AGA Certified Government Financial Manager CGFM Exam Practice Test

Answer : A

Definition of the Condition in an Audit Finding:

The 'condition' describes the actual state observed during the audit. It highlights what occurred in practice, serving as the factual basis for the finding.

In this case, the condition is the absence of receipts for multiple credit card purchases.

Explanation of Answer Choices:

A . We identified multiple credit card purchases without receipts to support them: Correct. This is the observed issue (condition).

B . Government policy requires a cardholder to submit receipts for all purchases: This is the 'criteria,' which defines the standard or rule being audited against.

C . Finance Department personnel did not regularly review purchases to ensure compliance: This is the 'cause,' explaining why the condition occurred.

D . We recommend that the government implements a timely review of all credit card purchases: This is the 'recommendation,' not the condition.

GAO, Government Auditing Standards (Yellow Book).

AICPA, Elements of an Audit Finding Guidance.

Answer : C

* What Is Internal Control Over Financial Reporting?

Internal control over financial reporting (ICFR) ensures the reliability of an entity's financial statements. It focuses on maintaining accurate, complete, and properly valued financial information that complies with accounting standards and meets the needs of users.

* Why Is Option C Correct?

Proper valuation of assets and liabilities is a critical component of ICFR. It ensures that financial statements fairly represent the entity's financial position.

Cost allocation is also essential where applicable, such as assigning costs to programs or projects.

* Why Other Options Are Incorrect:

A . Sufficient spending authority and financial resources exist: This relates to budgetary control, not financial reporting.

B . Physical inventory of capitalized assets: Conducting a physical inventory is part of asset management, not financial reporting assertions.

D . Legislatively directed program goals: Meeting program goals is related to performance reporting, not ICFR.

* Reference and Documents:

GAO Standards for Internal Control (Green Book): Stresses the importance of proper valuation and cost allocation for accurate financial reporting.

COSO Framework: Emphasizes ICFR's role in ensuring reliable and accurate financial statements.

Answer : B

Federal Entities and Internal Controls:

Federal entities assess internal controls to ensure efficient, effective, and economical use of resources while achieving program objectives.

Internal control assessments often identify areas for improvement, such as reducing waste or increasing operational efficiency.

Explanation of Answer Choices:

A . Confirm that all management objectives will be met: Internal controls reduce risk but do not guarantee all objectives will be achieved.

B . Identify program areas where efficiencies may be gained: Correct. Internal controls are assessed to optimize operations and identify improvements.

C . Ensure there is no fraud, waste, or abuse within the entity: While controls mitigate risks of fraud, waste, or abuse, assessments aim to identify opportunities for efficiency.

D . Determine what legislation is not applicable to the entity: This is unrelated to internal control assessments.

GAO, Standards for Internal Control in the Federal Government (Green Book).

Office of Management and Budget (OMB), Circular A-123, Internal Control Systems.

Answer : C

Type of Engagement for Reviewing Pilot Programs:

A performance audit evaluates the effectiveness, efficiency, and economy of programs or operations.

In this case, the review of the pilot program assessed the number of families served and the efficiencies achieved through community involvement, which aligns with performance auditing objectives.

Explanation of Answer Choices:

A . Financial audit: Focuses on the accuracy of financial statements, not program effectiveness or efficiency.

B . Single audit: Focuses on compliance with federal grant requirements, not program evaluation.

C . Performance audit: Correct. This type of audit reviews program outcomes and operational efficiencies.

D . Attestation: Provides assurance on specific subject matter but does not evaluate program performance.

GAO, Government Auditing Standards (Yellow Book).

Association of Government Accountants (AGA), Performance Auditing Best Practices.

Answer : B

Performance Audit Objectives:

Performance audits evaluate the effectiveness, efficiency, and economy of government programs, operations, or activities.

These audits focus on improving operations, achieving program goals, and ensuring responsible use of public resources.

Explanation of Answer Choices:

A . Providing an opinion on the entity's financial statement: This is the objective of a financial statement audit, not a performance audit.

B . Assessing program effectiveness, economy, and efficiency: Correct. This is the primary objective of performance audits.

C . Providing an opinion on a subject matter that is the responsibility of another party: This aligns with attestation engagements, not performance audits.

D . Issuing a report of findings based upon an agreed-upon procedure: This describes agreed-upon procedures engagements, not performance audits.

GAO, Government Auditing Standards (Yellow Book).

Association of Government Accountants (AGA), Performance Auditing Guidance.

Answer : C

* What Is GPRA?

The Government Performance and Results Act (GPRA) of 1993 was designed to improve the performance of federal programs by requiring federal agencies to establish goals, measure performance, and report on their progress.

* Stated Purposes of GPRA:

Improve Service Delivery (Option A): GPRA helps agencies align performance goals with customer needs, improving service delivery.

Improve Internal Management Practices (Option B): By requiring performance metrics and evaluations, GPRA enhances internal management and decision-making processes.

Improve Program Effectiveness (Option D): GPRA aims to make federal programs more effective by fostering accountability and linking resources to results.

* Why Option C Is Incorrect:

GPRA does not provide detailed instructions on program reporting. While it requires agencies to report on their performance, it does not dictate the specific steps or instructions for reporting. Instead, agencies design their own reporting processes within the GPRA framework.

* Reference and Documents:

Government Performance and Results Act of 1993: Stipulates the law's objectives but does not mention program reporting instructions.

GAO Report on GPRA Implementation: Highlights GPRA's purpose to improve performance management and accountability without prescribing reporting instructions.

Answer : C

Antideficiency Act Overview:

The Antideficiency Act (31 U.S.C. 1341, 1342, 1517) prohibits federal agencies from:

Obligating or expending funds in excess of their appropriations.

Entering into contracts without sufficient appropriated funds.

Violating the Act is a serious matter, and agencies are required to report such violations to Congress and the President.

Explanation of Answer Choices:

A . Federal Managers' Financial Integrity Act: Incorrect. This Act requires agencies to assess internal controls, not monitor appropriations.

B . Federal Financial Management Improvement Act: Incorrect. This Act focuses on improving financial systems, not budgetary compliance.

C . Antideficiency Act: Correct. This Act directly prohibits expenditures beyond appropriations.

D . Sarbanes-Oxley Act: Incorrect. This Act applies to corporate financial reporting, not federal appropriations.

Antideficiency Act (31 U.S.C. 1341, 1342, 1517).

GAO, Principles of Federal Appropriations Law.