01-20-04 Regular Meeting - Laserfiche WebLink

Browse Search

FINANCI ST~47'EMENZ' ~1II~ITS What is a "management letter"? Auditors are required to communicate all report- able conditions discovered in the course of a fi- nancial statement audit to management. In a GARS audit, this communication is accomplished by means of a formal management letter. In con- trast, in a Yellow Book audit (including a Single Audit), this communication takes the form of one or two separate auditor's reports on compliance and internal controls and an accompanying Schedule of Findings and Questioned Costs. In some circumstances, an auditor may wish to issue a management letter even in conjunction with a Yellow Book audit. In that case, the man- agement letter normally is restricted to items considered too immaterial for inclusion in the Schedule of Findings and Questioned Costs.4 Whenever a separate management letter is is- sued, the Yellow Book requires that the auditor's report on compliance and internal controls refer to that letter. It is important to distinguish the management letter, as just described, from the management representation letter, which was described ear- lier. 4A management letter also may contain recommendations for improving operations targeted at management. What is a financial statement audit? The goal of the annual financial statement audit is to assure users of a government's financial statements that those statements are fairly presented. In most cases, the fairness of the presentation of a set of financial statements is determined using a set of criteria known as gen- erally accepted accounting principles (GAAP). The most important source of GAAP for state and local governments is the Governmental Ac- counting Standards Board (GASB). Much of gov- ernmental GAAP can be found in the GASB publication Codification of Governmental Ac- counting and Financial Reporting Standards, which is updated annually. 4O AN ELECTED OFFICIAL'S GUIDE TO AUDITING 9