April 1999 Issue


The idea that CPAs would have to qualify their audit reports because Y2K footnote disclosures in financial statements of governmental units (as required by GASB) were not auditable made no sense to most observers. In October 1998, the AICPA published AICPA Illustrative Reporting Guidance on Year 2000 Disclosures Made Under GASB TB 98-1. It stated that auditors need to be very cautious about being associated with disclosures required by the GASB technical bulletin and may need to consider issuing a qualified opinion (scope limitation) with respect to such disclosures. This guidance was issued after GASB thought that it had responded to the AICPA's concerns as expressed in a comment letter to the exposure draft for the TB.

The issue has apparently been resolved. GASB has issued a fast-track proposed technical bulletin to amend TB 98-1, which says that the Y2K disclosures can be shown in either the footnotes or as required supplementary information and that the disclosure should say that completion of efforts as disclosed "is not a guarantee that systems and equipment will be Year 2000 compliant." The comment period for the amendment ended March 17, 1999, and GASB expected to issue the final version shortly thereafter.

The amendment works doubly hard to remove any reason for an auditor's qualification by permitting the disclosure to be outside the financial statements and requiring a statement that the efforts are no guarantee of success. The AICPA indicated that it will review its guidance when the amending TB is issued. It is expected that the AICPA's revised guidance will restore the governmental financial reporting process back to sensibility.. *

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