Updates in Government Auditing Standards and Implications for Federal Financial Audits

The latest Professional Standards Update (PSU No. 94) from the Government Accountability Office (GAO) highlights significant changes in auditing standards and regulatory guidance for government entities, with an emphasis on updates issued between July and September 2024. These updates encompass revisions in auditing, attestation, and financial reporting standards, all aimed at enhancing audit quality and accountability across federal agencies. Notable changes include the updated Government Auditing Standards, a revised Financial Audit Manual, and new audit requirements under the Office of Management and Budget (OMB) guidelines.

One of the prominent revisions is the Government Auditing Standards 2024 Revision, effective for financial audits and attestation engagements starting December 15, 2025. This revision includes a major overhaul of quality management processes, replacing the 2018 standard’s quality control section with a focus on engagement quality reviews. Auditors will now need to design and implement quality management systems by December 2025, with subsequent evaluations in 2026, fostering a more robust quality management approach in government audits. The updated Financial Audit Manual, revised in July 2024, provides additional guidance for determining compliance with accounting standards, particularly with federal financial reporting requirements effective for fiscal year 2024. This change supports greater consistency in evaluating federal financial statements, emphasizing uniformity in the application of auditing standards across agencies.

Further, the update includes regulatory guidance from the OMB, particularly in Bulletin No. 24-02, which addresses audit requirements for federal financial statements in line with acts such as the CFO Act and the Federal Financial Management Improvement Act. This bulletin, effective immediately, aims to enhance the accuracy and consistency of audits across federal departments, ensuring compliance with statutory financial reporting mandates. Additionally, a new Treasury Financial Manual (TFM) chapter on Fedwire, FedNow, and ACH credit deposits was introduced, enhancing the procedural framework for federal fund transfers and increasing transparency in fiscal management.

The Institute of Internal Auditors (IIA) released the Global Internal Audit Standards, set to take effect in January 2025, following a one-year transition from the 2017 standards. These new standards aim to provide a globally harmonized framework for internal audit practices, with an option for early adoption, supporting international consistency and improved risk management across government entities.

The implications of these updates are substantial for auditors, federal agencies, and financial managers. The revised standards emphasize a proactive approach to quality management, internal controls, and regulatory compliance, necessitating greater accountability in federal audits. As agencies implement these standards, they may need to allocate additional resources toward training, updating procedures, and enhancing quality management systems to meet the evolving regulatory demands. These updates are anticipated to contribute to stronger internal control environments, improved financial statement reliability, and increased transparency, ultimately strengthening public trust in federal financial management practices.

This summary is intended for informational purposes only and does not guarantee accuracy or constitute legal advice.