Appendix 7: Answers to Reinforcement Quizzes
Answers to Reinforcement Quiz ñ Section V, Chapter 3
1. If a local government spends about $1 million in grant funds that originated
from a state agency, it is required to obtain a Single Audit as a result of
expending those funds. True or false?
Answer: False. The local government is not required to obtain a Single
Audit as a result of funds received from the state agency. Only funds
originating from the federal government can require a Single Audit,
unless the state agency has its own Single Audit requirement.
2. A pass-through entity is one that:
a.
receives federal funds through a state agency.
b. receives state funds directly from the state.
c.
receives federal funds and subgrants them to other entities.
d. receives federal funds directly and provides services to eligible
recipients.
Answer: (c). A pass-through entity is one that receives federal funds
and subgrants them to other entities, usually local government agencies
or nonprofit corporations.
3. On a Single Audit, which items must be included in the schedule of findings
and questioned costs?
a.
known questioned costs, greater than $10,000 (subject to change)
b. significant deficiencies in internal controls over major programs
c.
material noncompliance in major programs
d. known fraud affecting a federal award
e.
all of the above
Answer: (e). The Single Audit Act requires all of the listed items be
disclosed in a Single Audit report.
4.
Management is not expected to demonstrate its cooperation with auditors
by which of the following?
a.
allowing reasonable access to its IT systems
b. providing documentation of its systems of internal controls
c.
agreeing with all findings
d. responding fully and promptly to a draft audit report
Answer: (c). Management must cooperate with auditors by providing
them with the information they need to do their job. It should also
respond to draft reports in a timely manner. However, if management
does not agree with a finding, it should be willing to say so and to
explain its position.
Online version, for personal use only
AGA Study Guide 3, 2016 Edition

Appendix 7: Answers to Reinforcement Quizzes
5. When contracting for a Single Audit, managers should: (Select two correct
answers.)
a.
first review the proposed price of the audit, and then determine
whether the auditor is competent to perform the audit.
b. first determine which audit firms are competent to perform the audit,
and then review the proposed prices.
c.
request a copy of the most recent peer report and letter of comment
for each proposing audit organization.
d. ensure that the CPA is a member of the AICPA.
Answer: (b) and (c). The manager should not review the price until it is
sure that the firm is competent to perform the audit. Otherwise, price
considerations are likely to overwhelm all others. CPAs decide whether
to join the AICPA. There is no requirement that CPAs be members of
the AICPA to conduct Single Audits.
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