Chapter 6 Deck 4

Question 1

Government Auditing Standards published by the Government Accountability Office:

Answer 1

Generally Accepted Government Auditing Standards primarily apply to audits of federal financial assistance and government organizations but have been adopted by some states for audits of state financial assistance and other governmental funding.

Question 2

An audit performed in accordance with 2 CFR 200 single audit will expand the auditor’s responsibilities beyond generally accepted auditing standards. The auditor’s expanded responsibilities include:

Answer 2

2 CFR 200 single audit expands the auditor’s responsibilities to include procedures designed to test and report on compliance matters having a direct and material effect on major federal award programs.

Question 3

Gearty & Duffy, certified public accountants, have been engaged to perform an audit of Sleepy Knoll Township in accordance with 2 CFR 200 single audit. In connection with that engagement, Gearty & Duffy will determine major programs:

Answer 3

2 CFR 200 single audit allows auditors to use a risk-based approach to determine major grants.

Question 4

When auditing an entity’s financial statements in accordance with Government Auditing Standards (the Yellow Book), an auditor is required to report on:

Answer 4

The scope of the auditor’s testing of internal controls

The scope of the auditor’s tests of compliance with laws and regulations.

Question 5

Which of the following statements represents a quality control requirement under Government Auditing Standards?

Answer 5

Audit organizations seeking to enter into a contract to perform an audit in accordance with government auditing standards should provide their most recent external quality control review report to the party contracting for the audit. The audit organization should make its most recent peer review report publicly available by posting to an external website or through similar means.

Question 6

Wolf is auditing an entity’s compliance with requirements governing a major federal financial assistance program in accordance with Government Auditing Standards. Wolf detected noncompliance with requirements that have a material effect on the program. Wolf’s report on compliance should express:

Answer 6

If material instances of noncompliance are identified, the auditor should express either a qualified or adverse opinion on compliance.

Question 7

Which of the following is a documentation requirement that an auditor should follow when auditing in accordance with Government Auditing Standards?

Answer 7

Per Government Auditing Standards, audit documentation should contain sufficient information so that supplementary oral explanations are not required.

Question 8

In performing a financial statement audit in accordance with Government Auditing Standards, an auditor is required to report on the entity’s compliance with laws and regulations. This report should:

Answer 8

Basic elements of a report on compliance include a statement that the audit should be planned to obtain reasonable assurance about whether noncompliance could have a material effect on the programs audited.

Question 9

Reporting on internal control to meet the requirements of Government Auditing Standards differs from reporting under other generally accepted auditing standards in that Government Auditing Standards requires a:

Answer 9

Government Auditing Standards require a description of the scope of the auditor’s testing of compliance and of internal control. This is not required under generally accepted auditing standards.

Question 10

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:

Answer 10

Generally accepted government auditing standards (GAGAS) prescribe additional standards on the direct reporting of illegal acts. For example, the auditor is required to directly report illegal acts discovered during the audit to federal inspector generals if management fails to disclose such illegal acts to the grantor or fails to take appropriate remedial action. In addition, GAGAS also prescribe additional standards related to internal control reporting, such as requiring that the auditor provide a written report on internal control in every financial statement audit and specific reporting over internal control over compliance.

Question 11

The risk-based approach of the Single Audit Act is designed to?

Answer 11

focus the auditor’s tests of federal financial assistance on the programs with the highest risk.

Question 12

Reporting standards for financial audits under Government Auditing Standards (the Yellow Book) differ from reporting under generally accepted auditing standards in that Government Auditing Standards require the auditor to:

Answer 12

The report on the audit of financial statements should describe the scope of the auditor’s testing of compliance with laws and regulations and internal control over financial reporting, and present the results of those tests.

Question 13

Management’s written representation to the auditor in connection with a governmental audit would most likely include:

Answer 13

The management letter will include identification of management’s interpretation of compliance requirements that are subject to different interpretations.

Question 14

A report on compliance would include:

Answer 14

The auditor will express an opinion at the level specified by the governmental audit requirement.

Question 15

A single audit represents:

Answer 15

A single audit represents a combined audit of both an entity’s financial statements and federal financial assistance programs. The single audit provides audited organizations with the opportunity to capitalize on the efficiency of satisfying their audit requirements with a single audit. Auditors are governed by the Single Audit Act and 2 CFR 200.

Question 16

A report on internal control over compliance will include which of the following assertions?

Answer 16

The audit opinion states that the audit was conducted in order to express an opinion on compliance but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.

Question 17

How does Title 2 of the Code of Federal Regulations (containing single audit requirements) define a subrecipient?

Answer 17

A nonfederal entity that expends federal financial assistance administered by another entity is a sub recipient. For example, a state might receive federal funds and in turn provides those funds to a not-for-profit organization to accomplish an objective (e.g., mental health care, homeless relief, etc.). The not-for-profit organization would be the sub recipient.

Question 18

In auditing a not-for-profit entity that receives governmental financial assistance, the auditor has a responsibility to:

Answer 18

The auditor must assess whether management has identified laws and regulations that have a direct and material effect on the determination of amounts in an entity’s financial statements and obtain an understanding of the possible effects on the financial statements of such laws and regulations.

Question 19

In auditing compliance with requirements governing major federal financial assistance programs under the Single Audit Act, the auditor’s consideration of materiality differs from materiality under generally accepted auditing standards. Under the Single Audit Act, materiality is:

Answer 19

Under the Single Audit Act, materiality is determined separately for each major federal financial assistance program.

Question 20

The auditor’s objectives in a compliance audit of a governmental entity include:

Answer 20

An objective of a compliance audit of a governmental entity is to form an opinion on whether that government complied with applicable compliance requirements in all material respects, and then to report at the level specified by the governmental audit requirement.