AICPA Technical
Questions and Answers
TQA Section 9160.31–.35 discusses:
- Whether
an entity is a state or local government for purposes of determining
whether it is using the appropriate set of accounting standards.
- How
to report on the entity’s financial statements when the entity elects to
follow either a different set of standards or a special-purpose framework.
Section
9160, Other Reporting Issues are as follows
.35
Reporting on Indian Tribe Financial Statements Prepared in Accordance With
Accounting Standards as Promulgated by FASB
Inquiry—an
Indian tribe (or a component thereof, such as a business component functioning
like a commercial entity) that meets the GAAP definition of a state or local
government prepares its financial statements in accordance with accounting
standards as promulgated by FASB. In such situations, may an auditor report on
whether the entity’s financial statements are presented, in all material
respects, in accordance with both the appropriate GAAP framework (that is,
accounting standards as promulgated by GASB) and accounting standards as
promulgated by FASB? Reply—Generally accepted auditing standards do not
prohibit an auditor from issuing a report containing two opinions—one opinion
on whether the financial statements are presented fairly, in all material
respects, in accordance with the appropriate GAAP, and a second opinion on
whether the financial statements are presented fairly, in all material
respects, in accordance with the accounting standards as promulgated by FASB.
An illustrative report that an auditor may issue on a tribe’s financial
statements when the entity has prepared its financial statements in accordance
with accounting standards as promulgated by FASB follows:
Reply—Generally
accepted auditing standards do not prohibit an auditor from issuing a report
containing two opinions—one opinion on whether the financial statements are
presented fairly, in all material respects, in accordance with the appropriate
GAAP, and a second opinion on whether the financial statements are presented
fairly, in all material respects, in accordance with the accounting standards
as promulgated by FASB. An illustrative report that an auditor may issue on a
tribe’s financial statements when the entity has prepared its financial
statements in accordance with accounting standards as promulgated by FASB
follows:
Report
on the Financial Statements
We have audited the
accompanying financial statements of XYZ Entity, which comprise the balance
sheet as of December 31, 20X1, and the related statements of income, changes in
stockholders’ equity, and cash flows for the year then ended, and the related
notes to the financial statements.
Management’s Responsibility for the Financial
Statements
Management is
responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United
States of America; this includes the design, implementation, and maintenance of
internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s
Responsibility
Our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinions.
Basis
for Adverse Opinion on U.S. Generally Accepted Accounting Principles for
Governmental Entities
As described in Note X of the financial
statements, XYZ Entity is a governmental entity as defined by the Governmental
Accounting Standards Board (GASB). Accordingly, the standards as promulgated by
GASB are the appropriate accounting standards for XYZ Entity to follow.
However, XYZ Entity has prepared its financial statements in accordance with
accounting standards as promulgated by the Financial Accounting Standards Board
(FASB) even though the entity meets the “governmental” criteria. The effects on
the financial statements of the variances between the accounting policies
described in Note X and generally accepted accounting principles for
governmental entities, although not reasonably determinable, are presumed to be
material.
Adverse
Opinion on U.S. Generally Accepted Accounting Principles for Governmental
Entities
In our opinion, because
of the significance of the matter discussed in the "Basis for Adverse
Opinion on U.S. Generally Accepted Accounting Principles for Governmental
Entities,” the financial statements referred to above do not present fairly, in
accordance with accounting principles generally accepted in the United States
of America for governmental entities, the financial position of XYZ Entity as
of December 31, 20X1, or changes in financial position or cash flows thereof
for the year then ended
Opinion
on Accounting Standards as Promulgated by the Financial Accounting Standards
Board
In our opinion, the
financial statements referred to above present fairly, in all material
respects, the financial position of XYZ Entity as of December 31, 20X1, and the
results of its operations and its aicpa.org/FRC cash flows for the year then
ended in accordance with accounting standards as promulgated by FASB.
[Auditor’s signature]
[Auditor’s city and state]
[Date of the auditor’s report]
[Issue Date: July
2017.]
Visit aicpa.org/FRC for
more details
thanks
ReplyDelete