State and Local Governments: Checklists and Illustrative Financial Statements

Introduction

References to Financial Accounting Standards Board Pronouncements in This Checklist

Governmental Accounting Standards Board (GASB) pronouncements have made certain AICPA and Financial Accounting Standards Board (FASB) pronouncements specifically applicable to governmental entities. For example, GASB Statements No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, as amended, and No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, require the application of certain pronouncements of the FASB and its predecessor standards-setting organizations issued before November 30, 1989, and permit the application of later FASB pronouncements in certain situations, as discussed in chapter 2, "Financial Reporting" of AICPA Audit and Accounting Guide State and Local Governments (with conforming changes as of May 1, 2009). For this reason, references to FASB pronouncements and predecessor standards-setting organization pronouncements are included throughout this checklist.

In April 2008, GASB added to its Technical Plan, a project, Codification of Pre-November 30, 1989, FASB Pronouncements, the purpose of which is to specifically identify and, when appropriate, modify provisions in FASB Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins, issued on or before November 30, 1989 (collectively, the "FASB pronouncements") as referenced in GASB Statement No. 34, that do not conflict with or contradict GASB pronouncements as they apply to financial reporting for governmental and business-type activities. Based on the outcome of the research portion of this project, GASB will then determine which of the provisions should be incorporated into GASB pronouncements.

The FASB Accounting Standards Codification™ (ASC) disassembled and reassembled thousands of nongovernmental accounting pronouncements (including those of the FASB, Emerging Issues Task Force, and the AICPA) to organize them under approximately 90 topics. FASB ASC is expected to become authoritative effective July 1, 2009, at which time it will become the source of authoritative U.S. accounting and reporting standards, other than guidance issued by the Securities and Exchange Commission (SEC), for nongovernmental entities. FASB ASC is not intended to change U.S. generally accepted accounting principles (GAAP) or any requirements of the SEC; rather, it is part of FASB's efforts to reduce the complexity of accounting standards and also to facilitate international convergence.

FASB ASC uses a topical structure in which guidance is organized into areas, topics, subtopics, sections, and subsections. This effectively organizes the content without regard to the original standard setter or standard from which the content was derived. Because this format would be of limited use in locating the text of pronouncements that were issued on or before November 30, 1989, the accounting guidance in this checklist has not been conformed to reflect reference to FASB ASC as described below.

The references to FASB pronouncements in this checklist will be updated upon completion of the GASB project.

    .01 This publication includes the following information, extracted from sections 13,000–13,400 of the Financial Statement Preparation Manual (FSP):

    .02 These checklists consider relevant standards through those in the following listing. Users should modify the checklists, as appropriate, for subsequent standards. In determining the applicability of a standard, its effective date also should be considered.

The checklists have been updated to include relevant accounting and auditing pronouncements through

The checklists and illustrative financial statements should be modified, as appropriate, for subsequent pronouncements. In determining the applicability of a pronouncement, its effective date should also be considered.

    .03 These checklists and illustrative materials have been developed by the AICPA Accounting and Auditing Publications Staff to serve as nonauthoritative practice aids for use by preparers and auditors for the financial statements of and federal financial assistance received by state and local governments. The Audit and Accounting Guide State and Local Governments defines those entities that are state and local governments. This publication is an other auditing publication as defined in AU section 150, Generally Accepted Auditing Standards (AICPA, Professional Standards, vol. 1). Other auditing publications have no authoritative status; however, they may help the auditor understand and apply SASs.

    .04 Additional guidance concerning governmental financial reporting is provided in the AICPA Practice Aid Applying OCBOA in State and Local Governmental Financial Statements (product no. 006614).

    .05 These checklists sometimes uses the term financial position statements in a generic manner to refer to one or more of the following—the government-wide statement of net assets, the governmental funds balance sheet, the proprietary funds statement of fund net assets or balance sheet, and the fiduciary funds statement of fiduciary net assets. These checklists also sometimes uses the term activity statements in a generic manner to refer to one or more of the following—the government-wide statement of activities; the governmental funds statement of revenues, expenditures, and changes in fund balances; the proprietary funds statement of revenues, expenses, and changes in fund net assets or fund equity; and the fiduciary funds statement of changes in fiduciary net assets.

    .06 These checklists contain references to authoritative accounting and auditing standards using the following abbreviations and acronyms:

    .07 The checklists provide spaces for checking off or initialing each question or point to indicate that it has been considered. Carefully review the topics listed and consider whether they represent potential disclosure items for the reporting entity for which you are preparing or auditing financial statements. Users should check or initial

    .08 Users may find it helpful to include references to the location in the financial report where each item marked "Yes" can be found. It also may be helpful to include on the checklists or elsewhere the reasons that items marked "N/A" do not apply. It is important that the effect of any "No" response be considered on the auditor's report. A "No" response that is material to the financial statements may warrant a departure from an unqualified opinion as discussed in paragraphs .20–.64 of AU section 508. If a "No" response is indicated, the authors recommend that a notation be made in the margin to explain why the disclosure was not made (for example, because the item was not considered to be material to the financial statements). A "No" response to a required disclosure that is material may warrant the issuance of a qualified or adverse opinion on the financial statements of the affected opinion unit3 or an explanatory paragraph on RSI. The right margin may be used for other remarks or comments as appropriate, including cross-referencing to applicable work papers where the support to a disclosure may be found.

    .09 These checklists and illustrative financial statements have been prepared by the AICPA staff. They have not been reviewed, approved, disapproved, or otherwise acted on by any senior technical committee of the AICPA and do not represent official positions or pronouncements of the AICPA.

    .10 The use of these or any other checklists requires the exercise of individual professional judgment and should be used by, or under the supervision of, persons having adequate technical training and proficiency in the application of GAAP, GAAS, and other applicable standards and requirements. These checklists and illustrative materials are not substitutes for original authoritative standards and requirements. Users of these checklists are urged to refer directly to applicable standards and requirements when appropriate. The checklists are not all-inclusive and are not intended to present minimum requirements. Users of the checklists are encouraged to tailor them as required to meet specific circumstances of each particular engagement. Users who have further questions may call the AICPA Technical Hotline at (877) 242-7212.

Note: This publication was extracted from sections 13,000 through 13,400 of the AICPA Financial Statement Preparation Manual (FSP).

¹ Governmental Accounting Standards Board (GASB) Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, issued in March 2009, incorporates the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the GASB's authoritative literature. It is intended to make it easier for preparers of state and local government financial statements to identify and apply the "GAAP hierarchy," which consists of sources of accounting principles used in the preparation of financial statements so that they are presented in conformity with GAAP and the framework for selecting those principles.

The AICPA is expected to amend AU section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (AICPA, Professional Standards, vol. 1), to remove the hierarchy of GAAP for state and local governments that currently exists therein.

² For example, the financial statements and notes checklist does not address the provisions of GASB Statement No. 44, Economic Condition Reporting: The Statistical Section, which establishes and modifies requirements for the supplementary information presented in a statistical section that accompanies the basic financial statements.

³ See the discussion of opinion units in chapters 4 and 14 of the Audit and Accounting Guide State and Local Governments.

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