Late last year, the U.S. Government Accountability Office (GAO) published an update to Government Auditing Standards. This version, called the "2011 Revision", replaces the 2007 Revision. Government auditors are required to adhere to these standards (usually referred to as Generally Accepted Government Auditing Standards or GAGAS) whenever they perform audits or attestation engagements. If you've ever looked at a Government audit, you would see something like the following: "This audit was performed in accordance with GAGAS..."
From a Government contractor's perspective, there should be little, if any impact from this new revision. There are some major changes involving the independence of the auditor and the audit organization to the entity under audit. The added concepts address personal, external, and organizational impairments to independence. This reminds us of an incident that happened a number of years ago. A Government contractor notified an audit agency performing audits at their plant that the auditor assigned to the engagement had a close relative employed by the contractor. The audit agency swiftly reassigned that particular auditor so as to avoid any real or perceived independence issues.
The new revision contains requirements for the audit agencies to assess whether management possesses suitable skills, knowledge, and experience for a particular audit. Sometimes it seems that auditors are in over their heads on certain audits. Often this is due to a lack of experience, training and/or supervision. The revision requires auditors to now document this determination.
Another change to the 2011 revision involves the reporting requirement for fraud. The GAO is trying to put it into perspective by restricting reports to only those occurrences that are significant within the context of the audit objectives. Evidently, the previous requirement did not allow judgment or common sense and investigative agencies were flooded with immaterial and trivial reports of "suspected" fraud.