OAR 162-040-0005
General Requirements
(1)
All municipal corporations, as defined in ORS 297.405 (Definitions for ORS 297.020, 297.230, 297.405 to 297.740 and 297.990), are required to have their accounts and fiscal affairs audited annually, unless they are exempt from audit under ORS 297.435 (Exemption from audit). The following administrative rules apply to review reports prepared under 297.435 (Exemption from audit)(3). Review reports must be prepared in accordance with Statements on Standards for Accounting and Review Services (SSARS), which contain professional requirements, together with related guidance, in the form of explanatory material. Accountants performing a compilation or review have a responsibility to consider the entire text of SSARS in carrying out their work on an engagement and in understanding and applying the professional requirements of the relevant Standards.(2)
The objective of a review differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. The objective of an audit is to provide a reasonable basis for expressing opinions on the financial statements that collectively comprise the municipality’s basic financial statements. A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records by obtaining sufficient appropriate evidence through inspection, observation, confirmation, or the examination of source documents; or other procedures ordinarily performed during an audit. A review is designed to obtain limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with GAAP or another financial reporting framework permitted by law.(3)
The accountant who performs a review of the financial statements of a municipal corporation must:(a)
Be licensed by the Oregon Board of Accountancy to conduct municipal audits;(b)
Personally perform the review in accordance with these rules to an extent satisfactory to the Secretary of State; and(c)
Prepare a report expressing limited assurance on the financial statements in accordance with these rules.(4)
Since the functions and forms of government, as well as the accounting, internal control, and management information systems, will vary greatly among municipal corporations, the accountant must be or become familiar with legal provisions applicable to a particular government. The accountant must also be familiar with the accounting principles considered to be generally acceptable for governments.(5)
Officials of the municipal corporation must account for all resources for which they are responsible. An appropriate accounting by officials of the municipal corporation will include financial statements, notes to the financial statements, and the supplementary information required by these rules.(6)
Based upon the review, the accountant should ascertain whether the municipal corporation’s accounts and records are maintained in a manner that will permit the preparation of financial statements that fairly present its financial position and results of operations in accordance with legal provisions, and in accordance with generally accepted accounting principles or other financial reporting framework permitted by law. The accounting principles contemplated are those contained in pronouncements of authoritative bodies including, but not necessarily limited to, the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, and the Governmental Accounting Standards Board. If the municipal corporation does not prepare and present the financial statements specified in these rules, the accountant should make a reasonable attempt to draft them for the municipal corporation using its accounts and records. Whenever legal provisions conflict with generally accepted accounting principles or principles applicable to another comprehensive basis of accounting, the accountant shall disclose these conflicts and modify the review report if necessary.(7)
The accountant should establish an understanding of the industry in which the municipality operates, and whether operations have been carried out in accordance with appropriate legal provisions including federal and state laws, charter provisions, court orders, ordinances, resolutions, and rules and regulations issued by other governmental agencies. If significant deficiencies, material weaknesses, or other recommendations for improvements have been communicated in a separate letter to management or the governing body, the independent accountant shall file a copy of the letter with the Secretary of State within 30 days of delivering the report to the municipal corporation.(8)
The report shall include financial statements with appropriate notes, and the accountant’s review report containing limited assurance on the financial statements. If the accountant becomes aware of a departure from GAAP or another financial reporting framework permitted by law that is material to the financial statements, the accountant should consider whether modification of the standard report is adequate to disclose the departure. The accountant’s review report shall include the reporting elements prescribed by the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.(9)
The municipal corporation must file a copy of its report with the Secretary of State. The report and supporting documentation are subject to review by the Secretary of State for compliance with these rules. The Secretary of State may require the accountant to submit documentation covering the review engagement for purposes of this requirement.(10)
The accountant shall submit a summary of the revenues and expenditures of the municipal corporation within 30 days after delivering the review report. The summary shall encompass the period covered by the review and shall be prepared in a manner and on forms prescribed by the Secretary of State. One copy of the summary shall be delivered to the municipal corporation.
Source:
Rule 162-040-0005 — General Requirements, https://secure.sos.state.or.us/oard/view.action?ruleNumber=162-040-0005.