Which of the following statements BEST describes the relationship between GAGAS and GAAS?

GAGAS, or Generally Accepted Government Auditing Standards, are designed for audits of government entities and programs. They provide a framework that includes standards for both financial and performance audits conducted in the public sector. The key aspect of GAGAS is that it incorporates GAAS, or Generally Accepted Auditing Standards, which are primarily established for private sector financial audits.

Therefore, the statement that GAGAS incorporate and supplement certain GAAS standards is correct because GAGAS builds upon the foundation provided by GAAS, adding additional requirements and guidance that are relevant specifically to the unique environment of government auditing. This incorporation ensures that auditors are adhering to a comprehensive standard that meets the specific needs of the public sector, while still grounding their practices in the recognized principles of GAAS.

Recognizing this relationship is crucial for auditors who engage in government work, as they must ensure compliance with both sets of standards when conducting audits in the public sector.