Deck 20: Auditing Governments and Not-For-Profit Organizations

Question 1

Generally accepted government auditing standards (GAGAS) are established by

A) The GASB.
B) The Comptroller General.
C) The AICPA.
D) The FASB.

Answer 1

B

Question 2

All of the following represent criteria for determining questioned costs except

A) Unallowable costs.
B) Unreasonable costs.
C) Unquestioned costs.
D) Unapproved costs.

Answer 2

C

Question 3

Questioned costs that may not reflect the actions that a prudent person would take under the circumstances are

A) Unallowable costs.
B) Unreasonable costs.
C) Unapproved costs.
D) Undocumented costs.

Answer 3

B

Question 4

Which single audit report does not include an "opinion"?

A) Report on the schedule of expenditures of federal awards.
B) Report on internal controls over federal financial assistance.
C) Report on financial statements.
D) Report on major federal financial assistance program compliance.

Question 5

Explain the concept of a single audit.

Question 6

Single audits must comply with all of the following guidance except

A) AICPA generally accepted auditing standards.
B) Generally accepted government auditing standards.
C) OMB Uniform Guidance.
D) Single audits must comply with all of the above guidance.

Question 7

What is a major federal program? Why does it matter if a federal assistance program is a major program?

Question 8

Which of the following is not an opinion unit?

A) Governmental activities.
B) Internal Service Fund type.
C) Aggregate of all discretely presented component units; aggregate nonmajor governmental funds; aggregate of nonmajor Enterprise Funds, Internal Service Fund type; and aggregate fiduciary fund type.
D) Each major governmental fund.

Question 9

A government is required to have a single audit for any year in which it expends federal awards of

A) At least $300,000.
B) At least $500,000.
C) At least $750,000
D) At least 25% of its total expenditures.

Question 10

An auditor must audit as a major program

A) All Type A programs unless the auditor has identified one as low risk.
B) All Type A programs.
C) All Type B programs.
D) At least two programs in each audit cycle.

Question 11

Which of the following is true?

A) A single audit must include a GAAS audit and a GAGAS audit.
B) A single audit must include a GAAS audit, but not a GAGAS audit.
C) A single audit must include a GAGAS audit, but not a GAAS audit.
D) A single audit does not include a GAAS audit or a GAGAS audit.

Question 12

The scope of a financial audit opinion will generally include all of the following except

A) The note disclosures.
B) The government-wide financial statements.
C) The governmental funds' balance sheet.
D) The statistical section.

Question 13

Assume that programs classified as major federal programs totaled $4,500,000. If the auditee is considered low-risk, the percentage of coverage rule would not be satisfied if the total federal awards expended were more than:

A) $4,500,000.
B) $9,000,000.
C) $11,250,000.
D) $22,500,000.

Question 14

$\underline{\text{ Requirement: }}$ Explain the process for identifying major federal programs in a single audit of a government that receives federal financial assistance.

Question 15

Generally accepted governmental auditing standards are issued by the

A) AICPA.
B) U.S. Government Accountability Office.
C) U.S. Office of Management and Budget.
D) U.S. Department of the Treasury.

Question 16

A local government received and expended the following federal financial assistance under several programs during 20X4:
$\begin{array}{lr}\text { Program A } & \$ 100,000 \\\text { Program B } & 200,000 \\\text { Program C } & 650,000 \\\text { Program D } & 875,000 \\\text { Program E } & 1,025,000 \\\text { Program F } & 900,000 \\\text { Program G } & \underline{ 1,000,000} \\\text { Total } & \underline{\$ 4.750,000}\end{array}$ Requirements:
A. Is this government required to have a single audit? Why?
B. If a single audit is performed on the government, what are its Type A programs?
C. Assume that the two largest Type A programs that you identified in Part B of this question were audited as major federal financial assistance programs in one of the past two years and that the audits uncovered no findings or questioned costs. Further assume that each of the Type B programs could reasonably be assessed as high-risk programs. Which programs should be audited as major programs? Why?

Question 17

A single audit must include all of the following except

A) A financial statement audit.
B) Compliance testing.
C) A performance audit.
D) Internal control evaluation and testing.

Question 18

What is a low-risk auditee, and what is the impact of being a low-risk auditee?

Question 19

Which of the following is not a reporting unit?

A) Governmental activities.
B) Aggregate nonmajor governmental funds.
C) Aggregate of all discretely presented component units, aggregate nonmajor governmental funds; aggregate nonmajor Enterprise Funds, Internal Service Fund type; and aggregate fiduciary fund type.
D) Agency Funds.

Question 20

To complete a single audit in conformity with generally accepted governmental auditing standards, the auditor should perform all of the following except

A) Audit the financial statements following generally accepted auditing standards.
B) Obtain an understanding of the internal controls over major federal financial assistance programs.
C) Audit the schedule of expenditures of federal awards.
D) Audit management's discussion and analysis and the statistical section since both include information from the basic financial statements.

Question 21

At what amount would the percentage of coverage rule be exceeded if the total of major federal programs was $7,000,000 for an auditee who is not low risk?

A) $7,000,000.
B) $17,500,000.
C) $21,000,000.
D) $35,000,000.

Question 22

When reporting on internal control deficiencies, an auditor need not report

A) Significant deficiencies.
B) Material weaknesses.
C) Significant deficiencies for nonmajor funds.
D) Immaterial differences.

Question 23

Audit reports that meet the requirements of the Single Audit Act and OMB Uniform Guidance need not include

A) An opinion on the financial statements.
B) An opinion on the schedule of expenditures of federal awards.
C) A report on internal controls.
D) A report on management's discussion and analysis.

Question 24

In order for a government to have a program-specific audit, which of the following must be met?

A) Expend less than $750,000 of federal awards.
B) Expend federal awards under only one federal program.
C) Have low-risk programs.
D) Have a combination of high-risk and low-risk programs.

Question 25

For governments that expend less than $25 million of federal awards during a year, each federal program for which it expended $750,000 or more is

A) Always treated as a major federal program.
B) Treated as a major federal program if it is a high risk Type B program.
C) Treated as a major federal program if it has not been audited as a major program in either of the two previous years.
D) Treated as a major federal program only if needed to meet the 40% test.

Question 26

Which of the following categories is not a threat to an auditor's independence?

A) The auditor performed the work that is being audited.
B) The auditor lacks any vested interest in the results of the audit.
C) The auditor has become too close to the audited organization over time.
D) The auditor makes management decisions.

Question 27

Governmental auditing may include
I. Financial audits
II. Attestation engagements
III. Performance audits

A) I, II, and III.
B) I and II only.
C) I and III only.
D) II and III only.

Question 28

A nonfederal entity is required to have either a Program-Specific Audit or a Single Audit if in a fiscal year it

A) Received $300,000 or more in federal awards.
B) Expended $300,000 or more in federal awards.
C) Received $750,000 or more in federal awards.
D) Expended $750,000 or more in federal awards.

Question 29

Auditors are responsible for

A) Preparing a government's financial statements and related notes to the financial statements.
B) Reporting on financial and other economic events, transactions, and balances.
C) Maintaining a government's internal control system.
D) Collecting sufficient objective data to allow them to express an opinion on the accuracy and reliability of management's assertions regarding a government's financial statements.

Question 30

Which of the following statements concerning the identification of a Type A low-risk program is true?

A) A Type A program can be considered low-risk if it has been audited as a major program in one of the last two years, and the most recent audit had no internal control deficiencies or a modified opinion on the program.
B) A Type A program is low-risk if it was audited as a major program last year, whether or not there were any reportable audit findings.
C) A Type A program is low-risk if there were no audit findings within the last two years.
D) A Type A program can never be classified as low-risk.

Question 31

Which of the following could not be an independent auditor for governmental entities?

A) Public auditors.
B) Officials of a government other than the one being examined.
C) Officials of the government being examined even if they are a part of government's management assuming they meet certain prescribed criteria.
D) Officials of the government being examined that are separately elected.

Question 32

A federal program that a government classifies as a Type A program

A) Must be treated as a major program.
B) Cannot normally be treated as a low-risk program in three consecutive years.
C) Can usually be treated as a low-risk program in more than three consecutive years.
D) May be treated as a low-risk program for an indefinite number of consecutive years.

Question 33

If required to perform risk assessments on Type B programs, an auditor is permitted to exclude any Type B programs with expenditures that are:

A) Less than 25% of the Type A threshold.
B) Less than the larger of $750,000 or 3% of the Type A threshold.
C) Less than the smaller of $750,000 or 1% of total federal awards expended if the total is less than $100 million.
D) Less than the smaller of $750,000 or 1% of total federal awards expended if the total is more than $100 million.

Question 34

Which of the following is not an auditee responsibility?

A) Prepare appropriate financial statements.
B) Ensure that the audit procedures performed are appropriate.
C) Comply with laws, regulations, and the provisions of contracts related to each of the federal programs.
D) Take corrective action on audit findings.

Question 35

For basic financial statements of a general purpose local government to be presented fairly in all material respects, the basic financial statements must include an opinion unit for:

A) Governmental activities in the government-wide financial statements.
B) All funds in the special revenue fund type reported together as a unit.
C) Investment trust funds as a unit apart from other fiduciary funds.
D) All agency funds reported together as a unit.

Question 36

A material weakness in internal control is a significant deficiency, or combination of significant deficiencies, that results

A) From a material misstatement in the financial statements.
B) In more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected on a timely basis.
C) In a material misstatement of the financial statements.
D) In a government having a qualified audit opinion on their financial statements.

Question 37

For a government that has less than $25 million in total federal awards expended, an auditor that must perform a risk assessment on a federal program classified as a Type B should consider as eligible all programs that

A) Have not been assessed in last three years.
B) Have not been assessed in the last two years.
C) Have expenditures that exceed $100,000
D) Have expenditures that exceed $187,500.

Question 38

With respect to illegal acts, an auditor should

A) Design procedures to find illegal acts.
B) Alert appropriate law enforcement officials regarding any material illegal acts found while conducting the audit.
C) Report any illegal acts discovered during the audit.
D) Stop the audit until the illegal acts are resolved.

Question 39

A data collection form

A) Is used in detailed testing of major federal program compliance.
B) Is used to summarize the results of a single audit.
C) Is completed by the cognizant agency.
D) Is not necessary unless the single audit report does not include a schedule of findings and questioned costs.

Question 40

Auditors working under generally accepted government auditing standards (GAGAS) should complete a minimum of 80 hours of continuing professional education every two years. What is the minimum number of hours that must be directly related to governmental accounting, governmental auditing, and related subjects?

A) 24.
B) 48.
C) 40.
D) 20.

Question 41

The primary purpose of an auditor's opinion is to

A) Detect and report fraud.
B) Help the client design and implement proper internal controls.
C) Add credibility to those representations properly made by management.
D) Guarantee the accuracy of management's representations.

Question 42

A local government that expends $750,000 or more of federal financial assistance is subject to: $\begin{array}{cccc}&&\text { GAO}\\&&\text { Government }\\&\text { Sarbanes- }&\text { Auditing }&\text { Single }\\&\underline{\text { Oxley Act}}&\underline{\text { Standards}}&\underline{\text { Avedit }}\\\text { I. } & \text { Yes } & \text { Yes } & \text { Yes } \\\text { II. } & \text { Yes } & \text { Yes } & \text { No } \\\text { III. } & \text { No } & \text { Yes } & \text { Yes } \\\text { TV } & \text { Yes } & \text { No } & \text { No }\end{array}$

A) II.
B) IV.
C) I.
D) III.

Question 43

Which of the following statements most accurately describes audit procedures?

A) Overall guidelines against which legal compliance is measured.
B) Guidance governing the auditor's judgment.
C) Overall guidelines for audit quality.
D) Specific tests and processes used to collect audit evidence.