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

CHAPTER 5

FEDERAL FINANCIAL STATEMENTS

INTRODUCTION TO FEDERAL FINANCIAL STATEMENTS

The financial statements issued by component entities of the Federal Government differ significantly from the statements issued by commercial entities, not-for-profit organizations, or state and local government entities. In addition, the requirements for Federal Government financial statements and their requisite form and content also differ between the three branches of the Federal Government.

HISTORICAL EMPHASIS OF FEDERAL FINANCIAL REPORTING

Historically, within the Federal Government, considerable effort was expended to meet only legally required reporting mandates of Congress. While such reports were important, these requirements were not the reporting information most needed by Federal entity executives to manage activities and operations properly. As a result, significant changes and improved financial reporting requirements were implemented by the Federal Government in the 1990s.

For the prior 200 years, Congress and executives of Federal entities were almost exclusively concerned with appropriated amounts, the status of apportioned budget authority, and the rate of obligation and expenditure. So long as the obligated and expended amounts remained below the amounts appropriated by Congress, few expressed any concern about the absence of other types of data. Information presented by Federal entities for both external and internal uses were essentially the dollar values of obligated balances ...