify threats Independence b) Evaluate the significance of those threats that have been previously identified, both individually and in the aggregate; and c) Apply any necessary safeguards to remove those threats to independence or minimize them to an acceptable level in which independence would no longer be impaired. 1) Familiarity threat – is the threat that aspects of a relationship with management or personnel of an audited entity, such as a close or long relationship or that of an immediate or close family member, lead an auditor to take a position that is not objective. 2) Self-interest threat – is a threat that a financial or other interest will inappropriately influence the auditor’s judgment or behavior. 3) Management participation threat – is the threat that results from an auditor’s taking on the role of management or otherwise performing management functions on behalf of the entity undergoing an audit. 4) Self-review threat – is the threat that an auditor or an audit organization that is provided non–audit services will not appropriately evaluate the results of previous judgments made or services performed as part of the non–audit services when forming a judgment significant to an audit. 5) Bias threat – is the threat that an auditor will, as a result of either political, ideological, social, or other convictions, take a position that is not objective. 6) Undue influence threat – is the threat that external influences or pressures will impact in auditor’s ability to make independent and objective judgments. 7) Structural threats – are threats that an audit organizations placement within a government entity, in combination with the structure of the government entity being audited, will impact the audit organizations ability to perform work and report results objectively.