Question 1

An audit designed to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a material and direct effect on the financial statements would be called a(n)
A) performance audit.
B) management audit.
C) operational audit.
D) compliance audit.

Accepted Answer

A compliance audit is designed to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a material and direct effect on the financial statements.

Question 2

In addition to an opinion on whether the financial statements are in accordance with GAAP, identify four other reports required by the OMB Circular A-133/2 CFR 200 subpart F.

Accepted Answer

The answer of In addition to an opinion on whether...

Question 3

Extensive professional development is necessary for auditors doing governmental audits.

Accepted Answer

Governmental audits involve a complex set of standards and regulations that require auditors to have extensive knowledge and skills. Professional development helps auditors to stay up-to-date with the latest changes in regulations and best practices, ensuring that audits are conducted effectively and accurately. Therefore, extensive professional development is necessary for auditors doing governmental audits.

Question 4

The Single Audit Act requires that an audit be conducted for recipients who receive total federal funds in any fiscal year of more than
A) $1,000,000.
B) $750,000.
C) $500,000.
D) $100,000.

Accepted Answer

The Single Audit Act requires that an audit be conducted for recipients who receive total federal funds in any fiscal year of more than $750,000. This requirement is intended to ensure accountability and transparency in the use of federal funds.

Question 5

How do the risk and materiality thresholds change in a government audit compared to a financial statement audit of a public company?

Accepted Answer

The answer of How do the risk and materiality thresholds...

Question 6

Auditors involved in planning, performing, or reporting on audits under Generally Accepted Government Auditing Standards (GAGAS) must complete ________ hours of continuing professional education in each two-year period.
A) 20
B) 40
C) 60
D) 80

Accepted Answer

Auditors under GAGAS are required to complete 80 hours of continuing professional education every two years to ensure they maintain the necessary skills and knowledge.

Question 7

An audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with
A) Generally Accepted Auditing Standards (GAAS).
B) Generally Accepted Government Auditing Standards (GAGAS).
C) Generally Accepted Standards on Auditing (GASA).
D) Statements on Auditing Standards (SAS).

Accepted Answer

The Yellow Book refers to the Generally Accepted Government Auditing Standards (GAGAS), so an audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with GAGAS.

Question 8

Government auditing standards are included in the Yellow Book.

Accepted Answer

Government auditing standards are indeed included in the Yellow Book which is issued by the Government Accountability Office (GAO) of the United States. The Yellow Book provides guidance for auditors of government entities and government-funded programs on performing high-quality audits that comply with professional standards.

Question 9

The Single Audit Act applies only to audits of state and local governments.

Accepted Answer

The Single Audit Act also applies to audits of non-profit organizations that expend more than $750,000 in federal funds in a year.

Question 10

Which of the following is not a difference between operational auditing and financial auditing?
A) Both must be performed by a CPA.
B) Operational audit reports are usually of a restricted distribution while financial audit reports are widely distributed.
C) Operational audits often cover nonfinancial issues while financial audits do not.
D) None of the above is a difference.

Accepted Answer

Both operational auditing and financial auditing must be performed by a CPA, making this option not a difference between the two types of audits. Option B is correct since operational audit reports are usually restricted and distributed to a limited number of people, while financial audit reports are widely distributed. Option C is true as well; operational audits might cover nonfinancial issues, such as internal controls, while financial audits focus on financial statements and records.

Question 11

Operational audits are primarily geared towards improving a company's operational efficiency and effectiveness.

Accepted Answer

Operational audits are specifically designed to evaluate an organization's operational efficiency and effectiveness with the objective of identifying areas for improvement. This type of audit can help managers pinpoint areas where the organization is falling behind in terms of performance, as well as identify ways to increase productivity, reduce costs, and improve customer service. Overall, operational audits are an important tool for any organization that wants to stay competitive and constantly improve its performance.

Question 12

At least 24 of the 80 hours of continuing professional education required under GAGAS must be in subjects related to governmental auditing or the governmental environment.

Accepted Answer

This statement is true, as per the Generally Accepted Government Auditing Standards (GAGAS), at least 24 out of the 80 hours of continuing professional education (CPE) required must be in subjects related to governmental auditing or the governmental environment.

Question 13

Government Auditing Standards recognize that because of public accountability over governmental activities the acceptable tolerable misstatement as compared to commercial businesses may be
A) equal.
B) lower.
C) higher.
D) indeterminable.

Accepted Answer

Government Auditing Standards recognize that because of public accountability, governmental activities require a higher level of scrutiny and transparency than commercial businesses. Therefore, the acceptable tolerable misstatement may be lower for government entities.

Question 14

The formal name of the Yellow Book is Government Auditing Standards.

Accepted Answer

The formal name of the Yellow Book is indeed Government Auditing Standards.

Question 15

Which one of the following is not a major difference between operational and financial auditing?
A) purpose of the audit
B) distribution of the report
C) testing the effectiveness of internal controls
D) inclusion of nonfinancial areas

Accepted Answer

Testing the effectiveness of internal controls is a common aspect of both operational and financial auditing, not a major difference between them.

Question 16

Which of the following is most correct with regard to the comparison of the financial auditing standards of the Yellow Book with the principles of the AICPA auditing standards?
A) the same as
B) quite different from
C) incompatible with
D) consistent with

Accepted Answer

The financial auditing standards of the Yellow Book are designed to be consistent with the principles of the AICPA auditing standards, allowing auditors to apply both sets of standards cohesively in their work.

Question 17

The auditing standards of the Yellow Book are consistent with the ten generally accepted auditing standards of the AICPA. There are, however, important additions/modifications in the Yellow Book. For example, the Yellow Book recognizes that materiality and risk are lower due to the nature of the government enterprise. Discuss the other additions/modifications.

Accepted Answer

The answer of The auditing standards of the Yellow Book...

Question 18

A typical objective of an operational audit is to determine whether an entity's
A) internal control is adequately operating as designed.
B) financial statements present fairly the results of operations.
C) specific operating units are functioning efficiently and effectively.
D) operational information is in accordance with generally accepted government auditing standards.

Accepted Answer

The primary objective of an operational audit is to evaluate and improve the efficiency and effectiveness of an entity's operations, with a focus on specific operating units. While internal control is an important aspect of the audit, it is not the primary objective. Additionally, operational audits typically do not address the fairness of financial statements or compliance with auditing standards.

Question 19

The correct title of the Yellow Book is
A) Government Auditing Standards.
B) Institute of Internal Auditors (IIA) Practice Standards.
C) Statement of Responsibilities of Internal Auditing.
D) Statement of Standards on Accounting and Review Services.

Accepted Answer

The correct title of the Yellow Book is "Government Auditing Standards," which is used to refer to the standards for audits of government organizations, programs, activities, and functions.

Question 20

Which of the following is not one of the major differences between financial and operational auditing?
A) The financial audit is oriented to the past, but an operational audit concerns performance for the future.
B) The financial audit report has widespread distribution, but the operational audit report has limited distribution.
C) Financial audits deal with the information on the financial statements, but operational audits are concerned with the information in the ledgers.
D) Financial audits are limited to matters that directly affect the fairness of the financial statement presentation, but operational audits cover any aspect of efficiency and effectiveness.

Accepted Answer

Financial audits deal with the information on the financial statements, while operational audits are concerned with the efficiency and effectiveness of operations in areas such as production, marketing, and management. Operational audits do not typically focus on the information in ledgers specifically, therefore option C is not a major difference between financial and operational auditing.

Quiz 26: Internal and Governmental Financial Auditing and Operational Auditing

An audit designed to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a material and direct effect on the financial statements would be called a(n)

In addition to an opinion on whether the financial statements are in accordance with GAAP, identify four other reports required by the OMB Circular A-133/2 CFR 200 subpart F.

Extensive professional development is necessary for auditors doing governmental audits.

The Single Audit Act requires that an audit be conducted for recipients who receive total federal funds in any fiscal year of more than

How do the risk and materiality thresholds change in a government audit compared to a financial statement audit of a public company?

Auditors involved in planning, performing, or reporting on audits under Generally Accepted Government Auditing Standards (GAGAS) must complete ________ hours of continuing professional education in each two-year period.

An audit conducted in accordance with the Yellow Book must include an audit report that states the audit was performed in accordance with

Government auditing standards are included in the Yellow Book.

The Single Audit Act applies only to audits of state and local governments.

Which of the following is not a difference between operational auditing and financial auditing?

Operational audits are primarily geared towards improving a company's operational efficiency and effectiveness.

At least 24 of the 80 hours of continuing professional education required under GAGAS must be in subjects related to governmental auditing or the governmental environment.

Government Auditing Standards recognize that because of public accountability over governmental activities the acceptable tolerable misstatement as compared to commercial businesses may be

The formal name of the Yellow Book is Government Auditing Standards.

Which one of the following is not a major difference between operational and financial auditing?

Which of the following is most correct with regard to the comparison of the financial auditing standards of the Yellow Book with the principles of the AICPA auditing standards?

A typical objective of an operational audit is to determine whether an entity's

The correct title of the Yellow Book is

Which of the following is not one of the major differences between financial and operational auditing?