AICPA Exam CPA-Auditing Topic 2 Question 50 Discussion

Choice 'c' is correct. An auditor's reporting requirements under Generally Accepted Government Auditing Standards (GAGAS or the Yellow Book) are expanded to include reports on the audited entity's compliance with laws, rules, and regulations that have a material impact on the financial statements and on internal controls over financial reporting.

Rule: Reporting responsibilities under GAGAS are expanded to include:

1. Reports on compliance with laws, rules, and regulations, violations of which may affect financial statement amounts, and

2. Reports on internal control over financial reporting.

Choice 'a' is incorrect. Specific reporting requirements and other expanded audit standards associated with Yellow Book audits do not reduce professional judgment.

Choice 'b' is incorrect. Federal Inspectors General do not split their responsibilities with independent public accountants performing Yellow Book Audits.

Choice 'd' is incorrect. Although Yellow Book requirements represent logical extensions of generally accepted auditing standards, the specific responsibilities undertaken in an audit that requires application of the Yellow Book would not surface as a result of an audit under generally accepted auditing standards.