Multiple Choice. Choose the best answer.
1. Which of the following activities would always indicate that an auditor’s independence has been impaired?
a. Providing advice on establishing an internal control system,
b. Posting adjusting journal entries into the client’s accounting records.
c. Providing benchmarking studies to be used by management.
d. Preparing draft financial statements based on management’s trial balance.
2. An adverse opinion is most likely to be rendered when:
a. Fund financial statements are presented along with government-wide statements in the basic financial statements.
b. There is a violation of generally accepted accounting principles that does not cause the basic financial statements to be materially misstated.
c. The auditor is not independent of the government being audited.
d. The government issues a stand-alone consolidated report.
3. Which of the following is a true statement about the relationship between generally accepted government auditing standards (GAGAS) and generally accepted auditing standards (GAAS)?
a. GAGAS and GAAS provide standards for financial audits, attestation engagements, and performance audits.
b. GAGAS encompass GAAS and supplement certain GAAS.
c. Single audits must be performed using GAGAS and GAAS.
d. GAGAS are promulgated by the Government Accountability Office and GAAS are promulgated by the Government Accounting Standards Board.
4. One of the overarching principles in the GAO’s standard on independence is:
a. Auditors should never provide payroll or tax services to audit clients.
b. Auditors should document an understanding with the audited entity regarding the objectives, scope of work, and product of the nonaudit service.
c. Auditors should not perform management functions or make management decisions.
d. Auditors should not perform nonaudit work for audit clients.
5. The goal of a performance audit is to:
a. Provide information to improve program operations and facilitate decision making by management.
b. Determine whether government programs and activities are meeting their stated goals and objectives.
c. Determine whether governments are performing their duties in the most economic and efficient manner possible.
d. All of the above.
6. Under the GASB reporting model, materiality is determined:
a. For opinion units.
b. At the government-wide level.
c. At the fund level.
d. For governmental and business-type activities and the aggregate discretely presented component units only.
7. Single audits performed pursuant to OMB circular A—133:
a. Apply to all entities that receive $500,000 or more in a fiscal year.
b. Result in the same number of reports as a generally accepted government auditing standards (GAGAS or yellow book) audit.
c. Must be performed in accordance with generally accepted government auditing standards.
d. Result in a reporting package that is submitted to the Office of Management and Budget.
8. The single audit concept:
a. Dates back to 1979 and was codified in 1984 and amended in 1996.
b. Requires that all audits of entities receiving federal financial assistance be audited by GAO auditors.
c. Means that each federal grant that an entity receives is audited as a single unit.
d. Requires that all large grants and half of the small grants be audited without regard to risk.
9. OMB Circular A—133 and the related Compliance Supplement provide guidance for auditors in:
a. Conducting a financial audit of governmental entities.
b. Conducting financial audits, attestation engagements, and performance audits of governmental entities.
c. Conducting a single audit of a government that has expended more than $500,000 in federal financial assistance.
d. None of the above.
10. The auditors responsibility for required supplementary information (RSI) is:
a. The same as with the basic financial statements.
b. To perform certain limited procedures to ensure that RSI is fairly presented in relation to the audited financial statements.
c. The same as for all information in the financial section of a comprehensive annual financial report.
d. To render an opinion as to the fairness of the RSI and whether it conforms to generally accepted accounting principles.