Absence of Principles and Endowment

Instructions: Provide complete answers to the following two questions.

It is sometimes asserted that the absence of specific principles as to what constitutes cost detracts from the objectivity of the financial statements of not only internal service funds but also financial statements of the general fund. In what sense might this be true?

Suppose that you are the independent auditor for a local performing arts association (either government or not-for-profit) that recently received a sizable endowment. The associations president has asked whether gains, both realized and unrealized, from the appreciation of endowment investments should be accounted for as expendable or nonexpendable resources. What should be the primary factors that determine your response? How should GASB or FASB pronouncements influence your recommendation?

Requirements:

Submit your responses to the following questions in a 1-2 page document in MS Word. Label each question clearly. Please include computations in a table.

For written answers, please make sure your responses are grammatically correct and free from spelling errors.

Follow the APA Requirements.

Review the grading rubric, which can be accessed from the Course Information page. Reach out to your instructor if you have any questions about the assignment.