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CPFO - Financial Test > Chapter 40-46 > Flashcards

Chapter 40-46 Flashcards

1
Q

Which of the following statements is false concerning the relationship between the PAFR and the CAFR?
A. The scope of the PAFR may be narrower than the scope of the CAFR.
B. Data in the PAFR may be presented in less detail than in the CAFR.
C. Data in the PAFR may be presented using a different measurement focus and basis of accounting than in the CAFR.
D. All of the above
E. None of the above

A

C

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2
Q

When is a PAFR a practical and effective substitute for a CAFR?
A. For special purpose governments
B. For the very smallest general purpose governments
C. For stand-alone business-type activities
D. All of the above
E. None of the above

A

E

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3
Q

Which of the following statements is true concerning the dissemination of a PAFR?
A. It is recommended that the PAFR always be available on a government’s website.
B. It is recommended that the PAFR always be available in hardcopy form.
C. Both A and B
D. Neither A nor B

A

A

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4
Q

Which of the following statements is true?
A. A PAFR should always reference the CAFR.
B. A PAFR should normally reference the CAFR.
C. A PAFR should never reference the CAFR

A

A

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5
Q

A government may participate in the GFOA’s PAFR Program only if it also participates in
A. GFOA’s Certificate of Achievement for Excellence in Financial Reporting Program
B. GFOA’s Distinguished Budget Presentation Award Program
C. Both A and B
D. Participation in other GFOA award programs is not required to participate in the PAFR Program

A

A

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6
Q

What is the fundamental purpose of internal control?
A. To prevent fraud and abuse
B. To promote economy and efficiency
C. To support the independent auditor’s opinion on the fair presentation of the financial statements
D. To achieve managerial objectives

A

D

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7
Q

What level of assurance should internal control provide?
A. Minimal assurance
B. Reasonable assurance
C. High assurance
D. Absolute assurance

A

B

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8
Q

Internal control is best described as a:
A. Principle
B. Procedure
C. Process
D. Parameter

A

C

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9
Q

Who is primarily responsible for internal control?
A. Management
B. The governing body
C. The internal auditor
D. The independent auditor

A

A

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10
Q

Who is ultimately responsible for internal control?
A. Management
B. The governing body
C. The internal auditor
D. The independent auditor

A

B

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11
Q

From an internal control perspective, internal auditors primarily assist:
A. Management
B. Governing body
C. Independent auditors
D. None of the above

A

A

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12
Q

From an internal control perspective, an audit committee is primarily associated with:
A. Management
B. Governing body
C. Independent auditors
D. None of the above

A

B

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13
Q

Which of the following is one of the basic components of a comprehensive framework of internal control?
A. Internal audit
B. Independent audit
C. Both A and B
D. Neither A nor B

A

D

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14
Q

Which of the following has a pervasive effect on the basic components of a comprehensive framework of internal control?
A. Control environment
B. Risk assessment
C. Control activities
D. Information and communication
E. Monitoring

A

A

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15
Q

Risk assessment should specifically address which of the following?
A. Changes in the external environment
B. Changes in internal operations
C. Changes in personnel
D. All of the above
E. Both A and B

A

D

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16
Q

To be effective, a control procedure must:
A. Prevent potential problems
B. Alert to potential problems
C. Either A or B
D. Both A and B

A

C

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17
Q

The significance of a potential risk is a function of:
A. Likelihood of occurrence
B. Potential impact
C. Speed of impact
D. Duration of impact
E. All of the above
F. Both A and B

A

E

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18
Q

Which of the following could be effective if the segregation of incompatible duties is not feasible?
A. Rotating duties
B. Making comparisons over time
C. Considering logical relationships among data
D. All of the above
E. Both A and B

A

D

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19
Q

Providing a separate line of communication for confidential information is necessary for:
A. Internal communication
B. External communication
C. Both A and B
D. None of the above

A

C

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20
Q

Reasonable assurance requires which of the five components of a comprehensive framework of internal control be present?
A. The control environment
B. Control activities
C. The control environment and control activities
D. Only those components that are relevant to the organization
E. All five components

A

E

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21
Q

In order to provide reasonable assurance, what must be true of the required components of the comprehensive framework of internal control?
A. They must function in accordance with the r.elevant principles from the COSO integrated framework.
B. They must each function together with other components.
C. They must be subject to periodic internal audit.
D. All of the above
E. Both A and B

A

E

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22
Q

Reasonable assurance requires that the five components of a comprehensive framework of internal control do what?
A. Be automated
B. Operate independently
C. Work together
D. Be subject to an annual external audit

A

C

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23
Q

The level of risk determined to be acceptable from a broad-based, strategic vantage point is referred to as an organization’s:
A. Risk tolerance
B. Risk appetite
C. Risk aggresiveness

A

B

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24
Q

What are the four objectives of a comprehensive framework of enterprise risk management?
A. Operations, reporting, compliance, and risk management
B. Operations, reporting, compliance, and strategic
C. Operations, reporting, compliance, and governance
D. Governance, strategy, performance, and reporting

A

B

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25
Q

What is the relationship between a comprehensive framework of internal control and enterprise risk management (ERM)?
A. Organizations should determine which framework best meets their needs, and implement it.
B. ERM superseded the outdated COSO report on internal control, which should no longer be followed.
C. A comprehensive framework of internal control should be used by smaller organizations, while ERM should be used by larger organizations.
D. Both frameworks provide value, and may be used together.

A

D

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26
Q

What is the goal of monitoring internal control?
A. To ensure that controls remain operational
B. To ensure that management has responded appropriately to deficiencies
C. Neither A nor B
D. Both A and B

A

D

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27
Q

Which of the following is essential to monitoring internal control?
A. Establishing a baseline of effective control
B. Selecting appropriate benchmarks
C. Performing analytical reviews
D. All of the above

A

A

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28
Q

Who is primarily responsible for monitoring internal control?
A. Internal auditors
B. Independent auditors
C. Management
D. Governing body

A

C

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29
Q

A risk is something that prevents management from having reasonable assurance that:
A. Operations are effective and efficient.
B. Financial reporting is reliable.
C. The organization has complied with applicable laws and regulations.
D. All of the above
E. Both B and C

A

D

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30
Q

A change in which of the following would require a revalidation of the baseline?
A. The process that is the object of internal control
B. The controls themselves
C. Risk exposure
D. All of the above
E. Both B and C

A

D

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31
Q

What is the process used to determine the order in which individual controls will be assessed?
A. Control cycle
B. Process cycle
C. Risk assessment
D. Vulnerability assessmen

A

D

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32
Q

To whom should deficiencies disclosed by an internal control evaluation be reported?
A. To the person responsible for the control
B. To an appropriate person at least one level higher
C. Both A and B
D. Either A or B

A

C

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33
Q

Who should monitor controls performed directly by senior management?
A. Another member of senior management
B. The internal auditors
C. Either the governing body or the audit committee
D. Controls performed directly by senior management don’t need to be monitored

A

C

34
Q

Who is responsible for financial statements in the public sector?
A. Management
B. Governing body
C. Independent auditor
D. Audit committee

A

A

35
Q

According to the GFOA, which of the following would be the best choice to serve as a member of an audit committee for a state or local government?
A. A representative of management
B. A retired CPA with experience auditing governments
C. A member of the governing body
D. Any of the above

A

C

36
Q

To whom should the independent auditor report?
A. Management
B. Governing body
C. Audit committee
D. Either A or C

A

C

37
Q

Each member of the audit committee of a state or local government should:
A. Possess a professional-level understanding of accounting, auditing, and financial reporting
B. Obtain a basic understanding of the objectives of internal control and financial reporting sufficient to allow them to make informed decisions
C. Hire their own financial expert to help them discharge their duties
D. Be a member of senior management who is actively involved with accounting and financial reporting

A

B

38
Q

In the course of its work, an audit committee should:
A. Meet with management to discuss the financial statements
B. Meet privately with the independent auditors to discuss management’s performance
C. Meet privately with management to discuss the performance of the independent auditors
D. All of the above
E. Only B and C

A

D

39
Q

Which of the following statements about a financial expert is true?
A. The financial expert must be a member of the audit committee.
B. The financial expert should have relevant education in governmental accounting and financial reporting.
C. The financial expert should have relevant experience in governmental accounting and financial reporting.
D. None of the above
E. Both B and C

A

E

40
Q

What is the appropriate point of reference for evaluating quantitative materiality in audits of state and local government financial statements?
A. Activity
B. Individual fund
C. Multiple funds in the aggregate
D. All of the above

A

D

41
Q

For which type of information might the auditor provide an in relation to opinion or accept greater responsibility by offering an opinion on its fair presentation?
A. Management’s discussion and analysis (MD&A)
B. Notes to the financial statements
C. Required supplementary information (RSI) other than MD&A
D. Other financial schedules
E. Statistical tables.

A

D

42
Q

What is the auditor’s responsibility for combining and individual fund financial statements and schedules?
A. Render an opinion on fair presentation
B. Render an opinion on fair presentation in relation to the basic financial statements
C. Either A or B

A

C

43
Q

How is an auditor’s opinion on the fair presentation of the basic financial statements affected by the omission or deficiency of RSI?
A. The auditor’s opinion is not affected.
B. The auditor’s report would need to indicate if RSI was omitted.
C. The auditor’s report would need to indicate if RSI was measured or presented in a manner that departed from authoritative standards.
D. All of the above
E. Only B and C

A

D

44
Q

GAGAS are composed of what three different types of standards with regards to the financial statement audit?
A. General standards, standards for performing financial audits, and standards for reporting on financial audits
B. General standards, independence standards, and ethical standards
C. Accounting standards, auditing standards, and internal control standards
D. Procurement standards, performance auditing standards, and accountability standards

A

A

45
Q

Which of the following best describes the relationship of the standards for performing and reporting on financial audits under GAGAS to the standards of GAAS in a Yellow Book audit?
A. The standards of GAGAS replace the standards of GAAS.
B. The standards of GAGAS incorporate the standards of GAAS by reference and build upon them.
C. The standards are unrelated.
D. Auditors use their professional judgment to choose which standards to follow.

A

B

46
Q

What are the elements of an audit finding under GAGAS?
A. Finding, recommendation, and corrective action
B. Criteria, condition, cause, and effect
C. Citation, violation, and consequence
D. Population, exception, projection, and remediation

A

B

47
Q

Which type of audit requires an independent auditor’s report on the fair presentation of the basic financial statements?
A. GAAS audit
B. GAGAS audit
C. Both A and B
D. Neither A nor B

A

C

48
Q

Which type of audit requires an independent auditor’s report on internal control and compliance?
A. GAAS audit
B. GAGAS audit
C. Both A and B
D. Neither A nor B

A

B

49
Q

Which type of audit requires the auditor to render an opinion on internal control?
A. GAAS audit
B. GAGAS audit
C. Both A and B
D. Neither A nor B

A

D

50
Q

Which type of audit requires the auditor to render an opinion on compliance?
A. GAAS audit
B. GAGAS audit
C. Both A and B
D. Neither A nor B

A

D

51
Q

Which of the following is a necessary part of a sound financial statement audit procurement process?
A. Openness and competition
B. Priority given to obtaining the lowest possible cost for the government
C. Both A and B
D. Neither A nor B

A

A

52
Q

Which of the following does the GFOA recommend in connection with the procurement of a financial statement audit?
A. Multiyear audit contracts
B. Mandatory auditor rotation
C. Both A and B
D. Neither A nor B

A

A

53
Q

The auditor of a government’s financial statements may not:
A. Perform any nonaudit services for that same government
B. Assume any management responsibilities
C. Have custody of the government’s assets
D. All of the above
E. Only B and C

A

A

54
Q

The Single Audit takes its name from the fact that it replaced:
A. Multiple departmental audits
B. Multiple federal grant audits
C. Both A and B

A

B

55
Q

The basic criterion used for determining whether a Single Audit is required is:
A. The amount of federal awards received
B. The amount of federal awards received or committed
C. The amount of federal awards expended
D. Greater of A or C

A

C

56
Q

Which of the following is always relevant to a Single Audit?
A. GAGAS
B. OMB’s Uniform Guidance
C. OMB’s Compliance Supplement
D. All of the above
E. Only B and C

A

D

57
Q

What is the appropriate scope for a Single Audit?
A. The entire government
B. The departments or agencies that received or managed federal awards
C. Either A or B

A

C

58
Q

Under the Single Audit Act, as amended, a program-specific audit is:
A. Always permitted
B. Sometimes permitted
C. Never permitted

A

B

59
Q

Which of the following statements is true about identifying a Type A program as a major program?
A. All Type A programs should be classified as major.
B. A Type A program should only be classified as major if it is not low-risk.
C. A Type A program should be classified as major if it is not low-risk, or is selected for coverage.
D. A Type A program should never be classified as major

A

C

60
Q

What normally is the minimum required coverage of federal awards in a Single Audit?
A. 40 percent
B. 50 percent
C. 75 percent
D. 90 percent

A

A

61
Q

On which of the following does the auditor express an opinion?
A. Compliance for federal awards
B. Internal control over compliance for federal awards
C. Both A and B
D. Neither A nor B

A

A

62
Q

How many auditor’s reports are normally produced in a Single Audit?
A. One
B. Two
C. Three
D. Four

A

D

63
Q

What are the reporting requirements for known and likely questioned costs?
A. The auditor considers known questioned costs, but only reports likely questioned costs.
B. The auditor considers likely questioned costs, but only reports known questioned costs.
C. The auditor reports both known and likely questioned costs
D. The auditor considers both known and likely questioned costs but doesn’t report either

A

B

64
Q

Which of the following statements is true about a high quality internal audit function?
A. It can reduce the need for management involvement with internal control.
B. It can potentially eliminate the need for management involvement with internal control.
C. Internal auditors form an integral part of a government’s comprehensive framework of internal control.
D. Internal auditors can replace the need for independent external auditors

A

C

65
Q

Which of the following statements about independence and internal auditing is FALSE?
A. All auditors need to be independent for their work to be credible.
B. The degree of independence that is required can and does vary.
C. Internal auditors can be sufficiently independent to conduct an audit of the government’s financial statements.
D. Internal auditors can significantly facilitate the work of the independent auditor of the financial statements

A

C

66
Q

To whom should the internal audit function be accountable?
A. Top management
B. Governing body
C. Audit committee
D. Any of the above
E. Only B or C

A

D

67
Q

Which of the following is an appropriate alternative if a government is too small to support a separate internal audit function?
A. Engage the financial statement auditor to perform internal audit tasks as a nonaudit service
B. Engage the services of a different accounting firm to perform internal audit tasks
C. Assign internal audit tasks to regular employees
D. All of the above
E. Only B and C

A

E

68
Q

How should the scope of a performance audit compare to the scope of the financial statement audit?
A. It should be the same.
B. It should be more narrowly focused.
C. It should be more broadly focused

A

B

69
Q

Which of the following statements about the criteria for a performance audit is FALSE?
A. They should be based on generally accepted accounting principles (GAAP) or some other comprehensive basis of accounting
B. There are no universally recognized criteria of effectiveness and efficiency equivalent to generally accepted accounting principles.
C. An important component of a performance audit is the establishment of the criteria to be used to assess effectiveness or efficiency for a specific engagement

A

A

70
Q

What is the relationship between the AICPA’s attestation standards and performance audits performed in accordance with GAGAS?
A. They are entirely unrelated concepts.
B. GAGAS permit internal auditors to use the AICPA’s attestation standards, as modified by GAGAS.
C. GAGAS preclude internal auditors from using the AICPA’s attestation standards, as modified by GAGAS, and instead require them to use the specialized performance auditing standards provided in GAGAS.
D. The AICPA’s attestations standards and GAGAS are essentially the same in all respects

A

B

71
Q

What is the “bottom line” for financial statement analysis in the public sector?
A. Net income
B. Fund balance
C. Unrestricted fund balance
D. None of the above

A

D

72
Q

What is the best source of information on near-term financial position?
A. Government-wide financial statements
B. Fund financial statements
C. Statistical section
D. None of the above

A

B

73
Q

What is the best source of information on net position?
A. Government-wide financial statements
B. Fund financial statements
C. Statistical section
D. None of the above

A

A

74
Q

What is the best source of information on economic condition?
A. Government-wide financial statements
B. Fund financial statements
C. Statistical section
D. None of the above

A

C

75
Q

Which of these is generally the best point of reference for assessing the adequacy of fund balance?
A. Total fund balance
B. Spendable fund balance
C. Unrestricted fund balance
D. Unassigned fund balance

A

C

76
Q

Which of these is generally the best point of comparison in assessing the adequacy of fund balance?
A. Regular operating revenues
B. Regular operating expenditures
C. Both A and B
D. Either A or B

A

D

77
Q

What should be the focal point for assessing near-term financial position in a proprietary fund?
A. Total assets
B. Net position
C. Unrestricted net position
D. Working capital

A

D

78
Q

Which of the following is true regarding enterprise funds?
A. Operating revenues in an enterprise fund should be sufficient to cover operating expenses.
B. The focus of all enterprise funds, like the private sector, should be on profits.
C. An enterprise fund with a 95% cost recovery is performing better than another enterprise fund with only a 50% cost recovery.
D. None of the above

A

D

79
Q

As a rule, the amount reported as net position in the government-wide statement of net position should be no less than:
A. Two months of regular operating revenues
B. Two months of regular operating expenses
C. Either A or B
D. Neither A nor B

A

D

80
Q

For which of the following is accrual-based data especially useful?
A. Assessing long-term net position
B. Budgeting
C. Rate setting
D. All of the above
E. None of the above

A

A

CPFO - Financial Test (18 decks)

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