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Government Financial Reporting

findings; and documentation of planning, evidence, and States noted: “As the PCAOB promulgates auditing stan-
conclusions. dards for audits of these entities, GAO will continue to
closely monitor the actions of both standard setting bod-
Reporting standards. The AICPA’s reporting standards ies [AICPA and PCAOB] and will issue clarifying guid-
for all levels of reporting under attestation engagements ance as necessary on the incorporation of future standards
are accepted for GAGAS. These are: by either standard setting body” (Yellow Book, pp. 3, 4).
In mid-2005, for example, GAO provided guidance
1. Subject matter or assertion and the character of the that allowed auditors to prepare GAGAS reports on inter-
engagement are to be identified
nal control based on the definition of “material weakness”
2. Conclusions in relation the criteria are presented contained in PCAOB’s Auditing Standard No. 2—Audit
3. Reservations that are significant, if any, are stated of Internal Control over Financial Reporting Performed
in Conjunction with an Audit of Financial Statements.
4. If use of the report is restricted (specific circum-
stances are provided in the guidance) SEE ALSO Government Accounting; United States Gov-
ernment Accountability Office
GAGAS also prescribes the following standards that
report:
BIBLIOGRAPHY
• Auditors’ compliance with GAGAS U.S. Government Accounting Office. http://www.gao.gov
U.S. Government Accounting Office. Comptroller General of
• Deficiencies in internal control, fraud, illegal acts,
the United States. (2001, June). Federal Information Systems
violations of provisions of contracts or grants, and
controls audit manual: Vol. 1. Financial statements audits
abuse AIMD-12.19.s. Retrieved November 14, 2005, from
• Views of responsible officials http://www.gao.gov/special.pubs/afm.html
U.S. Government Accounting Office. Comptroller General of
• Privileged and confidential information
the United States. (2004). GAO/PCIE [President’s Council on
• Issuance and distribution details Integrity and Efficiency] financial audit manual (including July
2004 updates). Retrieved November 14, 2005, from
http://www.gao.gov/special.pubs/gaopcie
FIELD AND REPORTING
U.S. Government Accountability Office. Comptroller General of
STANDARDS FOR PERFORMANCE
the United States. (2003, June). Government auditing stan-
AUDITS dards (The yellow book). Washington, DC: GAO.
Field and reporting standards for performance audits
overlap to some extent with those for financial audits.
Field standards are related to (1) planning; (2) supervi- Bernard H. Newman
sion; (3) design of the audit when laws, regulations, and Mary Ellen Oliverio
other compliance requirements are significant to the audit
objective; (4) understanding of management controls
when relevant to the audit; and (5) sufficient, competent, GOVERNMENT
relevant evidence.
Reporting standards are related to (1) preparation of FINANCIAL REPORTING
written reports that communicate results; (2) appropriate Government financial reporting is the process whereby
issuance; (3) reporting audit objectives as well as scope governments report their financial position and activities
and methodology; (4) the need for a complete, accurate, to the public at large. These reports are the standard that
objective, convincing, and clear and concise report; and citizens, oversight bodies, and other stakeholders use to
(5) report distribution. judge their government’s efficiency, effectiveness, and
overall financial condition. This article examines govern-
ment financial reporting from a historical perspective and
THE IMPACT OF THE PUBLIC
will discuss this contemporary issue at the federal level.
COMPANY ACCOUNTABILITY
OVERSIGHT BOARD
With the passage of the Sarbanes-Oxley Act of 2002 and HISTORY
the subsequent establishment of the Public Company Government financial reporting at the state and local lev-
Accountability Oversight Board (PCAOB), a process of els evolved throughout of the twentieth century. The
evaluating current auditing guidance and developing new National Committee on Municipal Accounting (NCMA)
guidance began. The comptroller general of the United was established in 1934 by the Government Finance Offi-

348 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION