Auditing & Corporate Governance Flashcards

A government auditor's 'professional skepticism' is BEST demonstrated by:

Answer: Critically assessing audit evidence without accepting it at face value, regardless of past experience

Professional skepticism means maintaining a questioning mind and critically evaluating evidence, neither assuming honesty nor dishonesty by default.

Under the Single Audit Act, a 'major program' determination is significant because:

Answer: Major programs must be audited in detail for compliance with federal requirements

The Single Audit Act requires detailed compliance auditing of major federal programs to ensure grant funds are used in accordance with applicable requirements.

Which governance body characteristic MOST supports audit committee effectiveness in a public sector entity?

Answer: Members have financial expertise and serve independently from management

An effective audit committee requires members with financial expertise who are independent from management to provide objective oversight.

In government performance auditing, 'economy' is measured by examining:

Answer: Whether inputs (resources) are acquired at the lowest reasonable cost while meeting quality standards

Economy focuses on input acquisition — obtaining the right quality and quantity of resources at the lowest reasonable cost.

When a government internal auditor has a 'self-review threat' to independence, the BEST mitigation is to:

Answer: Assign a different auditor who had no involvement in the work being reviewed

The most effective mitigation for a self-review threat is removing the auditor from reviewing their own prior work and assigning an independent auditor.

Which condition would cause a government auditor to issue a 'disclaimer of opinion' on financial statements?

Answer: Pervasive scope limitations that prevent gathering sufficient appropriate evidence

A disclaimer of opinion is issued when scope limitations are so pervasive that the auditor cannot obtain sufficient evidence to form any opinion.

A CGAP exam scenario shows that a government entity's board receives audit reports but takes no corrective action. This represents a failure in which governance function?

Answer: Oversight and accountability

Failing to act on audit findings is a breakdown in oversight and accountability — a core governance responsibility of the board.