Governmental entities: Compliance and performance auditing considerations

The American Institute of Certified Public Accountants recently issued Statement on Auditing Standards (SAS) No. 69 [1996a]. This establishes two parallel hierarchies—one for the public sector (headed by the Governmental Accounting Standards Board (GASB)) and one for the private sector (headed by the Financial Accounting Standards Board (FASB)). Formerly, governmental accountants had to absorb all FASB pronouncements and then ignore some on command of the GASB. Under the provisions of SAS No. 69, only those future FASB pronouncements that the GASB specifically makes applicable to government entities will be of primary concern to governmental accountants. However, some aspects of the new standard are confusing. The GASB hierarchy of authoritative sources should be understood as having six, not five, levels and some applications—such as accounting for proprietary funds of government entities—need to be clarified by future GASB pronouncements. This study first highlights the provisions of SAS No. 69. Then, based upon the responses to a survey questionnaire, it discusses how the new SAS will affect users of the new authoritative pronouncement.