Question 1

Which of the following is a true statement with regard to 'working papers' prepared by a CPA in an audit of an entity that receives federal financial assistance?

Accepted Answer

A)  There is no specific standard requiring working papers.
B)  The AICPA has no specific standard requiring working papers, but the GAO standards require working papers.
C)  The AICPA and the GAO standards concerning working papers are the same.
D)  The GAO standards concerning working papers are more rigorous than the AICPA standards. D

Question 2

A CPA has conducted an audit of the financial statements of an entity that received federal financial assistance.The CPA identified one major federal program and four nonmajor federal programs.The CPA's responsibility related to the Schedule of Expenditures of Federal Awards is to:

Accepted Answer

A)  Express an opinion as to whether the Schedule is fairly presented.
B)  Express an opinion as to whether the Schedule is fairly presented in relation to the financial statements taken as a whole.
C)  Express negative assurance on the Schedule.
D)  The CPA has no responsibility with regard to the Schedule. B

Question 3

Newly installed computer programs are one indicator that a government's participation in a federal program may be at high risk of noncompliance.

Accepted Answer

A) True 
 B)False  True

Question 4

Under GAO GAGAS standards, independent auditors must report all instances of fraud or illegal acts that they discover during the course of an audit.

Accepted Answer

A) True 
 B)False

Question 5

A performance audit includes which of the following?

Accepted Answer

A)  Economy and efficiency audit.
B)  Program audits.
C)  Both a and b.
D)  None of the above.

Question 6

Which of the following is NOT a necessary condition for a performance audit?

Accepted Answer

A)  The auditor must delineate specifically the activities and outcomes to be addressed.
B)  Entity management must have clearly defined operational objectives.
C)  The auditor must obtain an understanding of management controls relevant to the audit.
D)  There must be a schedule of disbursements related to the program.

Question 7

An independent CPA is engaged to audit the financial statements of the City of Highland Hills.The City has a variety of revenue sources including a $350,000 grant from the U.S.Department of Housing and Urban Development.Which of the following audit standards must the CPA use when conducting the audit?

Accepted Answer

A)  The AICPA audit standards.
B)  The GAO audit standards.
C)  The OMB audit standards.
D)  All of the above.

Question 8

Which of the following is not a unique characteristic that distinguishes ethical decisions made by employees of governmental entities from those made by employees of for-profit entities?

Accepted Answer

A)  The public holds employees of governments to a higher standard of conduct than those of businesses.
B)  Governments are guardians of public funds and are accountable to the public as to how they use them.
C)  Government employees must safeguard assets.
D)  Government activities are carried out in open view.

Question 9

Reports issued by CPAs conducting audits subject to the GAO standards must include all of the following except:

Accepted Answer

A)  A description of the scope of compliance testing.
B)  A description of the scope of internal control testing.
C)  A description of any irregularities and illegal acts found.
D)  A description of any sampling methodology and sampling plans used.

Question 10

Which of the following is NOT included in the general standards of GAGAS?

Accepted Answer

A)  Qualifications.
B)  Quality control.
C)  Planning.
D)  Independence.

Question 11

A program audit would include which of the following?

Accepted Answer

A)  Determining if sound procurement policies are being practiced.
B)  Determining if efficient operating procedures are being used.
C)  Determining if resources are being used efficiently.
D)  Determining the factors inhibiting satisfactory performance.

Question 12

To "attest" means to confirm that something is true, correct, or genuine.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following must have an audit under GAGAS?

Accepted Answer

A)  A state government that receives $500,000 in federal awards during the year.
B)  A local government that receives $501,000 in federal awards during two years.
C)  A state government that expends $500,000 in federal awards during the year.
D)  A local government that expends $501,000 in federal awards during two years.

Question 14

Which of the following groups is responsible for administering the Single Audit Act?

Accepted Answer

A)  OMB.
B)  GAO.
C)  AICPA.
D)  State Boards of Accountancy.

Question 15

Under which set of auditing standards is the auditor required to test compliance with laws and regulations that could have a direct and material effect on the financial statements of the entity?

Accepted Answer

A)  AICPA standards.
B)  GAO standards.
C)  OMB standards.
D)  All of the above.

Question 16

A CPA has conducted an audit of the financial statements of an entity that received federal financial assistance and had one program that qualified as a major program.The CPA's responsibility related to reporting on compliance for this entity is to

Accepted Answer

A)  Issue a report on compliance related to the entity.
B)  Issue an opinion on compliance related to the entity.
C)  Issue a report on compliance related to the entity and a report on compliance related to the federal programs.
D)  Issue a report on compliance related to the entity and an opinion on compliance related to the federal programs.

Question 17

Performance audits are sometimes referred to as "operational" audits.

Accepted Answer

A) True 
 B)False

Question 18

The Single Audit Act of 1984 was passed to eliminate the costly practice of requiring separate audits for each federal program in which an organization participated.

Accepted Answer

A) True 
 B)False

Question 19

If a program to be subjected to a performance audit lacks clearly defined objectives, what can the auditor do?

Accepted Answer

A)  Decline the audit until the entity defines its objectives.
B)  Personally discern the objectives based on the auditor's opinion.
C)  Examine the legislation to see if the legislation articulated the goals and objectives of the program.
D)  Create a list of goals and objectives.

Question 20

Under which set of auditing standards is the auditor required to express an opinion on compliance with laws and regulations applicable to each major program?

Accepted Answer

A)  AICPA standards.
B)  GAO standards.
C)  OMB standards.
D)  All of the above.

Exam 16: Auditing Governments and Not-For-Profit Organizations

Which of the following is a true statement with regard to 'working papers' prepared by a CPA in an audit of an entity that receives federal financial assistance?

A CPA has conducted an audit of the financial statements of an entity that received federal financial assistance.The CPA identified one major federal program and four nonmajor federal programs.The CPA's responsibility related to the Schedule of Expenditures of Federal Awards is to:

Newly installed computer programs are one indicator that a government's participation in a federal program may be at high risk of noncompliance.

Under GAO GAGAS standards, independent auditors must report all instances of fraud or illegal acts that they discover during the course of an audit.

A performance audit includes which of the following?

Which of the following is NOT a necessary condition for a performance audit?

Which of the following is not a unique characteristic that distinguishes ethical decisions made by employees of governmental entities from those made by employees of for-profit entities?

Reports issued by CPAs conducting audits subject to the GAO standards must include all of the following except:

Which of the following is NOT included in the general standards of GAGAS?

A program audit would include which of the following?

To "attest" means to confirm that something is true, correct, or genuine.

Which of the following must have an audit under GAGAS?

Which of the following groups is responsible for administering the Single Audit Act?

Under which set of auditing standards is the auditor required to test compliance with laws and regulations that could have a direct and material effect on the financial statements of the entity?

A CPA has conducted an audit of the financial statements of an entity that received federal financial assistance and had one program that qualified as a major program.The CPA's responsibility related to reporting on compliance for this entity is to

Performance audits are sometimes referred to as "operational" audits.

The Single Audit Act of 1984 was passed to eliminate the costly practice of requiring separate audits for each federal program in which an organization participated.

If a program to be subjected to a performance audit lacks clearly defined objectives, what can the auditor do?

Under which set of auditing standards is the auditor required to express an opinion on compliance with laws and regulations applicable to each major program?