Arkansas Code
Subchapter 4 - Arkansas Legislative Audit
§ 10-4-412. Audits of counties and municipalities

(a)
(1) Except as provided in subdivision (a)(2) of this section, the Legislative Auditor shall audit counties and municipalities in the state.
(2)
(A)
(i) Any municipality may retain the services of a licensed certified public accountant or a licensed accountant in public practice in good standing with the Arkansas State Board of Public Accountancy to conduct a financial audit as prescribed in subsection (b) of this section.
(ii) All reports of the annual financial audit shall be filed with the Legislative Auditor within ten (10) days of issuance of the audit report.

(B) Nothing in subdivision (a)(2)(A) of this section limits the authority of the Legislative Auditor to conduct an audit of any municipality.

(b) Financial Audits.
(1)
(A) For purposes of this subsection, a financial audit shall be planned and conducted, and the results of the work reported in accordance with auditing standards generally accepted in the United States and the Government Auditing Standards issued by the Comptroller General of the United States.
(B) The report shall include a report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with the Government Auditing Standards.

(2) Regulatory Basis.
(A) For county and municipal financial audits, the financial statements shall be presented on a fund-basis format with, at a minimum, the general fund and the street or road fund presented separately, and all other funds included in the audit presented in the aggregate.
(B) The financial statements shall consist of the following:
(i) A balance sheet;
(ii) A statement of revenues (receipts), expenditures (disbursements), and changes in fund equity (balances);
(iii) A comparison of the final adopted budget to the actual expenditures for the general fund and street or road fund of the entity; and
(iv) Notes to the financial statements.

(C) The report shall include as supplemental information a schedule of capital assets, including:
(i) Land;
(ii) Buildings; and
(iii) Equipment.

(3) Alternative Basis. As an alternative to the basis prescribed in subdivision (b)(2) of this section, the governing body of a municipality or a county may adopt an annual resolution requiring its annual financial audit to be performed and financial statements presented in accordance with the standards prescribed by the Governmental Accounting Standards Board, the American Institute of Certified Public Accountants, and the United States Government Accountability Office, if applicable.

(c) Agreed-Upon Procedures and Compilation Reports.
(1) As an alternative to a financial audit, the Legislative Auditor may conduct an agreed-upon procedures and compilation engagement of the records and accounts of all municipal or county offices, officials, or employees.
(2) For purposes of this subsection, agreed-upon procedures and compilation engagements shall be conducted in accordance with standards established by the American Institute of Certified Public Accountants and subject to the minimum procedures prescribed by the Legislative Joint Auditing Committee.
(3)
(A) Unless otherwise provided by law, the governing body of a municipality may choose and employ accountants licensed and in good standing with the Arkansas State Board of Public Accountancy to conduct agreed-upon procedures and compilation engagements.
(B) All reports shall be filed with the Legislative Auditor within ten (10) days of issuance.