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Audit and Accounting Guide: State and Local Governments 2018

Audit and Accounting Guide: State and Local Governments 2018

AICPA

ISBN: 978-1-948-30626-3

Jun 2018

944 pages

$111.99

Description

With all the recent changes in state and local government audit and accounting, including changes to some of the more complex areas such as pensions and post-employment benefits other than pensions (OPEB), accountants and financial managers can't afford to be without the most current guidance. This authoritative guide provides complete coverage of audit and accounting considerations critical for both preparers and auditors. This edition includes two new schedules: Governmental Employer Participation in Single-Employer Plans: Illustrative Schedule of Pension Amounts and Report; and, Illustrative Notes to Schedule of Employer Allocations and Schedule of Pension Amounts. It also provides insights, comparisons, and best practices for 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 abatements and much more.

Chapter 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

Chapter 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 97

Chapter 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

Chapter 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

Chapter 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 Pools12

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 Valuation64-67

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

Accounting and Financial Reporting Considerations—Derivative Instruments 114-120

Auditing Considerations—Derivative Instruments 121-131

Chapter 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

Chapter 7: Capital Assets 01-91

Nature of Transactions 01-09

Capital Asset Management 03-08

Compliance Considerations 09

Accounting and Financial Reporting Considerations 10-74

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

Service Concession Arrangements  65-70

Disclosures 71-72

Management’s Discussion and Analysis 73-74

Auditing Considerations 75-91

Capital Asset Records 78-80

Ownership of Infrastructure Assets 81

Useful Lives of Infrastructure Assets 82

Modified Approach for Infrastructure Assets 83-91

Chapter 8: Expenses or Expenditures and Liabilities  01- 126

Introduction 01

Nature of Transactions 02- 10

Accounting and Financial Reporting Considerations 11- 114

General Recognition Standards 11- 17

Specific Recognition and Financial Reporting Standards 18- 60

Expenses Resulting From Previously Incurred Disbursements 61- 65

Liabilities 66- 99

Resource Flows Statement Classifications 100- 107

Financial Position Statement Classifications 108- 109

Disclosures   110- 112

Management’s Discussion and Analysis 113- 114

Auditing Considerations 115- 126

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

(Plan & Employer Considerations)—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

Chapter 15: Concluding the Audit 01- 50

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- 31

Subsequent Events 32- 42

Analytical Procedures 43

Communicating With Those Charged With Governance 44- 46

Audit Documentation 47- 50

Chapter 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

Audit Reporting—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

Chapter 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

Chapter 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 andOther TechnicalGuidance

Subject Index