The 2018 Yellow Book is effective for financial audits for periods ending on or after June 30, 2020. However, that does not mean that auditors can wait until 2020 to become familiar with the new standards. A prime example of why early familiarity is necessary lies in the area of independence. Under the Yellow Book, auditors are required to be independent from an audited entity during: (1) any period of time that falls within the period covered by the financial statements or subject matter of the engagement; and (2) the period of professional engagement.
Based on the above, an auditor performing a June 30, 2020, financial statement audit under the 2018 Yellow Book will need to comply with the new independence requirements at the beginning of the audit period, July 1, 2019 (as July 1, 2019 falls within the period covered by the financial statements audited under the 2018 Yellow Book).
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Charlie Blanton, CPA is the Senior Director of Governmental and Nonprofit Content for Surgent CPE, where he authors Surgent’s government and not-for-profit CPE courses and is a frequent webinar instructor.