Appendix 7: Answers to Reinforcement Quizzes
Answers to Reinforcement Quiz ñ Section V, Chapter 1
1. The three types of engagements that the Yellow Book discusses are:
a. financial audits, performance audits and internal audits.
b. attestations, internal audits and management audits.
c. financial audits, attestations and performance audits.
d. internal audits, performance audits and management reviews.
Answer: (c). GAGAS discusses three types of engagements: financial
audits, attestation engagements and performance audits. Internal
audits can be done in accordance with GAGAS, but they would almost
always be performance audits. Management audits and management
reviews are often used as synonyms for performance audits.
2. According to GAGAS, which of the following is not the purpose of audit
documentation?
a. aid the auditors in the conduct and supervision of the audit
b. allow for review of audit quality
c. protect against frivolous lawsuits
d. provide the principal support for the auditorís report
Answer: (c). Good documentation may help to protect against frivolous
lawsuits, but that is not their purpose. The remaining three answers are
the purpose of audit documentation.
3. Under GAGAS, governmental auditors generally distribute reports:
a. more widely than CPA firms.
b. less widely than internal auditors.
c. the same as CPA firms and internal auditors.
d. to only the organization that requested the audit.
Answer: (a). Governmental auditors are generally required to distribute
audit reports widely. CPAs will usually distribute them in accordance
with the agreements they have with their clients. Internal auditors
distribute reports in accordance with the policies and procedures of
their organization.
4. Which agency issued the Generally Accepted Auditing Standards?
a. The American Institute of Certified Public Accountants
b. The Government Accountability Office
c. The Institute of Internal Auditors
d. The Governmental Accounting Standards Board
Online version, for personal use only AGA Study Guide 3, 2016 Edition

Appendix 7: Answers to Reinforcement Quizzes
Answer: (a). The AICPA issues ìgenerally accepted auditing
standards.î GAO issues the Yellow Book. The Institute of Internal
Auditors issues ìInternational Standards for the Professional Practice of
Internal Auditing.î GASB establishes GAAP for state and local
governments.
5.
Which organization does not establish generally accepted accounting
principles?
a.
Governmental Accounting Standards Board
b. Financial Accounting Standards Board
c.
State Boards of Accountancy
d. Federal Accounting Standards Advisory Board
Answer: (c). GASB, FASB and FASAB all establish generally accepted
accounting principles (GAAP) for state and local governments, for
nongovernmental entities and for the federal government, respectively.
6. Under GAGAS an audit organization that provides nonaudit services:
a.
must cite GAGAS in any report resulting from those services.
b. may not cite GAGAS in any report resulting from those services.
c.
has the option of citing GAGAS in any report resulting from those
services.
d. must cite the IIA standards in any report resulting from those
services.
Answer: (b). You may not cite GAGAS in a report that is not the result
of either an audit or an attestation engagement.
7. Name four ethical areas that auditors should consider when auditing under
GAGAS.
Answer: You can list any four of the five areas cited in the Yellow
Book: the public interest; integrity; objectivity; proper use of
government information, resources and position; and professional
behavior.
8. Under the GAGAS competence standard:
a.
all auditors must obtain at least 80 hours of CPE each year.
b. all auditors must obtain at least 40 hours of CPE each year.
c.
all auditors must obtain at least 80 hours of CPE each two-year
period.
d. CPE is desirable, but not required.
Answer: (c). All auditors must obtain at least 80 hours of CPE every
two years, with at least 20 hours each year.
Online version, for personal use only
AGA Study Guide 3, 2016 Edition

Appendix 7: Answers to Reinforcement Quizzes
9. Under GAGAS, auditors conducting financial audits must report:
a.
deficiencies in internal controls that are ìsignificant deficiencies.î
b. deficiencies in internal controls that are ìsubstantial weaknesses.î
c.
deficiencies in internal controls that result in over claims of $10,000
or more.
d. deficiencies in internal controls that cannot be readily corrected.
Answer: (a). Under GAGAS, auditors must disclose all significant
deficiencies. The term that covers the more serious issues is ìmaterial
weaknesses.î The amount of $10,000 does not mean an item is
material. (Envision a major company with annual revenues in the
billions of dollars).
10. Under GAGAS, financial auditors should:
a.
design their tests to provide reasonable assurance of detecting
abuse.
b. design their tests to provide reasonable assurance of detecting
noncompliance.
c.
be alert to possible noncompliance.
d. be alert ...











































































































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AGA CGFM Study Guide 3: Governmental Financial Management and Control