Generally accepted accounting principles or GAAP are the minimum standards and guidelines for financial accounting and reporting.
Different standards setting bodies establish GAAP for different types of entities. The Governmental Accounting Standards Board or GASB sets GAAP for state and local governmental entities. The Financial Accounting Standards Board or FASB sets GAAP for all non-governmental entities, including nonprofit organizations.
Reporting in accordance with GAAP ensures consistency and comparability among like entities. The audit report of a department store should include the same types of information as the audit report of another department store; and the audit report of a city should include the same types of information as the audit report of another city.
However, the audit report of a department store would not look like the audit report of a city; nor should it. This is because the purpose and activities of a department store are not the same as those of a city. The audit reports of local government agencies and nonprofits will also look different.
The audit law (Louisiana Revised Statute 24:514(opens in new tab)) requires the reports of local auditees to be prepared in accordance with GAAP. There is an exception in the law for local auditees that, under Louisiana law, cannot issue bonds.
Generally Accepted Accounting Principles
The Louisiana Governmental Audit Guide (LAGAG) is authorized by Louisiana Revised Statute 24:513 A. (5) (a) (i) to set forth the standards by which the engagements of local governments and quasi-public organizations (local auditees) are to be performed. The LAGAG is jointly produced by the Louisiana Legislative Auditor (LLA) and the Society of Louisiana Certified Public Accountants.
Although the LAGAG is intended to assist CPAs in performing their audits and other engagements for local auditees, it does not include a detailed analysis of the professional auditing and accounting standards a CPA must consider during his or her audit, review/attestation or compilation engagements; nor is it a substitute for professional judgment. CPAs must reach their own conclusions through research of all applicable auditing and accounting standards, in addition to the LAGAG, in the performance of their local auditee engagements.
In addition, although the LAGAG is intended to assist local auditees, it does not include all the legal and accounting information an agency needs to perform its operations; nor is it a substitute for professional, legal or accounting advice; or professional or personal judgment. Local auditees should use the information in the LAGAG, in conjunction with the guidance of the professionals most familiar with the particular facts and circumstances regarding their agency, in the performance of their operations.
For questions and comments about the LAGAG, please contact LLA at (225) 339-3800.