CGAP CGAP 3 — Questions and Answers
Question 1: Which type of government audit evaluates whether a program is achieving its intended results?
- Performance audit (Correct answer)
- Financial audit
- Compliance audit
- Attestation engagement
Correct answer: Performance audit
Performance audits assess effectiveness by examining whether programs are achieving stated objectives and desired outcomes.
Question 2: Under GAGAS, continuing professional education (CPE) requirements for government auditors include at least how many hours every two years?
- 80 hours, with at least 24 in government auditing subjects (Correct answer)
- 40 hours total with no subject restriction
- 60 hours total with 20 in ethics
- 100 hours with 50 in financial auditing
Correct answer: 80 hours, with at least 24 in government auditing subjects
GAGAS requires 80 CPE hours per two-year period, with at least 24 hours directly related to the government environment or government auditing.
Question 3: Which risk is defined as the probability that a material misstatement exists in a financial statement before considering internal controls?
- Inherent risk (Correct answer)
- Control risk
- Detection risk
- Audit risk
Correct answer: Inherent risk
Inherent risk is the susceptibility of an assertion to material misstatement assuming no related internal controls.
Question 4: A government auditor is reviewing a procurement process and finds that the same employee approves purchase orders and processes payments. This is an example of:
- A lack of segregation of duties (Correct answer)
- An effective compensating control
- Proper dual authorization
- Adequate supervisory review
Correct answer: A lack of segregation of duties
Combining authorization and payment functions in one person violates the internal control principle of segregation of duties.
Question 5: What is the purpose of the Yellow Book's 'conceptual framework' for independence?
- To provide a principles-based approach for identifying and evaluating threats to independence (Correct answer)
- To list every specific relationship that impairs independence
- To define materiality thresholds for independence determinations
- To replace the need for ethics training
Correct answer: To provide a principles-based approach for identifying and evaluating threats to independence
The conceptual framework guides auditors in identifying threats, evaluating their significance, and applying safeguards rather than relying on a rules-based list.
Question 6: In a single audit under 2 CFR Part 200, what threshold of federal expenditures triggers the audit requirement?
- $750,000 in federal expenditures in a fiscal year (Correct answer)
- $500,000 in federal expenditures in a fiscal year
- $1,000,000 in federal expenditures in a fiscal year
- $250,000 in federal expenditures in a fiscal year
Correct answer: $750,000 in federal expenditures in a fiscal year
Entities that expend $750,000 or more in federal awards during a fiscal year must have a single audit or program-specific audit.
Question 7: Which element of the COSO internal control framework addresses the organization's ethical values and commitment to competence?
- Control environment (Correct answer)
- Risk assessment
- Control activities
- Monitoring activities
Correct answer: Control environment
The control environment is the foundation of internal control, encompassing tone at the top, ethical values, and competence.
CGAP CGAP 3
Which type of government audit evaluates whether a program is achieving its intended results?