The City of Central Falls has engaged Robert Cohen, CPA to audit the June 30, 1999 financial statements of the City's Water Department under the GAO's Government Auditing Standards. Cohen's report will be used by the City and by the state's legislative auditors who, under laws passed by the General Assembly, will perform an audit of the City for the fiscal year ended June 30, 1999. The Water Department generates revenue from two sources: a water use tax and a budgetary allocation from the City's general fund.

Required:

1. How does Cohen's responsibility in auditing the Water Department's financial statements under the GAO's Government Auditing Standards differ from his responsibility under generally accepted auditing standards?

2. In reporting on the Water Department's compliance with laws and regulations, what specifically must Cohen report about transactions tested during the audit?