AGA Certified Government Financial Manager CGFM Exam Practice Test

Answer : D

Fraud Audit Objective:

Fraud audits aim to detect and investigate fraudulent activities, strengthen internal controls, and report findings to stakeholders.

Basic Steps in Fraud Audits:

Consulting Legal Counsel: Ensures compliance with legal requirements and protects the organization.

Reporting the Results: Essential to inform stakeholders of findings and corrective actions.

Follow-up on Control Weaknesses: Addresses identified vulnerabilities to prevent future fraud.

Explanation of Incorrect Answer :

D . Considering political ramifications: Irrelevant to fraud audits, as these audits focus on financial and legal matters rather than political considerations.

Association of Certified Fraud Examiners (ACFE), Fraud Examination Manual.

Government Accountability Office (GAO), Fraud Risk Management Framework.

Answer : C

* What Is an Internal Control Deficiency?

An internal control deficiency occurs when an organization fails to implement controls to prevent or detect risks effectively.

In this case, responding only to maintenance needs when complaints are received demonstrates a lack of proactive controls, increasing the risk of issues going unnoticed or escalating over time.

* Why Is Option C Correct?

Proactive maintenance schedules and inspections are essential for ensuring the safety and functionality of critical infrastructure like dams. Relying solely on complaints or employee reports is a reactive approach and represents a deficiency in internal controls.

* Why Other Options Are Incorrect:

A . Inspecting completed work: This is a proper control to ensure compliance with contract specifications.

B . Releasing the bond after work completion: This ensures contractual obligations are met and is a good control practice.

D . Checking bidder references: This is part of the procurement process and a valid internal control.

* Reference and Documents:

GAO Standards for Internal Control (Green Book): Emphasizes proactive controls and monitoring for critical operations.

Federal Infrastructure Maintenance Best Practices: Highlights proactive inspections and maintenance as essential controls.

Answer : B

* What Does GPRA Require?

The Government Performance and Results Act (GPRA) mandates that federal agencies prepare:

A strategic plan outlining long-term goals.

An annual performance plan detailing the objectives and performance measures for the upcoming year.

An annual performance report evaluating the agency's success in meeting the goals outlined in the annual performance plan.

* Why Is the Annual Performance Report Important?

The annual performance report provides accountability and transparency by comparing actual results to planned goals. It allows Congress and the public to assess how effectively the agency is achieving its mission.

* Why Other Options Are Incorrect:

A . A five-year performance plan: GPRA requires a strategic plan (updated every four years), not a separate five-year performance plan.

C . SEA Report: This refers to Service Efforts and Accomplishments reporting, which is not mandated by GPRA.

D . The prior year's audited financial report: While financial reports are important, they are separate from the performance reporting requirements of GPRA.

* Reference and Documents:

Government Performance and Results Act (1993): Requires agencies to submit strategic plans, annual performance plans, and annual performance reports.

GAO Reports on GPRA Compliance: Emphasizes the role of annual performance reports in promoting accountability.

Answer : C

* What Is a Risk Profile?

A risk profile represents the aggregate level and types of risks that an organization is willing to accept in pursuit of its strategic objectives. It aligns with the organization's risk appetite and tolerance and helps prioritize and manage risks effectively.

This profile typically includes key risks, their likelihood, and potential impact, as well as how those risks align with the organization's mission and strategy.

* Why Is Risk Profile the Correct Answer?

The risk profile provides an enterprise-wide view of risks and their potential influence on achieving strategic goals. It aggregates risks across all levels of the organization and ensures that management considers them when making decisions.

* Why Other Options Are Incorrect:

A . Risk Register: While a risk register includes detailed descriptions of individual risks, it does not aggregate risk levels or types across the organization.

B . Risk and Control Evaluation Matrix: This tool evaluates specific risks and controls but does not capture the organization's overall risk appetite or profile.

D . Risk and Control Assessment Tool: This is a generic tool for assessing risks and controls, not for aggregating the overall risk picture.

* Reference and Documents:

OMB Circular A-123: Specifies the need for agencies to maintain a risk profile as part of enterprise risk management.

COSO ERM Framework (2017): Defines a risk profile as central to managing risks in alignment with strategic objectives.

Answer : C

Regression Analysis:

Regression analysis is a statistical technique used to examine the relationships between a dependent variable (e.g., lottery ticket sales) and one or more independent variables (e.g., advertising, potential payouts, size of lottery cards).

This method helps quantify the extent to which each variable impacts sales.

Explanation of Answer Choices:

A . Content analysis: Incorrect. This method is used to analyze qualitative data (e.g., text or media) rather than numerical relationships.

B . Cost-benefit analysis: Incorrect. This technique evaluates the costs and benefits of a decision but does not identify the relationships between variables.

C . Regression analysis: Correct. This technique determines the impact of multiple variables on a single outcome.

D . Narrative analysis: Incorrect. This is used to analyze stories or qualitative information, not numerical data.

Association of Government Accountants (AGA), Data Analytics and Predictive Techniques in Government.

Answer : A

Performance Audit Overview:

A performance audit focuses on evaluating the economy, efficiency, and effectiveness of government programs or activities.

Due professional care is a requirement in Government Auditing Standards (Yellow Book), ensuring auditors perform their duties responsibly and with professional judgment.

Key Requirement: Sufficient and Competent Evidence:

Auditors must collect sufficient and reliable evidence to support their findings, conclusions, and recommendations. This is the cornerstone of 'due professional care.'

Explanation of Answer Choices:

A . Obtain sufficient and competent evidence: Correct. This ensures audit findings are supported by reliable, documented evidence.

B . Determine scope: While part of audit planning, it is not directly related to due professional care.

C . Set materiality of financial statements: This applies to financial audits, not performance audits.

D . Present the findings in accordance with GAAP: GAAP is not a requirement for performance audits.

GAO, Government Auditing Standards (Yellow Book).

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

Answer : B

* What Is Forensic Accounting?

Forensic accounting involves investigating financial records to detect fraud, gather evidence, and support legal proceedings. It focuses on identifying and responding to fraud rather than proactively preventing it.

* Tasks Performed in Forensic Accounting:

Auditing accounting records (Option A): Forensic accountants review records to uncover irregularities or fraud.

Interviewing related parties (Option C): They conduct interviews to gather information and evidence.

Serving as an expert witness (Option D): Forensic accountants often testify in court to explain their findings.

* Why Prevention Is Not Part of Forensic Accounting:

Preventing fraud is typically the responsibility of internal controls, management, and auditors, not forensic accountants. Forensic accounting is reactive, addressing fraud that has already occurred.

* Reference and Documents:

GAO Forensic Auditing Standards: Highlights the role of forensic accounting in investigating, not preventing, fraud.

AICPA Forensic and Valuation Services Practice Aid: Focuses on investigative and litigation support tasks performed by forensic accountants.