Government/Not-for-Profit – AICPA releases 2013 GAS/A-133 Audit Guide

As a result of the Clarified Auditing Standards and the issuance of the 2011 revision of Government Auditing Standards, the 2013 edition of the GAS/A-133 Audit Guide has been extensively rewritten. While this has far-reaching implications for auditors, governmental entities and not-for-profits who receive federal financial assistance should also be aware of what these changes mean for them.

Chapter 2 of the guide on Independence has been comprehensively rewritten. Performing non-audit services for a client – like assisting with the preparation of financial statements – can impair independence. Management has certain responsibilities in designating capable employees to oversee these services and must accept responsibility for the work in order for the auditor to issue an opinion. Likewise, the auditor independence is impaired if other management functions are performed. In a nutshell, the auditor is not allowed to audit his/her own work.

There are a number of report changes that went into effect at the end of 2012. Fiscal year governments and not-for-profits will see these changes this year. The new reports will appear difference in appearance, with headings and subsections, but the biggest changes for clients is the specific wording about what management’s responsibilities are and what responsibility the auditor bears. Long gone are the days when small and mid-sized cities, towns, villages and school districts could say, “well, the auditor did this”, or “the auditor made this entry” – those responsibilities have always belonged to management, and now the reports specifically detail that fact.

Governmental – Reporting Entity Reporting Changes now in Effect

The Governmental Accounting Standards Board (GASB) issued Statement No. 61, The Financial Reporting Entity Omnibus, an Amendment to GASB Statement No. 14 and No. 34 in 2010 with an effective date of periods beginning after June 15, 2012. As a result, governmental entities with fiscal years ending June 30, 2013 must implement the changes this year.

This Statement modifies certain requirements for inclusion of component units in the financial reporting entity. For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and that organization for it to be included in the reporting entity as a component unit. Further, for organizations that do not meet the financial accountability criteria for inclusion as component units but that, nevertheless, should be included because the primary government’s management determines that it would be misleading to exclude them, this Statement clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the determination.

The full text of Statement 61 can be downloaded at