CGAP CGAP 2 — Questions and Answers
Question 1: A government auditor discovers that a department has been using petty cash funds for unauthorized purchases. Which audit procedure best addresses this finding?
- Issue a formal audit finding and recommend policy training (Correct answer)
- Immediately report the matter to law enforcement
- Disregard it if the amount is below materiality threshold
- Transfer the finding to the department's supervisor without documentation
Correct answer: Issue a formal audit finding and recommend policy training
Formal audit findings with recommendations for corrective action, including policy training, are the appropriate response to control violations.
Question 2: Under GAGAS, which of the following best describes 'significant deficiency' in internal control?
- A deficiency less severe than a material weakness but important enough to merit attention by those charged with governance (Correct answer)
- Any control failure that results in a financial loss
- A deficiency that automatically requires criminal referral
- A weakness identified only during financial audits
Correct answer: A deficiency less severe than a material weakness but important enough to merit attention by those charged with governance
A significant deficiency is less severe than a material weakness but still warrants attention from those charged with governance.
Question 3: What is the primary purpose of an attestation engagement in government auditing?
- To examine and report on a subject matter or assertion made by another party (Correct answer)
- To conduct a full financial statement audit
- To investigate fraud allegations
- To review compliance with appropriations laws
Correct answer: To examine and report on a subject matter or assertion made by another party
Attestation engagements involve examining, reviewing, or performing agreed-upon procedures on subject matter or assertions prepared by another party.
Question 4: Which concept requires government auditors to communicate significant matters arising during an audit even if not required by the audit's original scope?
- Reporting of fraud, noncompliance, and abuse (Correct answer)
- Audit risk assessment
- Engagement letter requirements
- Peer review standards
Correct answer: Reporting of fraud, noncompliance, and abuse
GAGAS requires auditors to report fraud, illegal acts, violations, and abuse discovered during the engagement regardless of scope.
Question 5: A government entity receives a federal grant. Which body's standards govern the audit of federal grant expenditures?
- The Office of Management and Budget's Uniform Guidance (2 CFR Part 200) (Correct answer)
- The Financial Accounting Standards Board (FASB)
- The Public Company Accounting Oversight Board (PCAOB)
- The Institute of Internal Auditors (IIA)
Correct answer: The Office of Management and Budget's Uniform Guidance (2 CFR Part 200)
2 CFR Part 200 (Uniform Guidance) establishes audit requirements for entities expending federal awards.
Question 6: When planning a performance audit, which element is established first?
- Audit objectives (Correct answer)
- Audit criteria
- Evidence collection methods
- Reporting format
Correct answer: Audit objectives
Audit objectives must be established first because they drive the selection of criteria, evidence collection methods, and reporting format.
Question 7: An auditor-in-charge learns that a key auditee staff member is their former college roommate. The appropriate action is to:
- Disclose the relationship to audit management and assess whether independence is impaired (Correct answer)
- Continue the audit since a personal relationship does not affect professional judgment
- Recuse from the audit without notifying management
- Limit contact with the staff member during fieldwork
Correct answer: Disclose the relationship to audit management and assess whether independence is impaired
Auditors must disclose relationships that could impair independence so management can assess and document the impact.
CGAP CGAP 2
A government auditor discovers that a department has been using petty cash funds for unauthorized purchases.
Which audit procedure best addresses this finding?