The GAAP provides that a set of financial statements highlighting revenue, expenses, profit and the cash flow situation of the government entity are to be prepared according to specific procedures as per the GASB and FASAB. However these financial statements are slightly different from the normal financial statements drawn by the private sector entities and the non profit organizations. Similarly the audit requirements set for the government owned business entities and agencies are also somewhat different. The government auditing standards provide that the auditors report should depict compliance with the GAGAS, depict the internal control and compliance in the organization with the laws and grants agreements, report any present inefficiencies and wastage in the accounting procedures employed, and the restatement of previous as well as current financial reports of the entity. (Chapter 5: Reporting Standards for Financial Audits)
Conducting a routine audit as specified by the GAO for government entities can be beneficial for the government owned and run businesses. This is because the audit helps provide to the general public how their resources and tax dollars are being spent in an effective and efficient manner by the government through to run its administered businesses that comply with the required laws and regulation. The audit of the government run entities is crucial as it allows the government to release o the public about its management style, accounting procedures as well as increasing transparency of where government funds are employed. This increases the confidence of the public and encourages more funding and deployment of beneficial government entities and programs. “Government auditing standards provide a framework to auditors so that their work can lead to improved government management, decision making, oversight and accountability.” (Chapter 11: ACCY 161 – Spring 2009 Auditing Governmental Entities and Some Nonprofit Entities)
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