January 1999 Issue


The Governmental Accounting Standards Board (GASB) recently issued GASB Technical Bulletin (TB) 98-1, Disclosure About Year 2000 Issues, which is effective for financial statements on which the auditor's report is dated after October 31, 1998. The TB is available on the GASB website (www.gasb.org). In a comment letter on the exposure draft for the TB, the Auditing Standards Board and the AICPA's Government Accounting and Auditing Committee raised concerns about the auditability of certain aspects of the information called for in the TB.

According to David R. Bean, GASB's director of research, the final TB was modified to address many of the concerns raised in the AICPA and other respondents' letters. GASB attempted to remove any possible inference that the efforts being made might give readers a false assurance that the entity was in fact Y2K compliant. According to Bean, an acceptable disclosure could include such language as "notwithstanding the disclosures about the entity's efforts to be compliant, the entity makes no assertion that its efforts will be successful."

The Auditing Standards Board and the AICPA staff must have concluded that the final TB still raised some concerns because the AICPA recently issued AICPA Illustrative Reporting Guidance on Year 2000 Disclosures Made Under GASB TB 98-1 Issued October 22, 1998. This unofficial guidance--it is not enforceable under Rule 203 of the AICPA Code of Professional Conduct--refers back to the comment letter and concerns raised that the required disclosures were neither assertable by management nor verifiable by auditors. The guidance says that auditors need to be very cautious about being associated with the disclosures required by the TB and may need to consider issuing qualified opinions (scope limitations) with respect to such disclosures.

The guidance goes on to give examples of qualified opinions and the effect of such opinions on required reporting under Government Auditing Standards.

Timothy J. Green, chair of the AICPA Government Accounting and Auditing Committee, thinks that the ASB could not alter its view because of previous positions taken with regard to SEC Y2K disclosure requirements. He also believes an auditor will have difficulty in determining that the entity has identified all the "mission critical" items as required by the TB.

Bean indicated that he is seeing accountants' reports with the GASB-required Y2K disclosures that have been both qualified and not qualified. It may be that those who are not qualifying their reports have not seen the AICPA guidance. Yet to be heard from are the governmental entities who may resist receiving a qualified report from their auditors. The full text of the AICPA guidance is available on its website (www.aicpa.org). *

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