Auditor involvement with official statements and Web sites: GFOA believes that as a general rule, state and local governments should be free to publish their audited financial statements as they see fit without obtaining prior permission from the auditor.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle

The story of the audited financial statements does not necessarily end when a government releases its annual financial report. Governments frequently desire to incorporate the audited financial statements into a later official statement or post them on the government's Web site. Some auditors argue that a government should not be able to do either without first obtaining the auditor's consent. Many governments counter that the audited financial statements belong to the government, which should be able to use them in any appropriate manner, at its discretion.

Recently, two of GFOA's standing committees--the Committee on Accounting, Auditing, and Financial Reporting and the Committee on Governmental Debt Management--jointly developed guidelines for the benefit of governments wishing to incorporate their audited financial statements into offering statements or to post them on their Web sites. The GFOA Executive Board approved these guidelines in the form of a recommended practice at its winter meeting in Orlando, Florida.

BACKGROUND

Chapter 16 of the American Institute of Certified Public Accountants' authoritative audit and accounting guide, State and Local Governments, clarifies the rules governing auditor involvement with audited financial statements included in an official statement. The key elements of that guidance can be summarized as follows:

* Section 16.06 on "conditions affecting auditor association" reads, in part: "Because there is no Securities and Exchange Commission (SEC) requirement for auditor association with governmental official statements, an auditor generally is not required to participate in, or undertake any procedures with respect to, a government's official statement." In other words, the independent auditor is presumed not to be associated with financial statements included in an offering statement.

* Section 16.06 goes on to list a number of specific actions that the independent auditor might take subsequent to the audit that would create an "association" between the auditor and the offering statement. Examples of such actions include assisting in preparing the financial information included in the official statement and reviewing a draft of the official statements at the government's request.

* Footnote 5 to Section 16.06 notes that "some auditors require that they become associated with a government's official statements even though the conditions described in this paragraph establishing association would not...