Wiley Federal Government Auditing: Laws, Regulations, Standards, Practices, and Sarbanes-Oxley, 2nd Edition

CHAPTER 1

BACKGROUND OF FEDERAL AUDITING

Evolution, Standard Setters, Responsibilities, Audit Types

The Federal Government’s spending for fiscal year (FY) 2011 was almost $3.8 trillion. The accumulated national debt (debt held by the public) was more than $10.2 trillion. Annual Federal outlays accounted for roughly 25 percent of the country’s gross domestic product (GDP) and debt held by the public is on an upward trend, now almost 70 percent of GDP. The Federal Government’s financial statements presented on an accrual basis reported gross cost of almost $4 trillion and total liabilities in excess of $17.5 trillion for and as of the end of FY 2011, respectively. Never before has there been a greater time for accountability, credibility, and reliability of financial information to inform discussion and decision making.1

The numbers just cited are dramatic and emphasize the massive size, influence, and commitments of the Federal Government. They are also indicative of a growing need to accurately and consistently account for the Federal Government’s financial activities. With so much at stake, accurately measuring and reporting the financial position and condition of the Federal Government has never been so important. The need for timely and reliable financial information to support budget and program management decisions is essential. The credibility of generally accepted accounting principles (GAAP) and audited financial statements is vital to government integrity, credibility, ...