Appendix 7: Answers to Reinforcement Quizzes
Answers to Reinforcement Quiz ñ Section III, Chapter 4
1. Auditors are responsible for developing internal control techniques. True
or false?
Answer: False. Managers are responsible for developing internal
control techniques. The auditors must understand them and evaluate
them in order to properly conduct an audit. Further, they may
recommend (but cannot require or implement) changes to the internal
control techniques. However, regardless of audit activity, management
has the responsibility of developing and implementing internal control
techniques.
2. Which of the following statements is true?
a.
Auditors and managers have the same responsibility for internal
controls.
b. Auditors design internal controls and managers implement them.
c.
Managers design internal controls and auditors implement them.
d. Managers design and implement internal controls and auditors
assess and report on them.
Answer: (d). Auditors are not responsible for operating or managing
the organization. Indeed, if they step into that role, they render
themselves ineligible to conduct audits because they would no longer
be independent. However, the auditors must understand the internal
control systems in order to perform their audits. As we will discuss in
Section 2 of this course, Government Auditing Standards require
specific reporting on internal controls.
3. The primary difference between internal and external auditors is:
a.
external auditors must adopt audit standards.
b. external auditors review only financial statements.
c.
internal auditors are not independent.
d. internal auditors use the AICPA audit standards.
Answer: (c). External auditors must be independent of the organization
they are auditing; internal auditors cannot be. They both must adopt
audit standards. The external auditors are more likely than the internal
auditors to audit in accordance with the AICPA standards. The internal
auditors are more likely to use either Government Auditing Standards or
the standards set forth by the Institute of Internal Auditors. External
auditors can conduct performance audits in addition to financial
statement audits.
Online version, for personal use only
AGA Study Guide 3, 2016 Edition

Appendix 7: Answers to Reinforcement Quizzes
4.
Federal Inspectors General can act as both internal auditors and external
auditors. True or false?
Answer: True. OIG auditors act as external auditors when they
review grantees or contractors that have received awards from their
agency. They can also act as internal auditors when they audit agency
processes.
5.
Which organization publishes International Standards for the Professional
Practice of Internal Auditing?
a.
The Government Accountability Office
b. The Institute of Internal Auditors
c.
The Governmental Accounting Standards Board
d. The Office of Management and Budget
Answer: (b). The Institute of Internal Auditors. The GAO publishes
standards on government auditing. The GASB publishes standards on
accounting and reporting. OMB does not publish accounting standards,
but does provide guidance on other matters.
Online version, for personal use only
AGA Study Guide 3, 2016 Edition

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AGA CGFM Study Guide 3: Governmental Financial Management and Control