The Green Book
The Green Book is the common name for the Standards for Internal Control in the Federal Government. It’s published by GAO, the Government Accountability Office. They are the legislative auditor of the federal government. They have a responsibility given to them by Congress to set internal control standards for federal agencies.
The Green Book is the same thing as the COSO model but GAO makes it available for free online. The COSO model was developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The primary goal of the Treadway Commission was to study the factors that lead to fraudulent financial reporting and make recommendations to reduce its incidence. In 1992, COSO issued its initial Internal Control–Integrated Framework and was most recently updated in 2013.
The Green Book is divided into five sections, each representing a component of internal control and each has several principles. The five components of internal control must be effectively designed, implemented, and operating, and operating together in an integrated manner, for an internal control system to be effective.
Control Environment: Addresses management’s attitudes towards controls.
Risk Assessment: Lays out all the possible objectives management might care about. It gives management a way of ranking those risks, based on certain factors, and then to decide where they will focus their efforts.
Control Activities: It’s the controls management would put in place.
Information and Communication: This says to the organization, what information and who needs to know it.
Monitoring: Ensures that internal controls are monitored so if there are issues then they can be addressed.
The 2018 Revision of the Yellow Book incorporates a lot of the terms and concepts of the GAO Green Book into the performance audit chapter. It’s important that you understand these sections and make sure you’re in compliance both in your documentation of internal control, your testing of internal control, and in your reporting on internal control.
If you want to learn more about GAO’s Green Book you can check out our E-Book the Green Book Clarified or our video course on the Standards for Internal Control.