01-20-04 Regular Meeting - Laserfiche WebLink

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What is an "adverse opinion"? An adverse opinion is one in which the auditor states that the financial statements are not fairly presented in conformity with GAAP (or some other comprehensive basis of accounting). The financial reporting model used by state and local governments features a combination of gov- ernment-wide financial statements and fund fi- nancial statements. A financial report that left out either the government-wide financial state- ments or the fund financial statements would re- ceive anadverse opinion. Likewise, a government's failure to report general infrastructure assets in the government-wide financial statements (after the mandatory implementation date for retroac- tive infrastructure reporting), if material, typi- cally would result in an adverse opinion. e74 AN ELECTED OFFICIAL'S GUIDE What are internal controls? Management is responsible for protecting the government's assets and for ensuring the integ- rity and comprehensiveness of the data collected by the accounting system. Internal controls are the practical means that management uses to achieve these objectives. A comprehensive framework of internal controls must do all of the following: o Produce a favorable control environment o Ensure the ongoing assessment of risk o Establish and maintain control-related policies and procedures o Facilitate communication o Provide for monitoring the effectiveness of control-related policies and procedures as well as the resolution of potential problems identi- fied by control-related procedures. To be effective, control-related policies and proce- dures, which are at the heart of a government's framework of internal controls, must ensure all of the following: o The proper authorization of transactions o The proper design of records o The maintenance of security over assets and records o The periodic reconciliation of accounting re- cords TO AUDITING 15