Choose the best answer. 1. Under the hierarchy of GAAP for a state and local government, which of the following has the highest level of authority? a. AICPA Practice Bulletins if specifically made applicable to state and local governments by

Choose the best answer.
1. Under the hierarchy of GAAP for a state and local government, which of the following has the highest level of authority?
a. AICPA Practice Bulletins if specifically made applicable to state and local governments by the AICPA (and cleared by the GASB).
b. GASB Technical Bulletins.
c. GASB Implementation Guides.
d. All of the above items have equal authority.
2. The scope of an auditing engagement is described in
a. GAAS.
b. An engagement letter.
c. The “Auditor’s Responsibility” section of the audit report.
3. Ramon Fuentes is the new head of the State Department of Motor Vehicles. He has observed several situations that make him believe that there may be issues with the department’s internal controls. He wants to engage a CPA to provide him with assurance that the department’s internal controls are functioning as they should. This type of engagement is called
a. An attestation engagement.
b. An operational audit.
c. A Sarbanes-Oxley audit.
d. A general audit.
4. The GAGAS conceptual framework for independence should be employed
a. Annually.
b. At the end of the audit engagement, just prior to issuing the audit report.
c. Prior to accepting a nonaudit service engagement at an audited entity.
d. All of the above.
5. An additional auditing standard imposed by GAGAS when compared to GAAS is
a. The auditor must maintain independence in mental attitude in all matters relating to the audit.
b. The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed.
c. The auditor must identify in the auditor’s report those circumstances in which generally accepted accounting principles have not been consistently observed.
d. Documentation should be provided concerning evidence of supervisory review of work performed.

6. Single audits performed pursuant to OMB’s Uniform Guidance
a. Apply to all entities that receive $750,000 or more of federal funds in
a fiscal year.
b. Apply to not-for-profit organizations only.
c. Require the auditor to use generally accepted government auditing standards when conducting the audit.
d. Are triggered when federal funds are expended that are associated with a grant.
7. Under the GASB reporting model, materiality is determined
a. For opinion units.
b. At the government-wide level.
c. At the fund level.
d. For governmental and business-type activities and the aggregate discretely presented component units only.
8. An auditor must audit as a major program
a. All Type A programs, unless the auditor has identified one as low risk.
b. All Type A programs, including those the auditor considers low-risk programs.
c. One-fourth of all Type B programs.
d. At least 40 percent of all federal funds received.
9. Dan Cole is the head of the county’s Division of Animal Control. The division receives funding from both the state and federal governments and is required to have its audit under GAGAS. You and Dan were fraternity brothers at All State University, and your families often celebrate holidays and special occasions together. Dan has asked your audit firm to perform the division’s financial audit this year. What should you do?
a. Contact the state board of accountancy for authorization to accept the audit.
b. Decline the audit because you want to avoid any perceived independence issues.
c. Accept the audit but disclose your relationship in the engagement letter and audit report.
d. Refer to the ethics and independence guidance in GAGAS before making a decision to accept the engagement.
10. The auditor’s responsibility for required supplementary information (RSI) is
a. The same as with the basic financial statements.
b. To perform certain limited procedures to ensure that RSI is fairly presented in relation to the audited financial statements.
c. The same as for all information in the financial section of a comprehensive annual financial report.
d. To render an opinion as to the fairness of the RSI and whether it conforms to generally accepted accounting principles.
11. When evaluating nonaudit services that may impact auditor independence, each of the following routine services is acceptable under GAGAS except
a. Deciding which of an outside third party’s recommendations to implement.
b. Educating the audited entity on matters within the technical expertise of the auditors.
c. Providing information to the audited entity on best practices and bench marking studies.
d. Researching the audited entity’s technical questions on relevant tax laws.

12. Using the risk-based approach for selecting major programs for audit during a single audit, an auditor
a. Classifies low-risk Type A programs as those programs with awards less than $750,000.
b. Classifies Type A programs as those that exceed 25 percent (0.25) of the $750,000 threshold.
c. Must audit all Type A and Type B programs.
d. Must audit at least 40 percent of total federal awards expended unless the auditee is classified as low risk.
13. The reporting package for a single audit consists of all of the following except a
a. Schedule of expenditures of federal awards.
b. Summary schedule of prior audit findings.
c. SFAC data collection form.
d. Corrective action plan.

Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...

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Related Book For  answer-question

Accounting for Governmental and Nonprofit Entities

ISBN: 978-1259917059

18th edition

Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely

Question Details
Chapter # 11- Auditing of Government and Not?for?Profit Organiza
Section: Questions
Problem: 19
Posted Date: November 10, 2018 12:11:42