Question

Which factor is most important in determining the financial reporting entity for a governmental organization?

a. Financial accountability

b. Geographic proximity

c. Scope and nature of services

d. Bond issue history

Answer 1

Accountability as an objective of financial reporting. The basic premise is that elected officials in governmental organizatio should held accountable for their actions. A primary government is accountable for an organization if the government appoints a voting majority of the organization's governing body. However, accountability in this sense does not lead to the inclusion of an organization in a financial reporting entity. Sometimes appointments are ministerial and lack accountability and sometimes accountability exists without appointment.

Hence (a) a. Financial accountability is most important in determining the financial reporting entity for a  governmental organization.