Question 1

List four sources of income that is not subject to the unrelated business income tax:

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Question 2

The program expense ratio is calculated as follows:

Accepted Answer

The program expense ratio is calculated by dividing program service expenses by total expenses, indicating the proportion of expenses dedicated to program services.

Question 3

How is the Unrelated Business Income Tax computed?

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Question 4

What are major programs with respect to the Single Audit Act of 1984 and amendment of 1996?
 Distinguish between Type A and Type B programs.

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Question 5

What is required for an organization to qualify for tax-exempt status?

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Question 6

What is the purpose of the Unrelated Business Income Tax?

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Question 7

Which of the following is not a governmental audit opinion unit?

Accepted Answer

All three options (governmental activities, business-type activities, and each major fund) are governmental audit opinion units. Therefore, option D is incorrect.

Question 8

Describe the different types of governmental audit and attestation engagements.

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Question 9

How has the Sarbanes-Oxley Act of 2002 affected the practices of not-for-profit and governmental organizations?
 Why have these provisions been adopted?

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Question 10

List and explain the five ethical concepts outlined by the Yellow Book.

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Question 11

The IRS announced that it considers tax-exempt organizations to be one of its four highest enforcement priorities.What are the three areas of concern for the IRS?

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Question 12

Describe the types of audit opinions that may be issued on a governmental or not-for-profit financial report.

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Question 13

The Single Audit Act intends that auditors conducting regular financial audits of state and local governments and not-for-profits organizations provide assurance to the federal government that:

Accepted Answer

The Single Audit Act requires auditors to provide assurance to the federal government that federal funds have been expended in accordance with laws and regulations and that they are protected through a system of internal controls and sound financial management practices. Therefore, both options A and B are the intended outcomes of the Single Audit Act.

Question 14

Government financial audits must comply with the following:

Accepted Answer

Government financial audits are subject to both Generally Accepted Auditing Standards (GAAS) and Government Auditing Standards (GAS), which are established by the General Accounting Office (GAO) for audits of government organizations, programs, activities, and functions. Generally Accepted Accounting Principles (GAAP) are the set of accounting standards used to prepare financial statements for private entities, and do not apply to government audits.

Question 15

In a governmental audit the auditor:

Accepted Answer

In a governmental audit, the auditor is required to report directly to appropriate officials in addition to the board or audit committee. This is because the audit may have implications for the entire organization and may require action from those outside of the board or audit committee. Therefore, the auditor must communicate their findings to all relevant officials to ensure proper action is taken.

Question 16

A measure of performance that expresses how much an organization expends in raising the dollar of donations.

Accepted Answer

Fundraising efficiency measures how efficiently an organization converts the expenses incurred in fundraising activities into donations raised.

Question 17

A local government has four federal grants.Expenditures amounted to $1,000,000 during the year ended June 30,2012,as follows:
  A.Which grants would the auditor be required to audit,assuming the government is not found to be low risk?
B.Which grants would the auditor be required to audit,assuming the government is found to be low risk?

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Question 18

What factors would cause income that would otherwise qualify as unrelated business income to not be taxed?

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Question 19

What is the objective of the single audit process?

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Question 20

What is an "opinion unit" and what are the five opinion units for state and local governments?

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Quiz 13: Auditing, tax-Exempt Organizations, and Evaluating Performance