The proposed SOP addresses guidance to the auditor in situations in which the state of local governmental unit presents summary information in a document that does not include the general purpose financial statements. It includes recommended footnote disclosures on how the accounting and reporting principles used in the summary financial information materially differ from the principles followed in the general purpose financial statements as well as an illustrative report on summary financial information prepared on the same measurement focus as the general purpose financial statements.

When the summary financial information is prepared on a measurement focus that differs from the general purpose financial statements, the proposed SOP states that the auditor would ordinarily express an adverse opinion on the summary financial information due to the departures from generally accepted accounting principles.

The AICPA's Government Accounting and Auditing Committee is issuing an exposure draft of a revision to the AICPA Audit and Accounting Guide, Audits of State and Local Governmental Units (ASLGU). Although ASLGU was amended in September 1992, by the "Super SOP," SOP 92-7, Audits of State and Local Governmental Entities Receiving Federal Financial Assistance, SOP 92-7 amended only the portions of ASLGU addressing audits in accordance with the Single Audit Act of 1984. The exposure draft of ASLGU incorporates new accounting and financial reporting requirements resulting from statements issued by the GASB; the effect of auditing standards issued by the AICPA since 1986, including the "expectation gap" SASs, SAS 68, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance, and SAS 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles in the Independent Auditor's Report. ASLGU is intended as an initial reference source for the auditor new to governmental accounting and auditing. Accordingly, the discussion of audit procedures concentrates primarily on those unique to governmental audits. While ASLGU discusses existing accounting pronouncements and recognized practices unique to governmental units, it does not answer unresolved accounting issues.

Other changes to ASLGU proposed in the exposure draft include expanded discussion of overall audit planning considerations, the significance of the reporting entity and its fund structure, the auditor's responsibility for budgetary information, and a new chapter on considerations in concluding the audit (e.g., related party disclosures, management representations).

Expected Changes to the "Yellow Book"

In the spring of 1993 the General Accounting Office (GAO) expects to issue an exposure draft on proposed changes to Government Auditing Standards. The proposed changes are expected to include a requirement that GAO's continuing education standard be met before the beginning of field work (currently the standard requires that the standard be met within two years of the date the individual is assigned to her/his first audit made in accordance with Government Auditing Standards).

Presently, the audit procedures performed in a financial statement audit in accordance with GAAS are sufficient for the auditor to issue the reports on compliance with laws and regulations and on the auditor's consideration of the internal control structure in a financial statement audit required by Government Auditing Standards. The exposure draft may include a proposal that the auditor perform additional procedures, i.e., procedures in addition to those required by GAAS, and report based on those additional procedures performed. The proposal may include that the additional procedures to be performed pertain to management processes for monitoring the effectiveness of internal controls. The suggested procedures may include inquiry about how the monitoring processes operate, review of reports that assess the results of such processes, determining whether corrective action has been taken on significant deficiencies identified, determining whether such processes have been placed in operation as well as a requirement to perform a test of controls over compliance with specified laws and regulations.

Although the proposals are still in the discussion stage, auditors should be alert to the issuance of the exposure draft of proposed changes to Government Auditing Standards within the next few months. If the exposure draft is issued in the spring as planned, it is expected that the revision would be issued in final form by the end of 1993.