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Extant theory and practice suggest that there are no external users of a local authority's published accounts. Over the past thirty years, the major theme for such financial reporting has been increasingly to associate with company financial reporting. We rehearse the similarities but also the crucial differences between company and local authority financial reporting. Previous studies of the published accounts of local authorities, for 1977/78 and 1987/88, demonstrated that there was significant non‐compliance with promulgated accounting policies. We report on how this conclusion has not changed for 1997/98 (despite changes in policy‐making and in policies) and how the non‐compliance has been accompanied by clean audit opinions. We then offer a theory, based on Ijiri's (1975) theory of accounting measurement, that the published audited accounts of local authorities are the means by which the preparers provide implicit assurance of the underlying accounting: they legitimate the internal accounting.

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