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SAMPLE FINANCIAL STATEMENT OPINIONS

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SAMPLE FINANCIAL STATEMENT OPINIONS

AOS Regulatory Basis (i.e., non-OCBOA) & OCBOA Opinion examples

Revised July 2007

    (Dual Opinion Cover Letter --- Insert on AOS letterhead)

[ENTITY NAME]

    [COUNTY NAME] County

    [STREET ADDRESS]

    [CITY], Ohio [ZIP CODE]

To the [GOVERNING BODY]:

As you are aware, the Auditor of State’s Office (AOS) must modify the Independent Accountants’ Report we

    provide on your financial statements due to an interpretation from the American Institute of Certified Public

    Accountants (AICPA). While AOS does not legally require your government to prepare financial statements

    pursuant to Generally Accepted Accounting Principles (GAAP), the AICPA interpretation requires auditors to

    formally acknowledge that you did not prepare your financial statements in accordance with GAAP. Our

    Report includes an adverse opinion relating to GAAP presentation and measurement requirements, but

    does not imply the amounts the statements present are misstated under the non-GAAP basis you follow.

    The AOS report also includes an opinion on the financial statements you prepared using the cash basis and

    financial statement format the AOS permits.

Mary Taylor, CPA

    Auditor of State

[REPORT DATE]

    2

     1Dual (“Adverse” / Unqualified) Opinion on Financial Statements Prepared in Accordance With the Auditor of State’s Accounting Basis Including UAN Entities

    INDEPENDENT ACCOUNTANTS’ REPORT

    [ENTITY NAME]

    [COUNTY NAME] County

    (Insert address -

    This is very important. The Clerk of the Bureau needs an exact mailing address.)

    To the [GOVERNING BODY]:

    We have audited the accompanying financial statements of [ENTITY NAME], [COUNTY NAME] County2 ,

    (the Government) as of and for the years ended December 31, 2006 and 2005. These financial statements

    are the responsibility of the Government’s management. Our responsibility is to express an opinion on

    these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of

    America and the standards applicable to financial audits contained in the Comptroller General of the United

    States’ Government Auditing Standards. Those standards require that we plan and perform the audit to

    reasonably assure whether the financial statements are free of material misstatement. An audit includes

    examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

    An audit also includes assessing the accounting principles used and significant estimates made by

    management, as well as evaluating the overall financial statement presentation. [The Government processes its financial transactions with the Auditor of State’s Uniform Accounting Network (UAN).

     Government Auditing Standards considers this service to impair the independence of the Auditor

    of State to audit the Government because the Auditor of State designed, developed, implemented,

    and as requested, operates UAN. However, Government Auditing Standards permits the Auditor of State to audit and opine on this entity, because Ohio Revised Code ? 117.101 requires the Auditor

    of State to provide UAN services, and Ohio Revised Code ?? 117.11(B) and 115.56 mandate the

    Auditor of State to audit Ohio governments.

    3, 4] We believe our audit provides a reasonable basis for

    our opinion.

     1 Use this opinion for AOS basis governments not required to follow GAAP and which do not present

    “OCBOA 34” statements.)

    2 Insert, “, a component unit of [NAME OF PRIMARY GOVERNMENT],” if applicable. 3 Because this is a “departure from the standard report” under AICPA guidance, modify the related

    GAGAS, and, if applicable, federal awards schedule reports as follows:

    We have audited the financial statements of [ENTITY NAME] (the Government) as of and for the year

    ended [FYE DATE], and have issued our report thereon dated [REPORT DATE] wherein we noted the

    Government followed accounting practices the Auditor of State prescribes rather than accounting

    principles generally accepted in the United States of America. We also noted the Government uses

    the Auditor of State’s Uniform Accounting Network (UAN) to process its financial transactions.

    Government Auditing Standards considers this service to impair the Auditor of State’s independence

    to audit the [ENTITY TYPE] because the Auditor of State designed, developed, implemented, and, as

    requested, operates UAN. We conducted our audit in accordance with auditing standards generally

    accepted in the United States of America and the standards applicable to financial audits contained in

    the Comptroller General of the United States’ Government Auditing Standards.

4 If AOS serves as financial supervisor, insert:

    The Auditor of State served during the year(s) ended [End of Year Audited] as the Government’s

    financial supervisor under Ohio Rev. Code ?118.05 (G). Government Auditing Standards considers

    this service to impair the independence of the Auditor of State to audit the Government because the

    Auditor of State may assume broad management powers, duties and functions under Ohio Rev. Code

    ?118.04. However, Government Auditing Standards permits the Auditor of State to audit and opine 3

As described more fully in Note 1, the Government has prepared these financial statements using

    accounting practices the Auditor of State prescribes or permits. These practices differ from accounting

    principles generally accepted in the United States of America (GAAP). Although we cannot reasonably

    determine the effects on the financial statements of the variances between these regulatory accounting

    practices and GAAP, we presume they are material.

Instead of the combined funds the accompanying financial statements present, GAAP require presenting

    entity wide statements and also presenting the Government’s larger (i.e. major) funds separately. While the

    Government does not follow GAAP, generally accepted auditing standards requires us to include the

    following paragraph if the statements do not substantially conform to GAAP presentation requirements. The

    Auditor of State permits, but does not require Governments to reformat their statements. The Government

    has elected not to follow GAAP statement formatting requirements. The following paragraph does not imply

    the amounts reported are materially misstated under the accounting basis the Auditor of State permits. Our

    opinion on the fair presentation of the amounts reported pursuant to its non-GAAP basis is in the second

    following paragraph.

In our opinion, because of the effects of the matter discussed in the preceding two paragraphs, the financial

    statements referred to above for the years ended December 31, 2006 and 2005 do not present fairly, in

    conformity with accounting principles generally accepted in the United States of America, the financial

    position of the Government as of [FYE DATE], or its changes in financial position or cash flows, where

    applicable << insert only if the statements include proprietary funds for the years then ended.

Also, in our opinion, the financial statements referred to above present fairly, in all material respects, the

    combined fund cash balances and reserves for encumbrances of [ENTITY NAME], [COUNTY NAME]

    County, as of December 31, 2006 and 2005, and its combined cash receipts and disbursements for the

    years then ended on the accounting basis Note 1 describes.

The Government has not presented Management’s Discussion and Analysis, which accounting principles

    generally accepted in the United States of America has determined is necessary to supplement, although

    not required to be part of, the financial statements.

    In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE], on our consideration of the Government’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters.

     While we did not opine on the internal control over financial reporting or on compliance, that report

    describes the scope of our testing of internal control over financial reporting and compliance, and the results

    of that testing. That report is an integral part of an audit performed in accordance with Government Auditing

    Standards. You should read it in conjunction with this report in assessing the results of our audit.

Mary Taylor, CPA

    Auditor of State

[REPORT DATE]

    Do not use the “restricted use” paragraph with this opinion.

    on this entity, because Ohio Revised Code ? 118.05 (G) requires the Auditor of State to provide these

    supervisory services, and Ohio Revised Code ?? 117.11(B) and 115.56 mandate the Auditor of State

    to audit Ohio governments.

     (Refer to this in the first paragraph of the GAGAS letter, too.) 4

     5Unqualified Report on Modified Cash Basis (OCBOA) Statements

    Accompanied by Required Supplementary Information 6and Supplementary Information, if > 1 opinion unit GASB 34 Format

    INDEPENDENT ACCOUNTANTS REPORT

[ENTITY NAME]

    [COUNTY NAME] County

    [STREET ADDRESS]

    [CITY], Ohio [ZIP CODE]

To the [GOVERNING BODY]:

We have audited the accompanying financial statements of the governmental activities, the business-type

    activities, the [aggregate] discretely presented component unit(s), each major fund, and the aggregate remaining fund information7 8 of [ENTITY NAME], [COUNTY NAME] County, Ohio (the Government),as of

    and for the year ended [FYE DATE], which collectively comprise the Government’s basic financial

    statements as listed in the table of contents. These financial statements are the responsibility of the

    Government’s management. Our responsibility is to express opinions on these financial statements based

    on our audit.

    We conducted our audit in accordance with auditing standards generally accepted in the United States of

    America and the standards applicable to financial audits contained in the Comptroller General of the United

    StatesGovernment Auditing Standards. Those standards require that we plan and perform the audit to

    reasonably assure whether the financial statements are free of material misstatement.9 An audit includes

    examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

    An audit also includes assessing the accounting principles used and significant estimates made by

    management, as well as evaluating the overall financial statement presentation. We believe our audit

    provides a reasonable basis for our opinions.

USE THE FOLLOWING PARAGRAPH ONLY FOR GOVERNMENTS REQUIRED TO FOLLOW GAAP.

    Ohio Administrative Code ? 117-2-03 (B) requires the Government to prepare its annual financial report in

    accordance with accounting principles generally accepted in the United States of America. However, as

    discussed in Note 1, the accompanying financial statements and notes follow the modified cash accounting

    basis. This is a comprehensive accounting basis other than generally accepted accounting principles. The

    accompanying financial statements and notes omit assets, liabilities, fund equities, and disclosures that,

    while material, we cannot determine at this time.

THE FOLLOWING PARAGRAPH REPLACES THE PRECEDING PARAGRAPH, IF THE GOVERNMENT

5 The cash basis reports only cash and cash equivalents as assets. Since we permit governments to

    include all investments ORC 135 authorizes, Ohio governments can use a cash basis, modified to

    include ORC 135 long-term investments.

    6

     We adopted this example from the AICPA’s Applying OCBOA in State and Local Governmental

    Financial Statements. Your regional library should have a copy, which includes additional examples

    of qualified reports. Remember, qualified opinions require consultation with Accounting & Auditing

    Support. 7 If we combine discrete component units and remaining fund information into one opinion unit under

    the circumstances permitted by footnote 7 to Exhibit 4.1 in SLG, revise this phrase as follows:

“ . . . governmental activities, the business-type activities, each major fund and the [aggregate]

    discretely presented component unit and remaining fund information . . . “

    8 Insert, “, a component unit of [NAME OF PRIMARY GOVERNMENT],” if applicable. 5 9 If a material component unit or fund was audited under GAAS but not GAS, insert the following as the

    third sentence: “The financial statements of [name of fund or CU] were not audited in accordance with Government Auditing Standards.”

NEED NOT FOLLOW GAAP:

    As discussed in Note 1, the accompanying financial statements and notes follow the modified cash

    accounting basis. This is a comprehensive accounting basis other than accounting principles generally

    accepted in the United States of America.

     10In our opinion, the financial statements referred to above present fairly, in all material respects, the thereof for the year(s) then ended in conformity with the basis of respective modified cash financial position of the governmental activities, the business-type activities, the accounting Note 1 describes. [aggregate] discretely presented component unit(s), each major fund, and the aggregate remaining fund information of [ENTITY NAME], [COUNTY NAME] County, Ohio, as of [FYE DATE], and the respective For the year ended December 31, 20XX, the Government revised its financial presentation comparable to changes in modified cash financial position and the respective budgetary comparison for the General and the requirements of Governmental Accounting Standard No. 34, Basic Financial Statementsand [list major special revenue funds]Management’s Discussion and Analysis—for State and Local Governments.

In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE],

    on our consideration of the Government’s internal control over financial reporting and our tests of its

    compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters.

     While we did not opine on the internal control over financial reporting or on compliance, that report

    describes the scope of our testing of internal control over financial reporting and compliance, and the results

    of that testing. That report is an integral part of an audit performed in accordance with Government Auditing Standards. You should read it in conjunction with this report in assessing the results of our audit.

Management’s discussion and analysis [and the respective budgetary comparison for the General and

    [list major special revenue funds]

    11 is/are not a required part of the basic financial statements but is/are

    supplementary information the Governmental Accounting Standards Board requires. We have applied

    certain limited procedures, consisting principally of inquiries of management regarding the methods of

    measuring and presenting the required supplementary information. However, we did not audit the

    information and express no opinion on it.

    Mary Taylor, CPA

    Auditor of State

    [REPORT DATE]

    Note: Do not use the “restricted use” paragraph with this opinion.

    10 Delete reference to the budgetary comparisons from the opinion paragraph, and refer to it with the

    “MD&A / RSI paragraph” if the budgetary comparisons are presented as RSI.

    11 Delete reference to the budgetary comparisons from the RSI paragraph, and refer to it in the opinion

    paragraph if the budgetary comparisons are presented as basic statements.

    6

    Adverse Opinion for Governments Required to Follow GAAP,

    But that Instead Use the Auditor of State’s Accounting Basis

    INDEPENDENT ACCOUNTANTS’ REPORT

    [ENTITY NAME]

    [COUNTY NAME] County

    [STREET ADDRESS]

    [CITY], Ohio [ZIP CODE]

    To the [GOVERNING BODY]: 12(the Government) as of and for the year(s) ended [FYE DATE]. These financial statements are the We have audited the accompanying financial statements of [ENTITY NAME], [COUNTY NAME] County,responsibility of the Government’s management. Our responsibility is to express an opinion on these

    financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of

    America and the standards applicable to financial audits contained in the Comptroller General of the United

    States’ Government Auditing Standards. Those standards require that we plan and perform the audit to reasonably assure whether the financial statements are free of material misstatement. An audit includes

    examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

    An audit also includes assessing the accounting principles used and significant estimates made by

    management, as well as evaluating the overall financial statement presentation. We believe that our audit

    provides a reasonable basis for our opinion.

Ohio Administrative Code Section 117-2-03 (B) requires the Government to prepare its annual financial

    report in accordance with accounting principles generally accepted in the United States of America.

    However, as discussed in Note 1, the accompanying financial statements and notes have been prepared on

    an accounting basis not in accordance with these generally accepted accounting principles. The

    accompanying financial statements and notes omit entity wide statements, and assets, liabilities, fund

    equities, and disclosures that, while material, we cannot determine at this time.

In our opinion, the accompanying financial statements do not present fairly the financial position, results of

    operations, and cash flows, where applicable, of the [indicate entity] as of and for the year ended [date] in

    accordance with accounting principles generally accepted in the United States of America.

The Government has not presented Management’s Discussion and Analysis, which accounting principles

    generally accepted in the United States of America has determined is necessary to supplement, although

    not required to be part of, the financial statements.

    In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE], on our consideration of the Government’s internal control over financial reporting and our tests of its

    compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters.

     While we did not opine on the internal control over financial reporting or on compliance, that report

    describes the scope of our testing of internal control over financial reporting and compliance, and the results

    of that testing. That report is an integral part of an audit performed in accordance with Government Auditing

    Standards. You should read it in conjunction with this report in assessing the results of our audit.

    We conducted our audit to opine on the Government’s financial statements. The Federal Awards Expenditure Schedule presents additional information and is required by U.S. Office of Management and

    Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. It is not a

    required part of the financial statements. We subjected this schedule to the auditing procedures applied in

    our audit of the Government’s financial statements. For reasons stated in the third paragraph, the basic

12 Insert, “, a component unit of [NAME OF PRIMARY GOVERNMENT],” if applicable.

    7

financial statements do not present fairly, in conformity with accounting principles generally accepted in the

    United States of America, the financial position of the Government, as of [FYE DATE], or its changes in

    financial position or its cash flows for the year then ended. Therefore we are unable to express, and we do

    not express, an opinion on the Federal Awards Expenditure Schedule.

Mary Taylor, CPA

    Auditor of State

[REPORT DATE]

    Do not use the “restricted use” paragraph with this opinion.

    8

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