AUDIT OPINIONS
The following sample audit opinions illustrate reports on the basic financial statements to be
issued in selected situations. In all cases the auditor should strive to give an unqualified opinion. In
situations where this is not possible, the auditor should explain in detail what internal controls or
procedures are necessary to issue an unqualified opinion next year. This explanation should be contained
in the internal control report or management letter, a copy of which shall be sent to the NC Department of
State Treasurer, State and Local Government Finance Division. See the most recent memo regarding the
Contract to Audit Accounts for more details and the implications and/or requirements if less than an
unqualified opinion is to be issued.
Most of the sample opinions are adapted from the AICPA’s Audit and Accounting Guide: State
and Local Governments. The combining and individual fund financial statements presented with
supporting schedules must be reported on as supplementary data in Other Information section or in a
separate opinion because the unit and the NC Department of State Treasurer, State and Local Government
Finance Division, use this information for monitoring budgetary compliance, preparing bond circulars,
evaluating the financial condition, and other purposes.
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These samples are written to cover as many conditions and situations as possible. The actual opinion
letter should be modified based upon the actual funds audited and the various statements and schedules
presented
Audit Opinions Samples
EXAMPLE 1:
Unmodified Opinion on Basic Financial Statements Accompanied by
Required Supplementary Information, Supplementary Information,
and Other Information.
27-A-3
EXAMPLE 2:
Unmodified Opinion on Basic Financial Statements Performed Under
Governmental Auditing Standards Accompanied by Required
Supplementary Information, Supplementary Information, and Other
Information.
27-A-6
EXAMPLE 3:
Unmodified Opinion on Basic Financial Statements Accompanied by
Required Supplementary Information, Supplementary Information,
and Other Information - Single Audit Published Under Same Cover
27-A-9
EXAMPLE 4:
Adverse Opinion on Basic Financial Statements That Omit a Major
Fund or a Nonmajor Fund from a Fund Type
27-A-12
EXAMPLE 5:
Unmodified Opinion on Basic Financial Statements When One Fund
or Component Unit Representing Less Than All of a Fund Type Has
Been Audited by Other Auditors
27-A-15
EXAMPLE 6:
Report on Basic Financial Statements That Includes a Qualified
Opinion on Major Governmental Funds because of a GAAP
Departure
27-A-19
EXAMPLE 7:
Unmodified Opinion on the Basic Financial Statements of a Special
Purpose Government That Has a Single Opinion Unit Engaged in
Governmental Activities Only
27-A-22
EXAMPLE 8:
Unmodified Opinion on the Basic Financial Statements of a Special
Purpose Government That Has a Single Opinion Unit Engaged in
Business-Type Activities Only
27-A-23
EXAMPLE 9:
Report on Basic Financial Statements That Include Multiple Opinion
Modifications, Including an Adverse Opinion Because a Major Fund
is Omitted
27-A-24
Text that is unique to the type of example is noted in GREEN
Changes as a result of resent SASs or other authoritative sources are noted in BLUE
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EXAMPLE 1: Unmodified Opinion on Basic Financial Statements Accompanied by Required
Supplementary Information, Supplementary Information and Other Information
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 1 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.2 3
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.4 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.5
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion,4 the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of
City of Dogwood, North Carolina as of June 30, 20XX, and the respective changes in financial position,
and, where applicable, cash flows6 thereof and the respective budgetary comparison for the General Fund,
[and major, annually budgeted special revenue funds, if applicable]7 for the year then ended in accordance
with accounting principles generally accepted in the United States of America.
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Other Matters
Required Supplementary Information8
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information9
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, and other
schedules, are the responsibility of management and were derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion,4 the combining and individual
nonmajor fund financial statements, budgetary schedules, and other schedules are fairly stated, in all
material respects, in relation to the basic financial statements as a whole.10
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements, and accordingly, we do not express an
opinion or provide assurance on them.9 11 12
[Signature]
[City and State]
[Date
1
The financial statements are identified at the opinion unit level. This sentence should be modified to include only
those opinion units which relate to the governmental unit. The financial statements are identified at the opinion unit
level. However, if the financial statements do not clearly indicate the major funds, “each major fund” should be
replaced with the individual major fund names. The auditor may combine two aggregate opinion units, if both are
presented in the financial statements,-(the first one for the aggregate discretely presented opinion unit and the second
one for the remaining fund information) as a single opinion unit. If this is done, the auditor’s report should use the
term “aggregate discretely presented component unit and remaining fund information.” The terms “aggregate
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discretely presented component unit” and “aggregate remaining fund information” should not be used separately in
the auditor’s report since they have now been combined into one opinion unit.
2
If the governmental unit is a component unit of another government, the first sentence of the auditor’s report
should be modified; i.e., “We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of Dogwood Travel and Tourism Authority, component unit of City of Dogwood, as of
and for the year ended June 30, 20XX, which collectively comprise the Authority’s basic financial statements as
listed in the table of contents.” The reference to the table of contents should be deleted if the financial
statements are not listed there and replaced with the appropriate page numbers.
3
If the prior-period financial statements include the minimum information required by GAAP for a complete set of
financial statements, the continuing auditor should report on them. Due to the complexity of governmental financial
statements, prior-period financial statement information may present comparative information that is condensed or
summarized financial information that is not considered to be comparative financial statements. Accordingly, the
auditor is not required to opine on such comparative information. Instead the auditor should add an appropriate
headed other-matter paragraph to describe the character of the auditors work and the degree of responsibility taken.
Report on Summarized Comparative Information
The summarized comparative information presented herein as of and for the year ending June 30, 20XX, derived
from those financial statements, has not been audited, reviewed, compiled and, accordingly, we express no opinion
on it.
Prior-year information, such as prior-year combining and individual fund information may be included in RSI or SI
when prior-year financial statements are not presented. The auditor may choose not to report on such comparative
information.
If there has been a change in accounting principle that has a material effect on comparability of the financial
statements, a paragraph should be added after the opinions paragraph:
Change in Accounting Principle
As discussed in Note X to the financial statements, in 20XX the City adopted new accounting guidance, GASB 65,
Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter.
4
If the entire opinion unit is audited by another auditor and the primary auditor has chosen not to assume
responsibility for the work of the component unit’s auditor, insofar as it relates to the auditor’s opinion on the basic
financial statements, appropriate changes should be made to the first Auditor’s Responsibility paragraph. Refer to
Examples 5 and 6.
The phrase “and the report of the other auditors” should be included the last sentence of the second paragraph of the
Supplementary and Information paragraph. The phrase “by us and of other auditors” in second sentence following
“United States of America” should also be inserted. Also, any departure from an unqualified opinion on the
financial statements of the component units should be disclosed. Refer to Example 5 and 6
5
If the audit is submitted to comply with a legal, regulatory, or contractual requirement for a financial audit in
accordance with the Yellow Book, 2011 revision, or U. S. Office of Management and Budget Circular A-133, the
auditor’s report should refer to Government Auditing Standards; refer to Example 2. Also refer to footnote 12.
6
If the financial statements produce one or more financial statements of cash flows, the opinion paragraph should
reference cash flows, where applicable. If all funds have cash flows, then remove “where applicable.” If no
proprietary funds then reference to cash flows should be deleted.
7
The last sentence of the opinion paragraph should agree to the statements with regard to which funds’ budgetary
statements are included in the basic financial statements. The General Fund and each major annually budgeted
Special Revenue Fund must be listed by name.
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8
Per AU-C section 730, the auditor’s report on the financial statements should include an other-matter paragraph
that refers to the required supplementary information and includes language to explain certain circumstances. The
RSI listing the auditor’s report should be tailored for each engagement. If the RSI is omitted, the paragraph on RSI
would be replaced with the following:
Management has omitted [state the missing RSI, such as Law Enforcement Officers’ Special Separation Allowance
Supplemental Information Analysis for Funding Progress] that governmental accounting principles generally
accepted in the United States of America require to be presented to supplement the basic financial statements. Such
missing information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic
financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic
financial statements is not affected by this missing information.
If the auditor is unable to complete prescribed procedures, the last two sentences of the paragraph with the wording:
We were unable to apply certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America because [state the reasons]. We do not
express an opinion or provide any assurance on the information.
9
This section within “Other Matters” section of the report is intended to include the reporting on supplementary
information when the auditor is engaged to provide an “in relation to” opinion on SI and also when explanatory
language will be provided relating to Other Information when the auditor is disclaiming an opinion on OI. The SI
and the OI listing in the first, second, and third paragraphs of the Supplementary and Other Information section
should be tailored for each engagement. The first paragraph references all of the SI and OI presented in the audit
report. The second paragraph references the SI on which the auditor issues an “in-relation-to” opinion regarding
whether the supplementary information is fairly stated, in material respects, in relation to the financial statements as
a whole. The third paragraph references the OI on which the auditor is disclaiming an opinion.
Budgetary schedules, the schedule of ad valorem taxes receivable, and the analysis of current tax levy are required
by the NC Department of State Treasurer (NCDST) to be presented as supplementary information.
10
This illustration assumes that the auditor has engaged to provide an “in-relation-to” opinion on SI the auditor is
issuing an unmodified opinion on the financial statements, and the auditor concluded that SI is fairly stated, in all
material respects, in relation to the financial statements as a whole. If there is no SI, then references to SI in these
paragraphs would be deleted.
When reporting on supplementary information, the auditor should consider the effect of any modifications to the
report on the basic financial statements. Furthermore, if the report on supplementary information is anything other
than unqualified, this paragraph should be modified. Refer to AU-C section 725 for guidance.
11
The last sentence of this paragraph which disclaims an opinion on the other information included in the reports is
optional. If the auditor chooses not to include this wording no references to other information needs to be made in
the sentence of this paragraph. AU-C section 720 addresses the auditor’s responsibility in relation to other
information in documents containing audited financial statements and the auditor’s report. The auditor is not
required to determine if other information is properly stated or reference the other information in the auditor’s
report.
12
AU-C section 700, Paragraph .37 of AU-C, provides that the section related to an auditor’s other reporting
responsibilities should be subtitled “report on Other Legal and Regulatory Requirements” or otherwise, as
appropriate to the contents of this section. An example of an alternative title would be describing the reporting
requirements by audits performed under Governmental Auditing Standards. Refer to Example 2.
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EXAMPLE 2: Unmodified Opinion on Basic Financial Statements Performed Under
Governmental Auditing Standards Accompanied by Required Supplementary Information,
Supplementary Information, and Other Information
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 1 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.2 3
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.4 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the
Comptroller of the United States.5 Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion,4 the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of
City of Dogwood, North Carolina as of June 30, 20XX, and the respective changes in financial position,
and, where applicable, cash flows6 thereof and the respective budgetary comparison for the General Fund,
[and major, annually budgeted special revenue funds, if applicable]7 for the year then ended in accordance
with accounting principles generally accepted in the United States of America.
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Other Matters
Required Supplementary Information8
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information9
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, and other
schedules, are the responsibility of management and were derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion,4 the combining and individual
nonmajor fund financial statements, budgetary schedules, and other schedules are fairly stated, in all
material respects, in relation to the basic financial statements as a whole.10
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements, and accordingly, we do not express an
opinion or provide assurance on them.9 11
Other Reporting Required by Government Auditing Standards12
In accordance with Government Auditing Standards, we have also issued our report dated [date of report]
on our consideration of the City of Dogwood’s internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering City of Dogwood’s internal control over
financial reporting and compliance.
[[Signature]
[City and State]
[Date
Rev. - 4/2013
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1
Refer to Example 1, footnote 1.
2
Refer to Example 1, footnote 2
3
Refer to Example 1, footnote 3
4
Refer to Example 1, footnote 4
5
The report for an audit performed in accordance Governmental Auditing Standards (GAGAS) refers to audit
performed in accordance with the GAGAS, 2011 revision, chapters 1 – 4 as well as generally accepted auditing
standards. If a component unit or a fund was not required to be audited in accordance to and was not performed
under GAGAS, the following should be added as a third sentence of the paragraph: The financial statements of
[name of component unit or fund] were not audited in accordance with Governmental Auditing Standards.
6
Refer to Example 1, footnote 6.
7
Refer to Example 1, footnote 7.
8
Refer to Example 1, footnote 8.
9
Refer to Example 1, footnote 9
10
Refer to Example 1, footnote 10
11
Refer to Example 1, footnote 11
12
AU-C section 700, Paragraph .37 of AU-C, provides that the section related to an auditor’s other reporting
responsibilities should be subtitled “report on Other Legal and Regulatory Requirements” or otherwise, as
appropriate to the contents of this section. An example of an alternative title would be describing the reporting
requirements by audits performed under Governmental Auditing Standards as is illustrated here.
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EXAMPLE 3: Unmodified Opinion on Basic Financial Statements Accompanied by Required
Supplementary Information, Supplementary Information and Other Information- Single Audit
Published Under Same Cover
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 1 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.2 3
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.4 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the
Comptroller of the United States.5 Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion,4 the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of
City of Dogwood, North Carolina as of June 30, 20XX, and the respective changes in financial position,
and, where applicable, cash flows6 thereof and the respective budgetary comparison for the General Fund,
[and major, annually budgeted special revenue funds, if applicable]7 for the year then ended in accordance
with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information8
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
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xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information9
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section as well as the accompanying schedule of expenditures of federal and state awards as required by
U.S. Office and Management and Budget Circular A-133, Audits of State and Local Governments, and
Non-Profit Organizations and the State Single Audit Implementation Act10 are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, other schedules,
and the schedule of expenditures of federal and state awards10 are the responsibility of management and
were derived from and relates directly to the underlying accounting and other records used to prepare the
basic financial statements. Such information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare the
basic financial statements or to the basic financial statements themselves, and other additional procedures
in accordance with auditing standards generally accepted in the United States of America. In our opinion,4
the combining and individual nonmajor fund financial statements, budgetary schedules, other schedules,
and the schedule of expenditures of federal and state awards10 are fairly stated, in all material respects, in
relation to the basic financial statements as a whole.11
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements, and accordingly, we do not express an
opinion or provide assurance on them.9 12
Other Reporting Required by Government Auditing Standards13
In accordance with Government Auditing Standards, we have also issued our report dated [date of report]
on our consideration of the City of Dogwood’s internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering City of Dogwood’s internal control over
financial reporting and compliance.
[Signature]
[City and State]
[Date]
1
Refer to Example 1, footnote 1.
2
Refer to Example 1, footnote 2
3
Refer to Example 1, footnote 3
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4
Refer to Example 1, footnote 4
5
The report for an audit performed in accordance Governmental Auditing Standards (GAGAS) refers to audit
performed in accordance with the GAGAS, 2011 revision, chapters 1 – 4 as well as generally accepted auditing
standards. If a component unit or a fund was not required to be audited in accordance to and was not performed
under GAGAS, the following should be added as a third sentence of the paragraph: The financial statements of
[name of component unit or fund] were not audited in accordance with Governmental Auditing Standards.
6
Refer to Example 1, footnote 6.
7
Refer to Example 1, footnote 7.
8
Refer to Example 1, footnote 8.
9
Refer to Example 1, footnote 9
10
Guidance found in AICPA’s Accounting and Auditing Guide: State and Local Governments recommend
combining the reporting on the schedule of expenditures of federal and state awards (SEFSA) with the reporting on
the financial statements. However, if the SEFSA is issued under a separate cover and therefore not presented with
the basic financial statements, reference to the SEFSA in the auditor’s report should be deleted. Reporting on the
SEFSA should be included either in the Circular A-133 report (Single Audit report) and the State Single Audit
report or it could be contained in a stand-alone report.
11
Refer to Example 1, footnote 10
12
Refer to Example 1, footnote 11
13
Refer to Example 1, footnote 12.
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EXAMPLE 4: Adverse Opinion1 on Basic Financial Statements That Omit a Major Fund or a
Nonmajor Fund from a Fund Type
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 2 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.3 4
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.5 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.6
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Basis for Adverse Opinion on [Dogwood Fund] and Qualified Opinion on Business-Type Activities7 8
Management has not included [Dogwood fund] in the City’s financial statements. Accounting principles
generally accepted in the United States of America require [Dogwood fund] 7 to be presented as a major
enterprise fund and financial information about [Dogwood fund] to be part of the business-type activities,
thus increasing that activity’s assets, liabilities, revenues, and expenses, and changing its net position.
The amount by which this departure would affect the assets, liabilities, net position, revenues, and
expenses of the business-type activities and the omitted major fund has not been determined.
Rev. - 4/2013
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Adverse Opinion
In our opinion5, because of the significance of the matter described in the “Basis for Adverse Opinion on
Dogwood Fund and Qualified Opinion on Business-Type Activities” paragraph, the financial statements
referred to above do not present fairly the financial position of Dogwood Fund of the City of Dogwood,
North Carolina, as of June 30, 20XX, or the changes in financial position or cash flows 10 thereof for the
year then ended.
Qualified Opinion9
In our opinion5, except for the matter described in the “Basis for Adverse Opinion on Dogwood Fund and
Qualified Opinion on Business-Type Activities” paragraph, the financial statements referred to above
present fairly, in all material respects, the financial position of the business-type activities of the City of
Dogwood, North Carolina, as of June 30, 20XX, and the changes in financial position thereof for the year
then ended in accordance with accounting principles generally accepted in the United States of America.
Unmodified Opinions9
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the aggregate discretely presented component
units, [major funds not affected by the previously described adverse and qualified opinions], and the
aggregate remaining fund information of the City of Dogwood, North Carolina, as of June 30, 20XX, and
the respective changes in financial position and, where applicable, cash flows10 thereof and the respective
budgetary comparison for the General Fund, [and major, annually budgeted special revenue funds, if
applicable]11 for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Required Supplementary Information12
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information13
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
Rev. - 4/2013
27-A-14
The combining and individual nonmajor fund financial statements budgetary schedules, and other
schedules are the responsibility of management and were derived from and relate directly to the
underlying accounting and other records used to prepare the basic financial statements. Because of the
significance of the omission of [Dogwood fund], as discussed previously, it is inappropriate to and we do
not express an opinion on the supplementary information referred to above.14
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements and, accordingly, we do not express an
opinion or provide assurance on them. 15
[Signature]
[City and State]
[Date]
1
The first five paragraphs and their respective headings are the same as a standard unmodified report.
2
Refer to Example 1, footnote 1.
3
Refer to Example 2, footnote 2.
4
Refer to Example 3, footnote 3.
5
Refer to Example 4, footnote 4.
6
Refer to Example 5, footnote 5.
7
It is GAAP departure if one or more major funds are not reported as major in the fund financial statements. If a
major fund is improperly included in the nonmajor fund information, its impact on the aggregate remaining fund
information opinion unit should also be assessed. This example assumes that the auditor has concluded that a
qualified opinion unit affected by the omitted major fund (business-type activity) is appropriate. Another auditor
could have a different professional opinion.
8
The Basis for Adverse Opinion on [Dogwood Fund] and Qualified Opinion on Business-Type Activities paragraph
explains the reason and impact of GAAP departures.
9
The opinion units without the adverse opinion are referenced in the Qualified and/or Unmodified opinion
paragraphs.
10
Refer to Example 1, footnote 6.
11
Refer to Example 1, footnote 7.
12
Refer to Example 1, footnote 8.
13
Refer to Example 1, footnote 9
14
If the report on supplementary information is anything other than unqualified, this paragraph should be modified.
This sentence should be used if the auditor is issuing an adverse opinion on the financial statements.
15
Refer to Example 1, footnote 12
Rev. - 4/2013
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EXAMPLE 5: Unmodified Opinion on Basic Financial Statements When One Fund or Component
Unit Representing Less Than All of a Fund Type Has Been Audited by Other Auditors
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 1 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.2 3
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not
audit the financial statements of [identify major fund, fund type or all component units] which represents
XX percent, YY percent, and ZZ percent, respectively, of the assets, [net position, or fund balances], and
revenues of the [opinion unit(s)]. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion, insofar as it relates to the amounts included for [identify major
fund, fund type or all component units], is based solely on the report of the other auditors.4 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.5
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, based upon our audit and the report of the other auditors,4 the financial statements referred
to above present fairly, in all material respects, the respective financial position of the governmental
activities, the business-type activities, the aggregate discretely presented component units, each major
Rev. - 4/2013
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fund, and the aggregate remaining fund information of City of Dogwood, North Carolina as of June 30,
20XX, and the respective changes in financial position, and, where applicable, cash flows6 thereof and the
respective budgetary comparison for the General Fund, [and major, annually budgeted special revenue
funds, if applicable]7 for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
Other Matters
Required Supplementary Information8
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information9
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, and other
schedules, are the responsibility of management and were derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America by us and other auditors. In our opinion4, based on our
audit, the procedures performed as described above, and the report of other auditors 4, the combining and
individual nonmajor fund financial statements, budgetary schedules, and other schedules are fairly stated,
in all material respects, in relation to the basic financial statements as a whole.10
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements, and accordingly, we do not express an
opinion or provide assurance on them.9 11 12
[Signature]
[City and state]
[Date]
1
Refer to Example 1, footnote 1.
Rev. - 4/2013
27-A-17
2
Refer to Example 1, footnote 2.
3
Refer to Example 1, footnote 3.
4
Appropriate changes to this sentence should be made when an entire opinion unit is audited by another auditor and
the primary auditor has chosen not to assume responsibility for the work of the component unit’s auditor, insofar as
it relates to the auditor’s opinion on the basic financial statements. For example, “We did not audit the financial
statements of the Sewer Enterprise Fund, which is a major fund and XX percent, YY percent, and ZZ percent,
respectively, of the assets, net position, and revenues of the business-type activities.” However, the report still
should indicate in the “Auditor’s Responsibility” section the group engagement auditor’s responsibility for auditing
that opinion unit. The group engagement auditor should also express or disclaim an opinion on the opinion unit in
the “Opinion” section of the report.
The phrase “and the report of the other auditors” should be included the last sentence of the second paragraph of the
Supplementary and Information paragraph. The phrase “by us and of other auditors” in second sentence following
“United States of America” should also be inserted. Also, any departure from an unqualified opinion on the
financial statements of the component units should be disclosed.
5
Refer to Example 1, footnote 5.
6
Refer to Example 1, footnote 6.
7
Refer to Example 1, footnote 7.
8
Refer to Example 1, footnote 8.
9
Refer to Example 1, footnote 9
10
Refer to Example 1, footnote 10
11
Refer to Example 1, footnote 11
12
Refer to Example 1, footnote 12
Rev. - 4/2013
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EXAMPLE 6: Report on Basic Financial Statements That Includes a Qualified Opinion on Major
Governmental Funds because of a GAAP Departure1
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 2 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.3 4
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.5 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.6
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Basis for Qualified Opinions on [Major Fund Affected] 7 8
Management has not adopted a methodology for reviewing the collectability of taxes receivable in the
[major fund affected] and, accordingly, has not considered the need to provide an allowance for
uncollectable amounts. Accounting principles generally accepted in the United States of America require
that an adequate allowance be provided for uncollectable receivables, which would decrease the assets
and fund balances and change the revenues in the [major fund affected]. The amount by which this
departure would affect the assets, fund balances, and revenues of the [major fund affected] has not been
determined.
Rev. - 4/2013
27-A-19
Qualified Opinion9
In our opinion, except for the effects of the matter described in the “Basis for Qualified Opinions on
[Major Fund Affected],7 the financial statements referred to above present fairly, in all material respects,
the financial position of the [major fund affected] of the City of Dogwood, North Carolina, as of June 30,
20XX, and the respective changes in financial position thereof for the year ended in conformity with
accounting principles generally accepted in the United States of America.
Unmodified Opinions9
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the aggregate discretely presented component
units, [major funds not affected by the previously described adverse and qualified opinions], and the
aggregate remaining fund information of the City of Dogwood, North Carolina, as of June 30, 20XX, and
the respective changes in financial position and, where applicable, cash flows10 thereof and the respective
budgetary comparison for the General Fund, [and major, annually budgeted special revenue funds, if
applicable]11 for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Required Supplementary Information12
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information13
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, and other
schedules are the responsibility of management and were derived from and relate directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. Except for the effects on the combining and
individual statements and schedules of revenues, expenditures, and changes in fund balances, statements
of revenues, expenses and changes in net assets, and statements of cash flows for management having not
Rev. - 4/2013
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provided an allowance for uncollectable taxes receivable in [major fund affected], the combining and
individual nonmajor fund financial statements, budgetary schedules, and other schedules, in our opinion,
are fairly stated in all material respects in relation to the basic financial statements as a whole. .14
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements, and accordingly, we do not express an
opinion or provide assurance on them.9 15 16
[Signature]
[City and State]
[Date]
1
The first five paragraphs and their respective headings are the same as a standard unmodified report.
2
Refer to Example 1, footnote 1.
3
Refer to Example 1, footnote 2.
4
Refer to Example 1, footnote 3.
5
Refer to Example 1, footnote 4.
6
Refer to Example 1, footnote 5.
7
This Dogwood example assumes that the auditor has concluded that not providing an adequate allowance for taxes
receivable warrants a qualified opinion. Another auditor, using professional judgment, may decide to issue a
disclaimer of an opinion or make a different conclusion and would use the following: Disclaimer of an Opinion “In
our opinion, because management has not adopted a methodology for reviewing the collectability of taxes receivable
in the [major fund affected] and, accordingly, has not considered the need to provide an allowance for uncollectible
amounts, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the
financial statements of the governmental activities, the business-type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of City of Dogwood as of and for
the year ended June 30, 20XX.” Additionally, the “Basis for XXX Opinion ...” paragraph should mention the
disclaimer of opinion in the title. Any variations from unmodified opinions should be discussed with the staff of the
State and Local Government Finance Division and will require an amendment to the contract to audit accounts
before the final invoice will be approved.
8
The Basis for Qualified Opinion paragraph explains the reason and impact of GAAP departures.
9
The opinion units without the qualified opinion are referenced in the unmodified opinion paragraphs.
10
Refer to Example 1, footnote 6.
11
Refer to Example 1, footnote 7.
12
Refer to Example 1, footnote 8.
13
Refer to Example 1, footnote 9
14
Refer to Example 1, footnote 10
15
Refer to Example 1, footnote 11
16
Refer to Example 1, footnote 12.
Rev. - 4/2013
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EXAMPLE 7: Unmodified Opinion on the Basic Financial Statements of a Special Purpose
Government That Has a Single Opinion Unit Engaged in Governmental Activities Only
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying basic financial statements of the governmental activities and the
major fund of [Special Purpose Government], North Carolina as of and for the year ended June 30, 20XX,
and the related notes to the financial statements, which collectively comprise the [Special Purpose
Government]’s basic financial as listed in the table of contents. .1 2
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America.3 Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the governmental activities respective budgetary comparison for the General Fund4
for the year then ended in accordance with accounting principles generally accepted in the United States
of America.
Other Matters
Required Supplementary Information5
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
Rev. - 4/2013
27-A-22
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance. 6
[Signature]
[City and State]
[Date]
1
Refer to Example 1, footnote 2
2
Refer to Example 1, footnote 3
3
Refer to Example 1, footnote 5.
4
Refer to Example 1, footnote 7.
5
Refer to Example 1, footnote 8.
6
Refer to Example 1, footnote 12
Rev. - 4/2013
27-A-23
EXAMPLE 8: Unqualified Opinion on the Basic Financial Statements of a Special Purpose
Government That Has a Single Opinion Unit Engaged in Business-Type Activities Only- Single
Audit Published Under Same Cover
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying basic financial statements of the business-type activity and each
major fund of [Special Purpose Government], North Carolina as of and for the year ended June 30, 20XX,
and the related notes to the financial statements, which collectively comprise the [Special Purpose
Government]’s basic financial statements as listed in the table of contents. 1 2
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Governmental Auditing Standards,
issued by the Comptroller of the United States.3 Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the [Special Purpose Government], North Carolina as of June 30, 20XX, and the
changes in financial position and its cash flows 4 for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Rev. - 4/2013
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Other Matters
Required Supplementary Information5
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information6
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The accompanying schedule of expenditures
of federal and state awards as required by U.S. Office and Management and Budget Circular A-133,
Audits of State and Local Governments, and Non-Profit Organizations and the State Single Audit
Implementation Act7 are presented for purposes of additional analysis and are not a required part of the
basic financial statements.
The schedule of expenditures of federal and state awards was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the schedule of expenditures of
federal and state awards is fairly stated, in all material respects, in relation to the basic financial
statements as a whole.8
Other Reporting Required by Government Auditing Standards9
In accordance with Government Auditing Standards, we have also issued our report dated [date of report]
on our consideration of the City of Dogwood’s internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering City of Dogwood’s internal control over
financial reporting and compliance.
[Signature]
[City and State]
[Date]
1
Refer to Example 1, footnote 2
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2
Refer to Example 1, footnote 3
3
Refer to Example 1, footnote 5.
4
Refer to Example 1, footnote 6.
5
Refer to Example 1, footnote 8.
6
Refer to Example 1, footnote 9
7
Guidance found in AICPA’s Accounting and Auditing Guide: State and Local Governments recommend
combining the reporting on the schedule of expenditures of federal and state awards (SEFSA) with the reporting on
the financial statements. However, if the SEFSA is issued under a separate cover and therefore not presented with
the basic financial statements, reference to the SEFSA in the auditor’s report should be deleted. Reporting on the
SEFSA should be included either in the Circular A-133 report (Single Audit report) and the State Single Audit
report or it could be contained in a stand-alone report.
8
Refer to Example 1, footnote 10
9
AU-C section 700, Paragraph .37 of AU-C, provides that the section related to an auditor’s other reporting
responsibilities should be subtitled “report on Other Legal and Regulatory Requirements” or otherwise, as
appropriate to the contents of this section. An example of an alternative title would be describing the reporting
requirements by audits performed under Governmental Auditing Standards as is illustrated here.
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EXAMPLE 9: Report on Basic Financial Statements That Include Multiple Opinion Modifications,
Including an Adverse Opinion Because a Major Fund is Omitted1
Independent Auditor’s Report
To the [Highest Elected Official
and Governing Board]
City of Dogwood, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information 2 of City of Dogwood, North Carolina as of and for the year ended June 30,
20XX, and the related notes to the financial statements, which collectively comprise City of Dogwood’s
basic financial statements as listed in the table of contents.3 4
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.5 We conducted
our audit in accordance with auditing standards generally accepted in the United States of America.6
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Basis for Adverse Opinion on [the Omitted Fund] and Qualified Opinion on Business-Type Activities7 8
Management has not included [the Omitted Fund] in the City of Dogwood’s financial statements.
Accounting principles generally accepted in the United States of America require [Omitted Fund] to be
presented as a major enterprise fund and financial information about [Omitted Fund] to be part of the
business-type activities, thus increasing that activity’s assets, liabilities, revenues, and expenses, and
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changing its net position. The amount by which this departure would affect the assets, fund balances,
liabilities, net position, revenues, and expenses of the Business-Type activities and the [the omitted major
fund] has not been determined.
Adverse Opinion
In our opinion, because of the significance of the matter described in the “Basis for Adverse Opinion on
[Omitted Fund] and Qualified Opinion on Business-Type activities” paragraph, the financial statements
referred to above do not present fairly, the financial position of [the Omitted Fund] of the City of
Dogwood, as of June 30, 20XX or the changes in financial position or cash flows thereof for the year then
ended.
Qualified Opinion9
In our opinion, except for the matter described in the “Basis for Adverse Opinion on [Omitted Fund] and
Qualified Opinion on Business-Type Activities” paragraph, the financial statements referred to above
present fairly, in all material respects, the financial position of the business-type activities of the City of
Dogwood as of June 30, 20XX, and the changes in financial position thereof for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Basis for Qualified Opinions on Governmental Activities and [Major Governmental Funds Affected]
As discussed in Note X to the financial statements, management has not recorded a liability for
compensated absences in governmental activities and, accordingly, has not recorded an expense for the
current period change in that liability. Accounting principles generally accepted in the United States of
America require that compensated absences attributable to employee services already rendered and that
are not contingent on a specific event that is outside the control of the employer and the employee be
accrued as liabilities and expenses as employees earn the rights to the benefits, which would increase the
liabilities, reduce the net position, and change the expenses of the governmental activities. The amount
by which this departure would affect the liabilities, net position, and expenses of the governmental
activities has not been determined.
In addition, management has not adopted a methodology for reviewing the collectability of taxes
receivable in the [major governmental funds affected] and in governmental activities and, accordingly,
has not considered the need to provide an allowance for uncollectable amounts. Accounting principles
generally accepted in the United States of America require that an adequate allowance be provided for
uncollectable receivables, which would decrease the assets, fund balances, and net position, and change
the revenues in the [major governmental fund affected] and in governmental activities. The amount by
which this departure would affect the assets, fund balances, net position, and revenues of the [major
governmental funds affected] and governmental activities has not been determined.
Qualified Opinions
In our opinion, except for the matters described in the “Basis for Qualified Opinions on Governmental
Activities and [Major Governmental Funds Affected] paragraph, the financial statements referred to
above, present fairly, in all material respects, the respective financial position of the governmental
activities and the [major governmental funds affected] of the City of Dogwood as of June 30, 20XX, and
the respective changes in financial position thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
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Unmodified Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the aggregate discretely presented component units, [include any major
funds not affected by the above adverse and qualified opinions], and the aggregate remaining fund
information of the City of Dogwood, as of June 30, 20XX, and the respective changes in financial
position and, where applicable, cash flows thereof and the budgetary comparison for the [refer to the
appropriate governmental fund(s)] for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Other Matters
Required Supplementary Information10
Accounting principles generally accepted in the United States of America require that Management’s
Discussion and Analysis and the Other Post Employment Benefit and Law Enforcement Officers’ Special
Separation Allowance Schedules of Funding Progress and Employer Contributions on pages xx through
xx and xx and xx, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of the financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information11
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Dogwood’s basic financial statements. The introductory information, combining
and individual nonmajor fund financial statements, budgetary schedules, other schedules, and statistical
section are presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The combining and individual nonmajor fund financial statements, budgetary schedules, and other
schedules are the responsibility of management and were derived from and relate directly to the
underlying accounting and other records used to prepare the basic financial statements. Because of the
significance of the matters described in the “Basis for Adverse Opinion on [Omitted Fund]” and the
“Basis for Qualified Opinion on Governmental Activities and [Major Governmental Funds Affected]”
paragraphs, collectability as discussed previously, it is inappropriate to and we do not express an opinion
on the supplementary information referred to above.12
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of basic financial statements and, accordingly, we do not express an
opinion or provide assurance on them. 13
[Signature]
[City and State]
[Date]
Rev. - 4/2013
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1
The first five paragraphs and their respective headings are the same as a standard unmodified report.
2
Refer to Example 1, footnote 1.
3
Refer to Example 1, footnote 2.
4
Refer to Example 1, footnote 3.
5
Refer to Example 1, footnote 4.
6
Refer to Example 1, footnote 5.
7
It is GAAP departure if one or more major funds are not reported as major in the fund financial statements. If a
major fund is improperly included in the nonmajor fund information, its impact on the aggregate remaining fund
information opinion unit should also be assessed. This example assumes that the auditor has concluded that a
qualified opinion unit affected by the omitted major fund (business-type activity) is appropriate. Another auditor
could have a different professional opinion.
8
The Basis for Adverse Opinion on [Dogwood Fund] and Qualified Opinion on Business-Type Activities paragraph
explains the reason and impact of GAAP departures.
9
The opinion units without the adverse opinion are referenced in the Qualified and/or Unmodified opinion
paragraphs.
10
Refer to Example 1, footnote 8.
11
Refer to Example 1, footnote 9
12
If the report on supplementary information is anything other than unqualified, this paragraph should be modified.
This sentence should be used if the auditor is issuing an adverse opinion on the financial statements.
13
Refer to Example 1, footnote 12
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COMPLIANCE REPORTS
[FOR DOGWOODS OF ILLUSTRATIVE SINGLE AUDIT REPORTS, SEE
SECTION 35-E]
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