Monday, October 27, 2008

The Yellow Book

Have you heard of “The Yellow Book?”

The Yellow Book is the collection of Government Auditing Standards issued and updated from time to time by the Comptroller General of the United States. The 2007 Denver City Charter change, supported by the mayor, the council and me wrote into the charter language which charged the Denver Auditor’s Office to follow all standards from the Yellow Book in all audits performed. Tim O’Brien, former Colorado State Auditor and member of the City of Denver’s newly constituted independent audit committee opined that “having the Yellow Book in the Denver Charter is a very strong backup tool for any audit performed by the Denver Auditor’s Office.”

Chapter 3 of the Yellow Book covers general standards and the number one standard for all auditors, “whether government or public, must be free from personal, external, and organizational impairments to independence, and must avoid the appearance of such impairments of independence.”

Why do auditors have to fight for independence? As most Denverites know the Auditor’s Office is a nesting ground for future mayors. Many auditors have run for mayor while occupying the auditor’s chair. I am not. Now, I am not impuning that popular historic pattern of office climbing practiced by so many of my predecessors. And ambition, properly directed, is good. St. Paul says it’s good for young clerics to be ambitious seeking to be bishops. But the ambition we have to steer clear of is the extreme ambition of, let’s say, MacBeth whose ambition leapt over itself and fell on the other side.

Auditors must maintain independence “so that their opinions, findings, conclusions, judgments and recommendations” offered to management “will be impartial and viewed as impartial by objective third parties with knowledge of the relevant information.”

So an auditor running for mayor, whose ambition calls into question every action of an administration and its agency, in my view, may impair an auditor’s independence. This impairment is mentioned in the Yellow Book. It is called a “personal” impairment.

So in conclusion, in order for audit recommendations to be taken seriously, the source of the suggestions have to be free of “personal” impairments, external impairments and organizational impairments. We are sure glad we have the Yellow Book as a guide.

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