Audit & Assurance
Government engagements are held to a standard above GAAS, and the auditor has to meet requirements the client never sees.
Audits of state and local governments and of many federally funded entities must be performed under Government Auditing Standards — the Yellow Book, issued by the U.S. Government Accountability Office — in addition to generally accepted auditing standards. The 2024 revision, issued February 1, 2024, is effective for financial audits, attestation engagements, and reviews of financial statements for periods beginning on or after December 15, 2025, with early implementation permitted. Goldenthal & Suss Consulting P.C. performs Yellow Book engagements for municipalities, authorities, school districts, and housing entities in New York and New Jersey.
A Yellow Book audit is a GAAS audit plus a set of additional requirements, most of which fall on the audit firm rather than the client:
The effective date is easy to read backwards, and the distinction matters. The 2024 Yellow Book applies to periods *beginning* on or after December 15, 2025 — so a calendar-year 2026 audit falls under it, while a calendar-year 2025 audit does not unless the firm elected early implementation, which is permitted.
The most substantial change is the move to a system of quality management, replacing the older quality control framework. Audit organizations were required to design and implement a compliant system by December 15, 2025, and to complete their first evaluation of it by December 15, 2026. This is a firm-side obligation — it does not change what your finance staff has to produce, but it is worth asking any prospective auditor where they stand on it.
The requirement usually attaches through one of three routes: the entity is a government, the entity receives federal funding whose award terms require a Yellow Book audit, or state law imposes it. In practice that means municipalities and their component units, public authorities and special districts, school districts, housing authorities, and a wide range of nonprofits carrying federal awards.
Where federal spending also crosses $1,000,000 in the fiscal year, the engagement expands into a single audit, which is performed under the Yellow Book as well.
Government financial reporting runs on GASB standards, not FASB, and the differences are structural rather than cosmetic: government-wide statements alongside fund statements, the modified accrual basis in governmental funds, required supplementary information, and management's discussion and analysis.
New pronouncements land on a steady cadence, and each one tends to produce a year of transition adjustments and new disclosures. Staying ahead of them is part of what we are engaged for.
A Yellow Book audit is an audit conducted under Government Auditing Standards (GAGAS), issued by the U.S. Government Accountability Office. It layers additional independence, continuing education, peer review, reporting, and documentation requirements on top of a standard GAAS audit, and adds a required report on internal control over financial reporting and on compliance with laws, regulations, contracts, and grant agreements.
It is effective for financial audits, attestation engagements, and reviews of financial statements for periods beginning on or after December 15, 2025, with early implementation permitted. Note that it keys off when the period begins, not when it ends — so a calendar-year 2026 audit is covered, while a calendar-year 2025 audit generally is not.
Not automatically. It depends on the terms of the award and on the amount spent. Many federal award agreements require a Yellow Book audit directly, and any entity that expends $1,000,000 or more in federal awards in a fiscal year needs a single audit, which is itself performed under the Yellow Book. Smaller federal awards may carry no such requirement at all — check the award terms.
Sources & review
2024 Yellow Book issued 2024-02-01 per GAO-24-106786; effective for periods beginning on or after 2025-12-15, early implementation permitted. SQM design/implementation deadline 2025-12-15, first evaluation by 2026-12-15. CPE requirement 80/2yr with 24 government-specific and 20 minimum in any one year. Reviewed 2026-08-20. Thresholds and deadlines change — confirm current requirements before relying on them.
Tell us about your organization and the deadline you are working toward. We will tell you what the engagement involves and what it costs.
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