The 2006 Yellow Book has been issued with the following changes:

Chapter 1 – Use and Application of GAGAS
Governmental accountability is clarified to ncludei ethical, equitable, and legal responsibility. Terminology is defined to explain unconditional requirements (“must,” is required”), presumptively mandatory requirements (“should”), and explanatory material (“may,” “might,” “could”). Compliance with GAGAS will be cited as “unqualified,” “qualified,” or “negative” based on the extent to which mandatory requirements are fulfilled. Terminology and regulations throughout GAGAS will be explained to correspond to those in other professional standards, like the American Institute of Certified Public Accountants (AICPA,) the International Auditing and Assurance Standards Board (IAASB,) and the Public Company Accounting Oversight Board (PCAOB.) Types of government audits and attestation engagements that were previously described in Chapter 2 of the 2003 Revision are rewritten into Chapter 1.

Chapter 2 – Auditors’ Ethical Responsibilities
Ethical responsibilities have been elaborated on and sectioned into its own chapter, placing emphasis on the importance of ethics in maintaining the public’s trust in an audit’s fair analysis of information. Ethical concepts guiding audit work are addressed in terms of placing priority on Public Interest, Professional Behavior, Integrity, Objectivity, and proper use of government information, resources, and position.

Chapter 3 – General Standards
Independence from personal, external, and organizational impairments has been restructured. Nonaudit services that were previously addressed with concern to personal impairments have been moved to organizational impairments to accommodate the increased likelihood that consulting services may be influenced by organizational independence rather than that of the individual auditor. Types of nonaudit services have been categorized as:

Information regarding professional judgment carried out by the auditor has been refined with the addition of supplemental safeguards for maintaining independence when performing nonaudit services.
Additional information has been added to clarify the standards for determining the competence of audit staff.

Peer reviews for reporting on internal quality control systems have been expanded to consider specific standards in ethics, initiation and continuance of audit and attest engagements, human capital management, engagement performance and reporting, and monitoring of quality. Public availability of external peer reviews that were previously required only upon request, have been extended to presumptively mandatory disclosure on an external website. New enhanced quality assurance criteria have been established for audit organizations that receive an unmodified peer review opinion and elect to follow the optional 5-year time frame, instead of the 3-year time frame for those that receive an unmodified opinion and do not meet the criteria, or the 18-month time frame for organizations that receive modified opinions.

Chapter 4 – Field Work Standards for Financial Audits
Responsibilities and definitions of material misstatements due to fraud or illegal activity, and abuse that is quantitatively or qualitatively material is further defined and clarified in conformity with AICPA standards.

Chapter 5 – Reporting Standards for Financial Audits
The term “significant deficiencies” has been adopted to define “material weaknesses” in internal control, updated in consistency with the PCAOB and the AICPA. Guidelines have been formed to distinguish the requirements for reporting different levels of internal control deficiencies. Information has been incorporated to outline procedures in reporting potential fraud, illegal acts, violations of provisions of contracts or agreements, or abuse.

Chapter 6 – General, Field Work, and Reporting Standards for Attestation Engagements
Definitions and descriptions were updated to correspond with the modifications made throughout the Yellow Book.

Chapter 7 – Field Work Standards for Performance Audits
Explanations were added to define significance in a performance audit.
Determination of and methods for reducing audit risk are addressed.
The auditors’ responsibilities in assessing the sufficiency of evidence in order to deliver an appropriate level of assurance are addressed.

Chapter 8 – Reporting Standards for Performance Audits
Adjustments were made in content relating to reporting standards and audit responsibilities to conform to corresponding field work standards for performance audits.

For a more detailed discussion of the changes, please refer to the specific chapters in the 2006 Yellow Book.