8.06 - GOVERNMENT REPORTING Flashcards
8.06 - GOVERNMENT REPORTING
In reporting under Government Auditing Standards, an auditor most likely would be required to communicate management’s misappropriation of assets directly to a federal inspector general when the fraudulent activities are…
Concealed by management by circumventing specific internal controls designed to safeguard those assets.
Accompanied by fraudulent financial
reporting that results in material misstatements of asset balances.
Perpetrated by several levels of management in a scheme that is likely to continue in future years.
Reported to the entity’s governing body and the governing body fails to make a required report to the federal inspector general.
Reported to the entity’s governing body and the governing body fails to make a required report to the federal inspector general.
EXPLANATION:
In general, an auditor will limit communication about fraud to those within the entity at a level of management or
governance that is above that at which the fraud was committed.
The fact that the fraud was concealed by circumventing controls, involved fraudulent financial reporting, or involved several levels of management would not change the auditor’s reporting responsibilities.
If the governing body, however, fails to meet its obligations to report the matter to the federal inspect general, the auditor will be required to do so.
8.06 - GOVERNMENT REPORTING
In accordance with Office of Management and Budget audit requirements for audits of non-Federal entities expending Federal awards, which of the following statements is accurate regarding Federal awards expended?
Free rents received as part of an award to carry out a federal program are treated as federal funds expended.
Food stamps cannot be valued at fair market value at the time of receipt.
Donated surplus property cannot be valued at the assessed value provided by the federal agency.
Government loans are classied
as noncash assistance programs.
Free rents received as part of an award to carry out a federal program are treated as federal funds expended.
EXPLANATION:
Regarding audit requirements for audits of non-federal entities expending federal awards, free rent alone is not considered a federal award expended, but free rents received as part of an award to carry out a federal program are considered federal funds expended.
8.06 - GOVERNMENT REPORTING
Generally accepted government auditing standards use which of the following terms to describe a professional requirement to comply with a standard or provide a special explanation for not doing so?
Conditional requirement.
Presumptively mandatory requirement.
Unconditional requirement.
Explanatory requirement.
Presumptively mandatory requirement.
EXPLANATION:
A presumptively mandatory requirement is one that is expected to be complied with in all circumstances to which it
applies.
In rare circumstances, however, the auditor may depart from a presumptively mandatory requirement if the required procedure would be ineffective, in which case the auditor is required to document how an alternate procedure was able to
achieve the objective of the presumptively mandatory requirement.
An unconditional requirement must be complied with in all circumstances to which it applies and the auditor will be considered to have violated GAGAS when an unconditional requirement is not complied with.
There is no such thing as an explanatory requirement.
8.06 - GOVERNMENT REPORTING
After performing a compliance audit of an entity that received federal funds, what conclusion would the auditor draw if the entity does not have adequate documentation to support $5 million in operating expenses paid from
federal program funds?
Questioned costs of $5 million for operating expenses have been identified.
The entity spent $5 million in operating expenses that were not approved.
The entity submitted unauthorized invoices for expenses.
The entity spent $5 million of government funds for services that were not required.
Questioned costs of $5 million for operating expenses have been identified.
EXPLANATION:
The fact that an auditor is unable to obtain adequate documentation for a disbursement would not necessarily lead to the conclusion that the expenses were or were not approved, authorized, or required.
The auditor could only conclude that the
costs are in question.
8.06 - GOVERNMENT REPORTING
When auditing an entity’s nancial
statements in accordance with Government Auditing Standards (the Yellow Book), an auditor is required to report on…
I. Noteworthy accomplishments of the program.
II. The scope of the auditor’s testing of internal controls.
Neither I nor II.
II only.
Both I and II.
I only
II only.
EXPLANATION:
The auditor is not necessarily qualified to evaluate the accomplishments of a government program and would not
report on them.
In a report resulting from a Yellow Book audit, the auditor is required to indicate the scope of testing of internal controls.
8.06 - GOVERNMENT REPORTING
For financial statement audits, generally accepted government auditing standards (GAGAS) incorporate the Statements on Auditing Standards (SAS) that are issued by the AICPA. GAGAS prescribe additional standards on…
Neither direct reporting of noncompliance (illegal acts) nor reporting on internal controls.
Direct reporting of noncompliance (illegal acts) and reporting on internal controls.
Direct reporting of noncompliance (illegal acts) only.
Reporting on internal controls only.
Direct reporting of noncompliance (illegal acts) and reporting on internal controls.
EXPLANATION:
GAGAS requires the report to include information about the auditor’s knowledge that fraud or noncompliance (illegal
acts) have occurred or are likely to have occurred as well as on deficiencies in internal control.
