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
