Accounting and Reporting Principles. For more than 100 years, the financial statements of the Town of Brookfield have consisted of a statement of cash receipts and a statement of cash disbursements prepared by the town treasurer for each of its three finds: the General Fund, the Road Tax Fund, and the Sewer Fund. As required by state law the town submits its financial statements to the Office of the State Auditor; however, its financial statements have never been audited by an independent auditor.
Because of its growing population (nearing 2,000) and increasing financial complexity, the town has hired Emily Eager, who recently obtained her CPA certificate, to supervise all accounting and financial reporting operations. Having worked two years for a CPA firm in a nearby town, Ms. Eager gained limited experience auditing not-for-profit organizations, as well as compiling financial statements for small businesses. Although she has little knowledge of govern mental accounting, she is confident that her foundation in business and not-for-profit accounting will enable her to handle the job. For the year ended December 31, 2011. Ms. Eager has prepared the following unaudited financial statements for the Town of Brookfield. Study these financial statements and answer the questions that follow.
Required
a. Assume that you are the CPA Ms. Eager has contacted about the possibility of performing an audit of the Town of Brookfield€™s financial statements, Based on your preliminary review what concerns would you have about these financial statements? Do the statements appear to conform to generally accepted accounting principles (GAAP)? In what respects, if any, do the financial statements depart from GAAP?
b. Assume, instead, that you are a member of the town council or a citizen. What concerns would you have with these financialstatements?

TOWN OF BROOKFIELD Balance Sheet December 31, 2011 (unaudited) Assets $ 1,740 18,555 7,468 Cash Taxes receivable Investments Due from other governiments Land, buildings, and equipment (net of accumulated depreciation of $132,640) 28,766 287,580 Total assets $344, 109 Liabilities and Net Assets $ 3,892 11,943 15,835 Accounts payable Due to other governments. Total liabilities Net assets unrestricted Net assets restricted 299,893 28,381 Total net assets 328,274 $344,109 Total liabilities and net assets TOWN OF BROOKFIELD Statement of Activities Year Ended December 31, 2011 (unaudited) Revenues $124,870 6,859 Property taxes Sewer fees Investrnent income 239 Total revenues 131,968 Expenses Government services 115,958 7,227 8,462 131,647 Sewer services Miscellaneous Total expenses 321 Increase in net assets Net assets, January 1, 2011 327,953 $328,274 Net assets, December 31, 2011