Question 1

When a component unit is blended into the financial statements of a primary government,the resulting fund financial statements will include two general funds.

Accepted Answer

When a component unit is blended into the financial statements of a primary government, the resulting fund financial statements will not include two general funds. Instead, the blended component unit's funds will be combined with the primary government's funds, resulting in a single set of fund financial statements for the combined entity.

Question 2

A related organization is a contractual arrangement whereby two or more participants agree to carry out a common activity and share its risks and rewards.

Accepted Answer

False

Question 3

Required notes are an essential element of the basic financial statements.

Accepted Answer

Required notes provide additional information and details about the financial statements, ensuring transparency and accuracy in reporting financial information. They are required by accounting standards and regulations, and their absence can result in financial statements being considered incomplete or misleading. Therefore, they are an essential element of the basic financial statements.

Question 4

Required supplementary information RSI)is considered part of the basic financial statements.

Accepted Answer

Required supplementary information (RSI) is not considered part of the basic financial statements but is presented in a separate section of the comprehensive annual financial report (CAFR). RSI includes schedules and other information required by state or local government regulations, such as pension information and infrastructure assets.

Question 5

The typical audit is designed to cover all information included in the CAFR.

Accepted Answer

The answer of The typical audit is designed to cover...

Question 6

The financial reporting entity is composed of
A)The primary government.
B)The primary government and all legally separate governments for which the primary government is financially accountable.
C)The primary government and all legally separate organizations for which the primary government is financially accountable.
D)The primary government,all legally separate organizations for which the primary government is financially accountable,and any organizations whose omission would cause the primary government's financial statements to be misleading or incomplete.

Accepted Answer

The financial reporting entity includes the primary government, all legally separate organizations for which the primary government is financially accountable, and any organizations whose omission would cause the primary government's financial statements to be misleading or incomplete.

Question 7

There are only two government-wide statements: the statement of net position and the statement of activities.

Accepted Answer

This is true. The statement of net position and the statement of activities are the only two government-wide statements required by generally accepted accounting principles (GAAP). They provide information on the overall financial position and performance of the government as a whole. Other financial statements, such as the statement of revenues, expenditures, and changes in fund balances, are prepared at the fund level and do not give a full picture of the government's finances.

Question 8

A primary government can impose its will on a potential component unit if it has the authority to modify or approve the unit's budget.

Accepted Answer

If a primary government has the authority to modify or approve the budget of a potential component unit, it has the ability to influence the actions and decisions of that unit, effectively imposing its will upon it.

Question 9

Which of the following is a necessary characteristic of a component unit?
A)It is fiscally dependent on a primary government.
B)The primary government provides services that are used by both organizations.
C)The primary government can impose its will on the unit or the unit has the potential to provide a financial benefit to or impose a financial burden on the primary government.
D)The primary government appoints a voting majority of the component unit's governing body or a voting majority of the unit's governing body is composed of officials of the primary government.

Accepted Answer

The answer of Which of the following is a necessary...

Question 10

The Marigold School District,a legally separate school district that has a separately elected governing body,cannot enter into any debt agreements without the approval of the county commission.Marigold School District would be considered an):
A)Primary government.
B)Component unit.
C)Related organization.
D)Affiliated organization.

Accepted Answer

The Marigold School District is a legally separate school district with its own governing body, making it a potential component unit. The fact that it cannot enter into debt agreements without approval from the county commission indicates that it does not have complete financial autonomy, further suggesting that it is not a primary government. It is not a related or affiliated organization, as those terms generally describe entities that are either financially dependent on another organization or exist primarily to support another organization's functions.

Question 11

One ratio measure of fiscal effort is Revenue from own sources/Intergovernmental revenues.

Accepted Answer

The answer of One ratio measure of fiscal effort is...

Question 12

Public colleges and universities must adhere to the same GASB pronouncements as other types of governments.

Accepted Answer

GASB (Governmental Accounting Standards Board) pronouncements apply to all types of government entities, including public colleges and universities. These pronouncements include guidelines for financial reporting, budgeting, and accounting practices.

Question 13

Which of the following is necessary for a government to be considered fiscally independent?
A)It must be able to hire its own management.
B)It must be able to issue bonds that are tax-exempt.
C)It must not be subsidized by another government.
D)It must be able to levy taxes and/or set rates for its services.

Accepted Answer

Fiscal independence requires the ability to generate revenue through taxation or fees, therefore the government must be able to levy taxes and/or set rates for its services. The other options may contribute to a government's independence but are not necessary for fiscal independence.

Question 14

Governments must combine their blended component units into both the fund and government-wide statements.

Accepted Answer

Governments are required to present both fund financial statements and government-wide financial statements. In order to present these statements accurately, they must combine their blended component units into both the fund and government-wide statements.

Question 15

The comprehensive annual financial report CAFR)is divided into three main sections: the table of contents section,the auditors' report section,and the financial section.

Accepted Answer

The CAFR is divided into three main sections: the introductory section, the financial section, and the statistical section, not as described in the question.

Question 16

Governments must combine their discretely presented component units into both the fund and the government-wide statements.

Accepted Answer

Governments are required to combine their discretely presented component units only in the government-wide financial statements, not in the fund financial statements.

Question 17

It is unacceptable for a special-purpose government that is a component unit of a general-purpose government to issue its own "stand-alone" financial report.

Accepted Answer

It is acceptable for a special-purpose government that is a component unit of a general-purpose government to issue its own stand-alone financial report. However, this report must also be included in the general-purpose government's financial report as a component unit.

Question 18

Internal service funds are presented in a single column in the proprietary fund financial statements,even if one or more of them is a major fund.

Accepted Answer

Internal service funds are presented in a single column in the proprietary fund financial statements, regardless of their size or importance.

Question 19

Which of the following is NOT a primary government?
A)A state government.
B)A general-purpose local government with the ability to determine its own budget.
C)A general-purpose local government whose tax levies must be approved by the state.
D)A special-purpose local government whose tax levies must be approved by the state.

Accepted Answer

Primary governments are typically defined as state governments, general-purpose local governments (regardless of whether their tax levies need state approval), and any other entities that have standalone financial statements. Special-purpose local governments, which serve specific functions and whose tax levies must be approved by the state, do not fit the definition of a primary government as they lack the general governmental powers and autonomy of the entities classified as primary governments.

Question 20

Which of the following is necessary for a special-purpose local government to be considered a primary government?
A)It must operate for a single purpose.
B)It must have a separately elected governing body.
C)It must tax its citizens with ad valorem taxes.
D)It must be fiscally dependent on another government.

Accepted Answer

For a special-purpose local government to be considered a primary government, it must have a separately elected governing body. This means that the entity has its own set of elected officials who are responsible for making decisions regarding the operations of the government.

Quiz 11: Issues of Reporting, Disclosure, and Financial Analysis