The New Yellow Book

Chapter 3Ethics, Independence, and Professional Judgment

Learning objectives

• Recognize the fundamental ethical principles for auditors in the government environment.
• Identify requirements related to independence in an engagement conducted in accordance with generally accepted government auditing standards (GAGAS).
• Recognize the GAGAS conceptual framework approach to independence.
• Identify the auditor’s responsibility when providing nonaudit services to a nonfederal entity.
• Recognize the role of professional judgment in a GAGAS engagement.

Introduction

Chapter 3, Ethics, Independence, and Professional Judgment, of GAGAS is organized in three parts. The first section, ethical principles, contains no requirements. Instead it sets forth fundamental ethical principles for auditors operating in the government environment. The second section provides guidance and establishes independence standards for auditors conducting financial audits, attestation engagements, reviews of financial statements, and performance audits under GAGAS. This section highlights the importance of independence to the auditor and the audit organization. The third section establishes the standard for the auditor’s use of professional judgment and provides related application guidance.

The requirements in chapter 3 of the Yellow Book are intended to be followed in conjunction with all other applicable GAGAS requirements.

Ethical principles

The ethical principles of GAGAS provide the foundation, discipline, ...