State and local government audit and accounting is changing rapidly. This title features insights, comparisons, and best practices for some of the more complex areas such as pensions and post-employment benefits other than pensions (OPEB), this authoritative guide provides complete coverage of audit and accounting considerations critical for both preparers and auditors.
This edition includes dual guidance for accountants and auditors early implementing GASB Statement No. 84, Fiduciary Activities. Topics covered also include:
- Financial reporting and the financial reporting entity
- Revenue and expense recognition
- Capital asset accounting
- The elements of net position
- Accounting for fair value
- Municipal securities offerings
- Tax abatementsTable of Contents
1 Overview and Introduction .01-.24
Scope and Purpose .01-.08
GAAP for State and Local Governments .09-.14
Applicable Auditing Standards and Requirements .15-.20
Guidance in Other AICPA Audit and Accounting Guides and Statements of Position .21-.22
Other Sources of Guidance .23
Organization of This Guide .24
2 Financial Reporting .01-.97
Introduction and Overview .01-.06
Historical Perspective .02-.06
Governmental Financial Statements .07-.53
Management’s Discussion and Analysis .09-.10
Government-Wide Financial Statements .11-.25
Fund Financial Statements .26-.44
Notes to the Financial Statements .45-.48
Required Supplementary Information Other Than MD&A .49-.52
Special-Purpose Governments .53
Other Financial Reporting Issues .54-.59
Other Information and Supplementary Information .54
Prior-Period Comparative Financial Information .55-.56
Government Combinations and Disposals of Government Operations .57-.59
Fair Value Measurement .60-.85
General Principles of Fair Value .61-.68
Valuation Techniques .69-.71
Inputs to Valuation Techniques .72-.75
Fair Value Hierarchy .76-.79
Guidance for Fair Value Measurement in Special Circumstances .80-.85
Auditing Considerations .86-.96
Compliance Requirements .87
Fund and Activity Classifications .88
Major Funds .89
Restricted Assets .90
Notes to the Financial Statements .91-.92
Required Supplementary Information, Supplementary Information, and Other Information .93-.94
Other Financial Reporting Considerations .95
Accounting and Financial Reporting Alternatives .96
Appendix A - Accounting and Financial Reporting Alternatives in GASB Statement No. 34, as Amended, and GASB Statement No 84 .97
3 The Financial Reporting Entity .01-.39
Introduction .01-.03
GASB’s Financial Reporting Entity Standards .04-.29
Definition of the Financial Reporting Entity .05-.12
Financial Statement Presentation .13-.22
Disclosures .23-.25
Other Financial Reporting Requirements .26-.29
Auditing Considerations .30-.39
Reporting Entity .30
Internal Control Over Financial Reporting .31
Audit Procedures .32-.33
Separate Component Unit Auditor .34
Presentation of Less Than a Complete Financial Reporting Entity .35
Departures of Component Unit Information From GAAP .36
Nongovernmental Component Unit Use of Private-Sector Standards .37
Changes in the Financial Reporting Entity .38
Other Component Unit Auditing Considerations .39
4 General Auditing Considerations .01-.138
Introduction .01-.02
General Principles and Responsibilities .03-.29
Overall Objectives .03
Terms of Engagement .04-.08
Laws and Regulations .09-.22
Auditor’s Communication with Those Charged with Governance .23-.27
Communicating Internal Control Related Matters .28-.29
Auditor’s Risk Assessment and Response to Assessed Audit Risk .30-.66
Planning an Audit .30-.34
Audit Strategy .35-.40
Understanding the Entity, Its Environment, and Its Internal Control .41-.66
Materiality in Planning and Performing an Audit .67-.93
GASB Guidance to Preparers on Materiality Determinations .69-.70
Auditor Materiality Determinations .71-.87
Performing Further Audit Procedures .88-.93
Related Parties and Transactions .94
Group Audit Engagements .95-.121
Other Audit Considerations .122-.127
Subcontracting Arrangements .122
Independence Requirements .123-.127
Required Supplementary Information, Supplementary Information, and Other Information .128-.137
Audit Scope Includes Required Supplementary Information or Supplementary Information .131-.132
Required Supplementary Information .133
Supplementary Information .134-.136
Other Information .137
Appendix A - Consideration of Fraud in a Financial Statement Audit .138
5 Investments, Certain Equity Interests, and Derivatives .01-.131
Part I - Accounting, Financial Reporting, and Auditing Considerations for Investments and Certain Equity Interests .04-.05
Nature of Transactions .06-.17
Compliance Requirements and Deposit and Investment Policies .06-.10
Deposit and Investment Risk .11
Internal Investment Pools .12
Reverse Repurchase Agreements .13
Securities Lending Transactions .14
Investment Arrangements, Including External Investment Pools .15-.17
Accounting and Financial Reporting Considerations .18-.55
General Recognition Standards .18-.55
Auditing Considerations for Investments and Certain Equity Investments .56-.99
Risk Assessment .57
Overall Considerations Relating to Investments and Certain Equity Interests .58-.59
Identification of Material Classes of Transactions, Account Balances, and Disclosures .60-.63
Identification of Significant Risks Related to Valuation .64-.67
Determining Audit Strategy for Testing Investments at Fair Value .68-.70
Management’s Specialist and the Use of Others in Fair Value Measurement .71-.99
Part II - Accounting, Financial Reporting, and Auditing Considerations for Derivative Instruments .100
Nature of Transactions .100-.113
Investment Derivative Instruments .103
Hedging Derivative Instruments .104-.105
Hybrid Instruments .106-.108
Financial Instruments Not Included in the Scope of GASB Statement No 53 .109
Derivative Instrument Risk .110-.111
Compliance Requirements and Derivative Instrument Policies .112-.113
Accounting and Financial Reporting Considerations - Derivative Instruments .114-.120
Auditing Considerations - Derivative Instruments .121-.131
6 Revenues and Receivables .01-.102
Introduction .01-.02
Nature of Transactions .03-.09
Accounting and Financial Reporting Considerations .10-.88
Accounting .11-.68
Resource Flows Statement Classifications .69-.85
Financial Position Statement Classifications .86-.87
Disclosures .88
Auditing Considerations .89-.102
Confirmations .94-.97
Estimates .98-.99
Tax Abatement Disclosures .100
Confidential Records .101
Other Auditing Procedures .102
7 Capital Assets .01-.92
Nature of Transactions .01-.09
Capital Asset Management .03-.08
Compliance Considerations .09
Accounting and Financial Reporting Considerations .10-.75
Accounting and Financial Statement Presentation - Government-Wide Financial Statements .13-.30
Accounting and Financial Statement Presentation - Governmental Funds .31-.32
Accounting and Financial Statement Presentation - Proprietary Funds .33
Accounting and Financial Statement Presentation - Fiduciary Funds .34
Capital Leases .35-.38
Capital Asset Impairment .39-.44
Modified Approach for Infrastructure Assets .45-.53
Specified Conditions Approach for Internally Generated Intangible Assets - Other Than Computer Software .54-.55
Specified Conditions Approach for Internally Generated Computer Software .56-.59
Interfund Movements and Intra-Entity Transfers of Capital Assets .60-.62
Capital Assets Used in Landfills .63
Capital Assets Used in Pollution Remediation .64
Certain Asset Retirement Obligations .65
Service Concession Arrangements .66-.71
Disclosures .72-.73
Management’s Discussion and Analysis .74-.75
Auditing Considerations .76-.92
Capital Asset Records .79-.81
Ownership of Infrastructure Assets .82
Useful Lives of Infrastructure Assets .83
Modified Approach for Infrastructure Assets .84-.92
8 Expenses or Expenditures and Liabilities .01-.132
Introduction .01
Nature of Transactions .02-.10
Accounting and Financial Reporting Considerations .11-.120
General Recognition Standards .11-.17
Specific Recognition and Financial Reporting Standards .18-.65
Expenses Resulting From Previously Incurred Disbursements .66-.70
Liabilities .71-.105
Resource Flows Statement Classifications .106-.113
Financial Position Statement Classifications .114-.115
Disclosures .116-.118
Management’s Discussion and Analysis .119-.120
Auditing Considerations .121-.132
9 Interfund, Internal, and Intra-Entity Activity and Balances .01-.35
Introduction .01
Nature of Transactions .02-.05
Nature of Interfund Activity and Balances .02-.03
Nature of Internal Activity and Balances .04
Nature of Intra-Entity Activity and Balances .05
Accounting and Financial Reporting Considerations .06-.35
Reporting Interfund Activity and Balances .06-.15
Reporting Internal Balances and Activity .16-.20
Reporting Intra-Entity Activity and Balances .21-.26
Differing Year Ends .27
Auditing Considerations .28-.35
10 Net Position and Financial Statement Reconciliations .01-.31
Nature of Transactions .01-.04
Financial Reporting Considerations .05-.24
Government-Wide Net Position .06-.08
Proprietary Fund Net Position .09
Governmental Fund Balances .10-.18
Reconciliations - Net Position and Changes in Net Position .19-.21
Fiduciary Fund Net Position .22
Disclosures .23-.24
Auditing Considerations .25-.31
11 The Budget .01-.26
Introduction .01-.03
Budgetary Processes .04-.11
Types of Budgets .04-.06
Legal Level of Budgetary Control .07-.08
Encumbrances .09-.10
Budgetary Basis .11
Financial Reporting Considerations .12-.16
Budgetary Comparison Schedules or Statements .12-.13
Disclosures .14-.16
Auditing Considerations .17-.26
Internal Control Considerations .18
Presentation of Budgetary Comparison Information .19-.21
Audit Support for Financial Statement Assertions .22-.24
Budgetary Compliance Considerations .25-.26
12 Special-Purpose and State Governments .01-.124
Introduction .01-.03
Financial Reporting Requirements for Special-Purpose Governments .04-.09
Compliance Requirements .10
Specific Guidance for Special-Purpose Governments .11-.89
Hospitals and Other Health Care Providers .11-.13
School Districts .14-.20
Airports .21-.23
Public Housing Authorities .24-.27
Financing Authorities .28-.35
Transportation Systems .36-.37
Utilities .38-.39
Postemployment Benefit Plans .40-.45
Public Entity Risk Pools .46-.50
External Investment Pools .51-.58
Colleges and Universities .59-.89
Specific Guidance for Indian Tribes .90-.94
Specific Guidance for State Governments .95-.124
Nature and Organization of State Governments .96-.99
Specialized Reporting Requirements .100
Reporting Entity Definition .101
Separate Fund, Departmental, Agency, and Program Audits .102
Medicaid .103-.105
Food Stamps .106
Unemployment Compensation Benefit Plans .107
Lotteries .108-.113
Escheat Property .114-.117
State Tuition Programs .118-.119
Multistate Legal Settlements, Including Tobacco Settlement Resources .120-.124
13 Defined Benefit Pension Plans (Plan & Employer Considerations) .01-.183
Introduction .01-.06
Nature of Transactions .07-.15
Types of Defined Benefit Pension Plans .07-.08
Number of Defined Benefit Pension Plans .09-.10
Relevance of Census Data .11-.15
Part I - Plan Accounting, Financial Reporting, and Auditing Considerations for Defined Benefit Pension
Plans Administered Through a Qualifying Trust .16-.95
Accounting and Financial Reporting Considerations .16-.43
Auditing Considerations for the Pension Plan .44-.95
Part II - Employer Accounting, Financial Reporting, and Auditing Considerations: Single and Agent Employers .96-.142
Accounting and Financial Reporting Considerations .96-.108
Auditing Considerations for Single and Agent Employers .109-.142
Part III - Employer Accounting, Financial Reporting, and Auditing Considerations: Cost-Sharing Employers .143-.180
Accounting and Financial Reporting Considerations .143-.165
Auditing Considerations for Cost-Sharing Employers .166-.180
Appendix A - Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting .181
Appendix B - Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for Employer Reporting .182
Appendix C - Governmental Employer Participation in Single-Employer Plans: Illustrative Schedule of Pension Amounts and Illustrative Auditor’s Report .183
14 Defined Benefit Postemployment Benefits Other Than Pensions (Plan & Employer Considerations) .01-.218
Introduction .01-.05
Nature of Transactions .06-.16
Types of Defined Benefit OPEB Plans .06-.08
OPEB Financing (Risk Management) and Administrative Arrangements .09-.11
Number of Defined Benefit OPEB Plans - OPEB Plans Administered Through a Qualifying Trust .12-.13
Relevance of Census Data .14-.16
Part I - Plan Accounting, Financial Reporting, and Auditing Considerations for Defined Benefit OPEB Plans Administered Through a Qualifying Trust .17-.102
Accounting and Financial Reporting Considerations .17-.47
Auditing Considerations for OPEB Plans Administered Through a Qualifying Trust .48-.102
Part II - Employer Accounting, Financial Reporting, and Auditing Considerations for Defined Benefit OPEB Plans Administered Through a Qualifying Trust: Single and Agent Employers .103-.149
Accounting and Financial Reporting Considerations .103-.115
Auditing Considerations for Single and Agent Employers Administered Through a Qualifying Trust .116-.149
Part III - Employer Accounting, Financial Reporting, and Auditing Considerations for Defined Benefit OPEB Plans Administered Through a Qualifying Trust: Cost-Sharing Employers .150-.187
Accounting and Financial Reporting Considerations .150-.172
Auditing Considerations for Cost-Sharing Employers .173-.187
Part IV - Employer Accounting, Financial Reporting, and Auditing Considerations for Defined Benefit OPEB Plans That are Not Administered Through a Qualifying Trust .188-.218
Accounting and Financial Reporting Considerations .188-.201
Auditing Considerations for Employers When the Plan is Not Administered Through a Qualifying Trust .202-.218
15 Concluding the Audit .01-.49
Introduction .01
Misstatements and Audit Adjustments .02-.07
Litigation, Claims, and Assessments .08-.10
Written Representations .11-.15
Related-Party Transactions .16-.19
Going Concern Considerations .20-.30
Subsequent Events .31-.41
Analytical Procedures .42
Communicating with Those Charged with Governance .43-.45
Audit Documentation .46-.49
16 Audit Reporting .01-.103
Introduction .01-.03
Materiality .04-.11
Specific Issues in Reporting on the Audits of Governmental Financial Statements .12-.62
Basic Financial Statements .12
The Auditor’s Report .13-.35
Special Situations .36-.62
Required Supplementary Information, Supplementary Information, and Other Information .63-.86
Audit Scope Includes Required Supplementary Information, Supplementary Information, or Other Information .65
Required Supplementary Information .66-.73
Supplementary Information .74-.79
Other Information .80-.86
Other Financial Presentations .87-.102
Individual Fund Financial Statements .87-.90
Departmental, Agency, and Program Financial Statements .91
Special-Purpose Regulatory Presentations .92
Summary Financial Information .93-.102
Appendix A - Illustrative Auditor’s Reports .103
17 Financial Statements Prepared in Accordance with a Special-Purpose Framework .01-.19
Accounting and Financial Reporting Considerations .01-.06
Auditing Considerations .07-.17
Auditor’s Reports .15-.17
Appendix A - Illustrative Auditor’s Reports .18
Appendix B - Overview of Reporting Requirements for Special-Purpose Financial Statements .19
18 Auditor Involvement with Municipal Securities Filings .01-.40
Introduction .01-.06
Auditor Involvement with Municipal Securities Offerings .07-.30
Conditions Affecting Auditor Involvement .08-.20
Auditor Responsibilities When Involved in an Official Statement .21-.27
Engagement Terms Regarding Auditor Involvement .28-.29
Continuing Disclosure Documents .30
Using Government Auditing Standards Reports and References in the Official Statement .31
Letters for Underwriters and Other Requesting Parties .32-.38
References to the Auditor as an "Expert" .38
Attestation Engagements Related to Municipal Securities Issuances .39-.40
Supplement
Statement of Position 98-2
Appendix
A Acronyms and Abbreviations
B Category B Guidance
C Overview of Statements on Quality Control Standards
D Schedule of Changes Made to the Text From the Previous Edition
Index of Pronouncements and Other Technical Guidance
Subject Index
