Question
Governmental entities are held to different auditing standards than commercial entities because of their differences in nature, structure, and operating environments. While commercial entities engage
Governmental entities are held to different auditing standards than commercial entities because of their differences in nature, structure, and operating environments. While commercial entities engage in business for the purpose of generating a profit, governmental entities operate primarily to provide goods and services to a group or society of people. In business, owners/managers are most accountable to their shareholders, while those in governmental roles are most accountable to the general public. This requires for a different set of auditing standards when it comes to financial reporting.
Most audits are conducted in accordance with Generally Accepted Auditing Standards (GAAS). However, due to their responsibility to comply with laws, regulations, and other provisions, audits of governmental entities are also to be performed in accordance with Generally Accepted Government Auditing Standards (GAGAS). Government entities are complex entities and have a significant responsibility to the public and thus, are held to a higher standard of financial reporting. The additional requirements not only ensure the fair presentation of financial reports, but they also provide the necessary accountability to ensure the proper and responsible use of public resources. Therefore, I do find the standards to be appropriate.
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