Comptroller General extends deadline for new auditing standards

The General Accounting Office is extending its Oct. 1 deadline for new federal auditing standards to go into effect to give agencies and auditors a chance to make the adjustments needed to comply with the new standards. Under guidance announced Tuesday by Comptroller General David Walker, agencies and auditors would not have to begin complying with the new government auditing standards until Jan. 1, 2003. GAO released the new auditing standards in January, after spending more than two years developing them, Walker said. Government auditing standards, which differ from private sector auditing standards, were first published in 1972 and cover federal agencies and organizations getting federal money. The new auditing standards are designed to make sure auditors who review federal agencies do not perform management functions, make management decisions or audit their own work, according to GAO. The rule expressly prohibits some consulting services-such as bookkeeping, record keeping and payroll services firms-from auditing government agencies, though auditors can continue to provide routine advice and answer technical questions. "We felt that it was important that all the affected parties be dedicated to a simple set of principles and that they employ a substance over form approach in reaching related decisions," Walker said in explaining the rule-based approach of the new federal auditing standard. Any auditor who reviews the financial statements and performance of federal agencies and organizations is subject to the new rule, including GAO itself, agency inspectors general and major private auditing firms, such as Andersen and PricewaterhouseCoopers. The extended date also ensures that most contracts for consulting services awarded after June 30 for which the work is completed by June 30, 2003, would be grandfathered, essentially making them exempt from the new rule, Walker said. Walker said that the independence of auditors in the federal government was paramount given the recent revelations that accounting firm Andersen audited Enron's financial statements and allegedly shredded important documents related to an investigation of the company. "Recent private sector accounting and reporting scandals have served to reinforce the critical importance of having tough, but fair, auditor independence standards to protect the public and ensure the credibility of the auditing profession," Walker wrote in a statement explaining the changes.