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Question 1

Which of the following should be considered part of one of the three primary user groups of the external financial reports of a state government?

Voters

Bond rating agencies

Members of a county commission

All of the answer choices are primary user groups of governmental external reports.

Answer 1

All of the answer choices are primary user groups of governmental external reports.

There are three groups of primary users of a government’s external financial reports:

1. the citizenry to whom the government is primarily accountable, including taxpayers, voters, service recipients, the media, advocate groups, and public finance researchers;
2. legislative and oversight bodies, including members of state legislatures, county commissions, city councils, boards of trustees and school boards, and executive branch officials with oversight responsibility over other levels of government; and
3. investors and creditors, including individual and institutional investors and creditors, municipal security underwriters, bond rating agencies, bond insurers, and financial institutions.

Question 1

Primary Government

Answer 1

In governmental accounting, the reporting entity is considered the primary government. The key characteristic of a primary government is that it is a governing body separately elected by the citizenry. Additionally, it is legally separate and fiscally independent of other governments.

GASB 2100.112

Question 2

Underwriter

Answer 2

An underwriter is one who distributes a new issue of securities or a large block of issued securities—that is, a secondary offering, commonly including an obligation to purchase the underwritten securities, regardless of whether they can be resold to others. In AU-C 920, the word “underwriter” refers to the managing, or lead, underwriter, who typically negotiates the underwriting agreement or purchase agreement for a group of underwriters whose exact composition is not determined until shortly before a securities offering becomes effective.

Question 3

2131.03

Answer 3

Users of financial reports. There are three groups of primary users of a government’s external financial reports.

1. The citizenry: To whom the government is primarily accountable, including citizens (taxpayers, voters, service recipients), the media, advocate groups, and public finance researchers
2. Legislative and oversight bodies: Those who directly represent the citizens, including members of state legislatures, county commissions, city councils, boards of trustees and school boards, and executive branch officials with oversight responsibility over other levels of government
3. Investors and creditors: Who lend or participate in the lending process, including individual and institutional investors and creditors, municipal security underwriters, bond rating agencies, bond insurers, and financial institutions

If a government’s internal executive branch managers do not have ready access to a government’s internal information, they constitute a fourth primary user group for that government.