Question 1

Which of the following are not required disclosures in a Form 990?

Accepted Answer

A)   A Statement of Functional Expense.
B)   A discussion of program effectiveness.
C)   A Statement of Revenues, Expenses and Changes in Net Assets.
D)   None of the above. They are all required disclosures. D

Question 2

The classification of Net Assets for tax-exempt organizations are consistent with FASB standards for not-for-profit organizations.

Accepted Answer

A) True 
 B)False  True

Question 3

The single audit requirements apply only to state and local governments.Private not-for-profits do not have to comply with these requirements,even if they receive federal grants.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is true regarding the Single Audit Act and its amendments?

Accepted Answer

A)   A risk-based approach is used.
B)   An opinion is required on compliance of all programs.
C)   Both A and B above.
D)   Neither A nor B above.

Question 5

The Museum of Creative Arts had the following expenses: $5,000 of membership development expense,$3,000 of Fund-raising expense,$2,000 of Instructional Classes expense,and $1,500 of general and administrative expense.What is the program expense ratio (rounded)?

Accepted Answer

A)   70%.
B)   43%.
C)   39%.
D)   17%.

Question 6

Which of the following is a governmental audit that is concerned with examining,reviewing,or performing agreed upon procedures on a subject matter of an assertion and reporting on the results?

Accepted Answer

A)   Financial Audit.
B)   Attestation Engagement.
C)   Performance Audits.
D)   Nonaudit Services.

Question 7

In order to compute the operating ratio-enterprise funds,one would look in the CAFR in which of the following sections?

Accepted Answer

A)   In the government-wide Statement of Net Assets.
B)   In the proprietary funds Statement of Net Assets.
C)   In the proprietary funds Statement of Revenues, Expenses, and Changes in Net Assets.
D)   In the proprietary funds Statement of Cash Flows.

Question 8

Churches are exempt from Form 990 filing requirements.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following audit opinions is issued when a government fails to comply with generally accepted accounting principles?

Accepted Answer

A)   Qualified
B)   Adverse
C)   Either of the above, depending on the severity of the noncompliance
D)   Neither (a)  or (b)  above

Question 10

Which of the following is not a type of governmental audit?

Accepted Answer

A)   Attestation engagements.
B)   Consulting engagements.
C)   Financial audits.
D)   Performance audits.

Question 11

Service Efforts and Accomplishments Reporting is best completed by using a variety of measures,which are reported consistently.

Accepted Answer

A) True 
 B)False

Question 12

If an auditee is not considered low-risk,what percent of federal funds expended are auditors required to express an opinion on?

Accepted Answer

A)   100%.
B)   70%.
C)   50%.
D)   25%.

Question 13

Which of the following conditions would exempt income-producing activities from the Unrelated Business Income Tax (UBIT)?

Accepted Answer

A)   The business is carried on regularly but sells donated merchandise.
B)   Majority of labor is performed by paid employees.
C)   The business is carried on regularly but is unrelated to the organization's tax-exempt purpose.
D)   The business is operated for a profit.

Question 14

Which of the following is true regarding the Internal Revenue Service's concern regarding tax-exempt organizations?

Accepted Answer

A)   Organizations are charging many of their program expenses to fund-raising.
B)   Executives of tax-exempt organizations are receiving excessive salaries and benefits.
C)   Both (a)  and (b) .
D)   Neither (a)  nor (b) .

Question 15

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

Accepted Answer

The answer of Describe the types of audit opinions that...

Question 16

Which of the following is true regarding the Single Audit Act and its amendments?

Accepted Answer

A)   Governments and not-for-profit organizations that exceed $50 million in federal awards are normally assigned a cognizant agency to provide guidance.
B)   Smaller governments report to oversight agencies; typically the agency providing more funding than any other agency.
C)   Both A and B above.
D)   Neither A nor B above.

Question 17

Which of the following is not prohibited of organizations receiving tax-exempt status under IRS Section 501(c)3?

Accepted Answer

A)   Earning a profit (increase in net assets) .
B)   Distributing earnings to the benefit of members or officers.
C)   Endorsing political candidates or attempting to influence legislation.
D)   None of the above. All of these are prohibited of Tax-exempt organizations.

Question 18

The Comprehensive Annual Financial Report of a local governmental unit includes several statements and sections.When a financial analyst is computing ratios and extracting other information,he or she needs to know where in the CAFR to look.Use the following classification to indicate where an analyst would look in the CAFR to compute the ratios and gather information by placing the appropriate letter(s)in the space next to each item.When possible,choose the location in the basic financial statements or notes that would be subject to examination:
a.Letter of transmittal-introductory section
b.Management's Discussion and Analysis
c.Auditor's opinion
d.Government-wide Statement of Net Assets
e.Government-wide Statement of Activities
f.Governmental funds Balance Sheet
g.Governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances
h.Proprietary funds Statement of Net Assets
i.Proprietary funds Statement of Revenues,Expenses,and Changes in Net Assets
j.Proprietary funds Statement of Cash Flows
k.Fiduciary funds Statement of Fiduciary Net Assets
l.Fiduciary funds Statement of Changes in Fiduciary Net Assets
m.Notes to the Basic Financial Statements
n.Required Supplementary Information other than MD&A 
o.Combining and individual fund statements (Other Supplementary 
Information)
p.Statistical Section
Ratios and Other Items:
______ 1.Net debt per capita
______ 2.Net debt to fair value of property
______ 3.Interest coverage-revenue bonds
______ 4.Operating ratio-enterprise funds
______ 5.Governmental revenues per capita
______ 6.Debt service/total governmental revenues
______ 7.Unreserved fund balance/revenues-General Fund
______ 8.Actual expenditures/budgeted expenditures-General Fund
______ 9.Unrestricted net assets-governmental activities/general government expenses-governmental activities
______ 10.Cash expended on capital assets- enterprise activities
______ 11.Summary information regarding overall government financial performance for the year
______ 12.City management organizational chart
______ 13.Unfunded pension liability for the government as a whole
______ 14.Information regarding actual and planned maintenance of infrastructure,when the modified approach is used
______ 15.Debt limit and debt margin
______ 16.Total expenses for interest for a major enterprise fund
______ 17.Assessed value of property
______ 18.Information regarding balances for a nonmajor enterprise fund
______ 19.Schedule of direct and overlapping debt
______ 20.Cash balances in a pension trust fund

Accepted Answer

The answer of The Comprehensive Annual Financial Report of a...

Question 19

The program expense ratio is calculated as Program service expenses / Total expenses.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would be an example of an attestation engagement?

Accepted Answer

A)   Report on cost under contract
B)   Report on prospective financial information
C)   Report on internal controls
D)   All of the above

Exam 13: Auditing, Tax-Exempt Organizations, and Evaluating Performance

Which of the following are not required disclosures in a Form 990?

The classification of Net Assets for tax-exempt organizations are consistent with FASB standards for not-for-profit organizations.

The single audit requirements apply only to state and local governments.Private not-for-profits do not have to comply with these requirements,even if they receive federal grants.

Which of the following is true regarding the Single Audit Act and its amendments?

The Museum of Creative Arts had the following expenses: $5,000 of membership development expense,$3,000 of Fund-raising expense,$2,000 of Instructional Classes expense,and $1,500 of general and administrative expense.What is the program expense ratio (rounded) ?

Which of the following is a governmental audit that is concerned with examining,reviewing,or performing agreed upon procedures on a subject matter of an assertion and reporting on the results?

In order to compute the operating ratio-enterprise funds,one would look in the CAFR in which of the following sections?

Churches are exempt from Form 990 filing requirements.

Which of the following audit opinions is issued when a government fails to comply with generally accepted accounting principles?

Which of the following is not a type of governmental audit?

Service Efforts and Accomplishments Reporting is best completed by using a variety of measures,which are reported consistently.

If an auditee is not considered low-risk,what percent of federal funds expended are auditors required to express an opinion on?

Which of the following conditions would exempt income-producing activities from the Unrelated Business Income Tax (UBIT) ?

Which of the following is true regarding the Internal Revenue Service's concern regarding tax-exempt organizations?

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

Which of the following is true regarding the Single Audit Act and its amendments?

Which of the following is not prohibited of organizations receiving tax-exempt status under IRS Section 501(c) 3?

The program expense ratio is calculated as Program service expenses / Total expenses.

Which of the following would be an example of an attestation engagement?