CGAP CGAP 5 — Questions and Answers
Question 1: An audit organization conducting a peer review must have the review completed at least once every:
- Three years (Correct answer)
- Two years
- Five years
- One year
Correct answer: Three years
GAGAS requires audit organizations to have an external peer review at least once every three years.
Question 2: Which of the following best represents the concept of 'materiality' in a government financial audit context?
- The magnitude of an omission or misstatement that could influence the judgment of a reasonable user of the financial statements (Correct answer)
- Any amount exceeding 5% of total expenditures
- Errors that management has deemed significant
- Amounts that exceed the single audit threshold
Correct answer: The magnitude of an omission or misstatement that could influence the judgment of a reasonable user of the financial statements
Materiality is a judgment about the significance of information to reasonable users' decision-making, not a fixed percentage.
Question 3: A government auditor is testing compliance with grant requirements. The appropriate criteria for the audit would be:
- The terms of the grant agreement and applicable federal regulations (Correct answer)
- Generally accepted accounting principles (GAAP)
- The auditor's professional judgment about best practices
- Criteria established by the auditee's internal policy
Correct answer: The terms of the grant agreement and applicable federal regulations
Compliance with grant requirements is evaluated against the grant agreement and applicable laws and regulations such as Uniform Guidance.
Question 4: When government auditors communicate findings, which four attributes are generally required?
- Criteria, condition, cause, and effect (or potential effect) (Correct answer)
- Objective, scope, methodology, and conclusion
- Risk, control, test, and result
- Input, process, output, and outcome
Correct answer: Criteria, condition, cause, and effect (or potential effect)
GAGAS requires audit findings to include criteria (what should be), condition (what is), cause (why), and effect (impact).
Question 5: A government auditor uses data analytics to identify anomalies in a large dataset of vendor payments. This technique best exemplifies:
- Computer-assisted audit techniques (CAATs) (Correct answer)
- Statistical attribute sampling
- Walk-through testing
- Substantive analytical procedures
Correct answer: Computer-assisted audit techniques (CAATs)
CAATs include using software tools to analyze large volumes of data, identify patterns, and flag anomalies for further investigation.
Question 6: Which of the following is an example of an economy audit objective in a government performance audit?
- Assessing whether the agency acquired resources at the lowest cost for the required quality (Correct answer)
- Determining whether the program achieved its legislatively mandated outcomes
- Evaluating whether outputs were produced with the minimum amount of inputs
- Reviewing whether funds were spent in compliance with appropriations law
Correct answer: Assessing whether the agency acquired resources at the lowest cost for the required quality
Economy focuses on acquiring resources (inputs) at the lowest cost consistent with required quality, not on what is produced with those resources.
Question 7: An auditor concludes that sufficient appropriate evidence cannot be obtained to support the audit objective. The auditor should:
- Issue a qualified or disclaimer of opinion and disclose the scope limitation in the report (Correct answer)
- Complete the report based on available evidence without disclosure
- Withdraw from the engagement without issuing a report
- Expand testing until enough evidence is gathered regardless of cost
Correct answer: Issue a qualified or disclaimer of opinion and disclose the scope limitation in the report
A scope limitation that prevents obtaining sufficient evidence requires the auditor to qualify or disclaim the opinion and disclose the limitation.
CGAP CGAP 5
An audit organization conducting a peer review must have the review completed at least once every: