Question 1

Which of the following would not be considered Category (b) GAAP for state and local government auditees?

Accepted Answer

Category (b) GAAP for state and local government auditees includes authoritative guidance that has been cleared by the Governmental Accounting Standards Board (GASB) but is not directly issued by GASB. GASB Statements are considered Category (a) GAAP as they are official pronouncements of the GASB.

Question 2

Audit objectives set forth by the United States Comptroller General in Government Auditing Standards (GAS or GAGAS) differ from the AICPA view (GAAS) as discussed in Chapter 11. What are some of the differences?

Accepted Answer

The answer of Audit objectives set forth by the United...

Question 3

The fundamental ethical principles identified under generally accepted government auditing standards (GAGAS) include all of the following except:

Accepted Answer

The three fundamental ethical principles identified under generally accepted government auditing standards (GAGAS) are public interest, integrity, and professional behavior. The proper use of government information, resources, and position is a subprinciple of integrity. The oath of office is related to the legal obligations of government officials, rather than specifically related to ethical principles.

Question 4

Which of the following is not considered an opinion unit requiring a materiality determination associated with a financial statement audit of a state or local government?

Accepted Answer

Investment trust fund financial statements are not typically considered an opinion unit requiring materiality determination in a financial statement audit of a state or local government, as they are often presented as fiduciary funds and not part of the government's primary activities. The other options listed (aggregate discretely presented component units, each major governmental fund, and business-type activities) would typically require materiality determinations and opinions in a financial statement audit.

Question 5

Which of the following is not a required component of the audit report for a single audit?

Accepted Answer

A report on the completeness of the schedule of expenditures is not a required component of the audit report for a single audit. The other options listed (A, C, and D) are required components according to Generally Accepted Government Auditing Standards (GAGAS).

Question 6

Each of the following activities could be performed by an independent auditor.  Select whether generally accepted government auditing standards deem each activity Acceptable (A), Prohibited (P), or Require conceptual framework assessment (R) in regarding to independence.
 
________ 1. Reporting to those charged with governance on behalf of management.
________ 2. Providing valuation services.
________ 3. Researching and responding to the audited entity's technical questions on relevant tax laws as an ancillary part of providing tax services.
________ 4. Preparing accounting records and financial statements.
________ 5. Providing internal control monitoring and assessments.
________ 6. Having custody of an audited entity's assets.
________ 7. Setting policies and strategic direction for the audited entity.
________ 8. Educating the audited entity on matters within the technical expertise of the auditors.

Accepted Answer

The answer of Each of the following activities could be...

Question 7

Select the key term that relate to auditing of government and not-for-profit organizations from the list that best matches with the following definition.
A. Attestation engagement
B. Generally accepted auditing standards (GAAS)
C. Opinion units
D. Materiality
E. Financial audit
F. Generally accepted government auditing standards (GAGAS)
G. Performance audits
________ 1. A process that culminates in an opinion that financial statements present fairly an entity's financial position and results of operations in conformity with GAAP
________ 2. An auditor's judgment as to the level at which the quantitative or qualitative effects of misstatements will have a significant impact on user's evaluations
________ 3. Standards prescribed by the AICPA to provide guidance for planning, conducting, and reporting on audits by CPAs
________ 4. Professional services related to internal control, compliance, MD&A presentation, allowability and reasonableness of proposed contract amounts, final contract costs, and reliability of performance measures
________ 5. Units of the government on which the auditor expresses an opinion (e.g., governmental activities, each major governmental fund, etc.)

Accepted Answer

The answer of Select the key term that relate to...

Question 8

When compared to generally accepted auditing standards (GAAS), generally accepted government auditing standards (GAGAS) include additional General Standard requirements for financial audits related to all of the following except:

Accepted Answer

GAGAS includes additional requirements related to independence, quality control and assurance, and competence for financial audits. However, the requirements related to audit opinions are the same as GAAS.

Question 9

A common reason why a government might receive a "modified opinion" from the external auditors is:

Accepted Answer

A "modified opinion" from external auditors often indicates that there were issues encountered during the audit that prevent the auditor from providing an unqualified (clean) opinion. Poor internal controls that result in the accounting records being unauditable can lead to a modified opinion because the auditors cannot obtain sufficient assurance about the financial statements' accuracy.

Question 10

Which of the following is the highest in the hierarchy of generally accepted accounting principles for federal government entities?

Accepted Answer

FASAB statements are the highest in the hierarchy of generally accepted accounting principles for federal government entities as they are specifically designed for the federal government accounting and financial reporting. The AICPA Audit and Accounting Guide, FASB emerging issues task force reports, and GASB statements are not designed for federal government entities.

Question 11

"An unmodified opinion on the financial statements of a local government means the entirety of the comprehensive annual financial report (CAFR) has been audited and conforms with GAAP." Do you agree or disagree? Why?

Accepted Answer

The answer of "An unmodified opinion on the financial statements...

Question 12

Under a single audit:

Accepted Answer

All of the given statements regarding a single audit are true.

Question 13

What are the major types of audits and audit engagements described in the Government Accountability Office's Government Auditing Standards or generally accepted government auditing standards (GAGAS), and how do they differ?

Accepted Answer

The answer of What are the major types of audits...

Question 14

Under a single audit, low-risk Type A programs are identified as those:

Accepted Answer

The answer of Under a single audit, low-risk Type A...

Question 15

An auditor performing nonaudit work for a client may be in danger of violating the independence rules in Government Auditing Standards when he or she provides:

Accepted Answer

Providing valuation services creates a self-review threat to independence, which is prohibited under Government Auditing Standards. Providing advice on establishing or improving internal controls and benchmarking information is considered a management advisory service and is allowed as long as the auditor complies with the requirements for performing such services. Providing answers to technical questions is also allowed as long as the auditor does not assume management responsibilities or make management decisions.

Question 16

Which of the following statements regarding audit findings is True?

Accepted Answer

A deficiency in internal control is when a control's design or operation fails to prevent, detect, or correct misstatements timely.

Question 17

Cognizant agencies:

Accepted Answer

Cognizant agencies are assigned to each nonfederal agency expending more than $50 million of federal funds per year. Their role is to oversee and verify that the agency is using the funds appropriately and in compliance with regulations. They are not responsible for conducting government single audits or issuing Government Auditing Standards. They are sometimes referred to as oversight agencies.

Question 18

Select the key term that relate to single audits from the list that best matches with the following definition.
 
A. Risk-based approach
B. Single audit
C. Questioned cost
D. Material weakness
E. Oversight agency
F. Major programs
G. Cognizant agency
H. Significant deficiency
________ 1. The federal agency that makes the predominant amount of direct funding to the nonfederal entity receiving less than $50 million in federal awards
________ 2. A deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis
________ 3. An audit prescribed by federal law for state and local governments and not-for-profit organizations that expend more than $750,000 in a fiscal year
________ 4. Used by auditors to determine which programs will be audited as part of the single audit
________ 5. A monetary item identified by an auditor in an audit finding that generally relates to noncompliance with a law, regulation, or agreement, where the costs are either not supported by adequate documentation or appear unreasonable

Accepted Answer

The answer of Select the key term that relate to...

Question 19

When conducting a single audit:

Accepted Answer

According to the Single Audit Act, as amended in 1996, at a minimum, all Type A major programs not identified as low-risk and certain high-risk Type B programs must be considered for audit. This means that not all federal grant programs or all programs not identified as low-risk must be audited, but rather only those programs that meet the criteria outlined in the act. The determination of which programs are Type A or Type B and their risk status is based on specific criteria outlined in Circular A-133.

Question 20

Which of the following best describes the relationship between generally accepted auditing standards (GAAS) and generally accepted government auditing standards (GAGAS)?

Accepted Answer

GAGAS incorporates GAAS as a minimum requirement, but also includes additional standards tailored for government audits. Therefore, audits conducted in conformity with GAGAS require the auditor to conform to GAAS as well. Option A is incorrect because both GAAS and GAGAS apply to both independent CPA auditors and government auditors. Option C is incorrect because GAAS do not necessarily require conformity with GAGAS. Option D is incorrect because audits of state and local governments may require the use of both GAAS and GAGAS, but this is not always the case.

Quiz 11: Auditing of Government and Not-for-Profit Organizations

Which of the following would not be considered Category (b) GAAP for state and local government auditees?

Audit objectives set forth by the United States Comptroller General in Government Auditing Standards (GAS or GAGAS) differ from the AICPA view (GAAS) as discussed in Chapter 11. What are some of the differences?

The fundamental ethical principles identified under generally accepted government auditing standards (GAGAS) include all of the following except:

Which of the following is not considered an opinion unit requiring a materiality determination associated with a financial statement audit of a state or local government?

Which of the following is not a required component of the audit report for a single audit?

When compared to generally accepted auditing standards (GAAS) , generally accepted government auditing standards (GAGAS) include additional General Standard requirements for financial audits related to all of the following except:

A common reason why a government might receive a "modified opinion" from the external auditors is:

Which of the following is the highest in the hierarchy of generally accepted accounting principles for federal government entities?

"An unmodified opinion on the financial statements of a local government means the entirety of the comprehensive annual financial report (CAFR) has been audited and conforms with GAAP." Do you agree or disagree? Why?

Under a single audit:

What are the major types of audits and audit engagements described in the Government Accountability Office's Government Auditing Standards or generally accepted government auditing standards (GAGAS), and how do they differ?

Under a single audit, low-risk Type A programs are identified as those:

An auditor performing nonaudit work for a client may be in danger of violating the independence rules in Government Auditing Standards when he or she provides:

Which of the following statements regarding audit findings is True?

Cognizant agencies:

When conducting a single audit:

Which of the following best describes the relationship between generally accepted auditing standards (GAAS) and generally accepted government auditing standards (GAGAS) ?