As governments respond to emerging risks, new disclosure requirements and calls for greater transparency, policies are reshaping the audit landscape in significant ways. For auditors and finance professionals working with public entities, these shifts aren’t just technical, they influence audit scope, timing, risk assessment and, ultimately, public trust.

Here are three ways today’s policy updates are influencing government audits and how finance teams can stay agile in the face of regulatory change:

1. Standard-Driven Policy Changes Are Expanding Audit Risks

Government financial reporting standards continue to evolve. Governmental Accounting Standards Board (GASB) pronouncements such as GASB Statement No. 96 (Subscription-Based IT Arrangements), GASB Statement No. 101 (Compensated Absences) and GASB Statement No. 102 (Certain Risk Disclosures) reflect a broader push toward modernized and consistent disclosures. While these standards are not legislative mandates, governments at all levels are establishing internal policies and procedures to align with and implement them.

These developments have auditors reassessing risk, particularly around the new estimates and judgments that governmental entities are making. In addition, auditors are evaluating the design and effectiveness of internal controls over financial reporting in light of the new standards, as well as assessing the adequacy of supporting documentation.

Remaining up to date on how these standards are implemented at each government entity is essential to understanding their impact on audit planning, risk assessment and testing.

2. Data and Technology Policies Are Reshaping Audit Evidence

Government policies on data governance and digital records are actively changing how audit evidence is obtained, documented and evaluated. As more entities transition to cloud-based systems, electronic records and workflow automation tools, new requirements around data retention, cybersecurity and access control are directly impacting audit processes.

While some government entities continue to lag in technology adoption, particularly with artificial intelligence, many are steadily increasing their use of digital tools for daily operations. This shift introduces new considerations and risks for auditors to navigate.

These changes are especially relevant as audit teams leverage technology-assisted audit software. The broader movement toward digitalization will further influence how auditors approach evidence collection, analytical procedures and consistency checks across large datasets.

To remain effective, audit teams must understand and assess the risks associated with emerging data policies while investing in training that equips auditors to evaluate controls in increasingly digitized environments.

3. Policy-Driven Transparency Initiatives Are Elevating Expectations

Public sector accountability is top of mind for policymakers and citizens alike. Transparency initiatives, such as open data laws, performance dashboards and public reporting portals, have become more common and raise the public’s expectations for accuracy, comparability and clarity in financial reporting.

The audit and the Annual Comprehensive Financial Report (ACFR) are increasingly viewed as mechanisms to validate that governmental entities are collecting, managing and allocating resources appropriately (the NJCPA’s and New Jersey Business & Industry Association’s recent legislation to provide a “plain-language” summary of the report likely helps). When audit findings identify deficiencies, the impact extends beyond the finance function, affecting legislative decision-making, media narratives and public trust.

Finance professionals and auditors must therefore view each policy-driven disclosure as an opportunity to strengthen communication, provide context and support decision-makers with clear and reliable data.

New policies are not just regulatory hurdles — they are key factors that directly influence how we plan and perform audits of governmental entities. Whether it’s adopting a new GASB standard, evaluating IT systems under new security policies or ensuring transparency through improved disclosures, every change requires auditors and government finance professionals to stay informed, flexible and collaborative.

By viewing policy shifts through a lens of opportunity, not just obligation, we can elevate the value of audits and contribute to stronger governance, greater accountability and more transparent, trusted public entities.