1. Which of the following is a probable use a donor would make of the external financial statements of a not-for-profit entity?

a) To determine the proportion of entity resources directed to programs as opposed to fund-raising.

b) To determine the creditworthiness of the entity for investment purposes.

c) To determine the salaries paid to all employees of the entity.

d) To determine the budget of the entity.

2. A regulatory agency would use the external financial statements of a local government for which of the following purposes?

a) To assure that the entity is spending and receiving resources in accordance with laws, regulations or policies.

b) To determine how resources should be allocated.

c) To exercise general oversight responsibility.

d) To do all of the above.

3. Which of the following constituency groups would be most likely to evaluate government financial statements to determine likely areas in which to achieve cost-savings?

a) Creditors.

b) Union officials representing the government's employees.

c) Federal agencies that provide purpose-restricted grants.

d) Students of governmental accounting.

4. Which of the following objectives is considered to be the cornerstone of financial reporting by a governmental entity?

a) Accountability.

b) Budgetary compliance.

c) Inter-period equity.

d) Service efforts and accomplishments.

5. Which of the following is an objective of financial reporting by governmental entities as established by GASB?

a) Financial reporting should assist users in assessing the management skills of top management.

b) Financial reporting should assist users in determining if current-period revenues were sufficient to pay for current-period services.

c) Financial reporting should assist users in evaluating the cash management operations of the governmental entity for the year.

d) Financial reporting should assist users in assessing whether the government provided appropriate services to its constituents in the current year.