CGAP MCQ 2 — Questions and Answers
Question 1: Which type of government audit focuses on whether programs are achieving their intended results?
- Financial audit
- Compliance audit
- Performance audit (Correct answer)
- Operational audit
Correct answer: Performance audit
Performance audits examine whether government programs are effective, efficient, and achieving their stated objectives.
Question 2: Under the Yellow Book, which standard requires auditors to report all known or likely fraud affecting the financial statements?
- Fieldwork standards
- Reporting standards (Correct answer)
- General standards
- Peer review standards
Correct answer: Reporting standards
Yellow Book reporting standards require auditors to communicate fraud findings that are material to the financial statements.
Question 3: A government auditor discovers that a department head has been approving her own expense reimbursements. This is best described as:
- An accounting error
- A segregation of duties weakness (Correct answer)
- A documentation deficiency
- A budget variance
Correct answer: A segregation of duties weakness
Allowing one person to both initiate and approve transactions violates the segregation of duties internal control principle.
Question 4: In government auditing, 'materiality' for a compliance audit is typically determined based on:
- Net income thresholds
- Quantitative and qualitative factors related to the specific law or regulation (Correct answer)
- A fixed dollar amount set by the legislature
- The auditor's prior year materiality level
Correct answer: Quantitative and qualitative factors related to the specific law or regulation
Compliance audit materiality considers both quantitative thresholds and qualitative factors such as the sensitivity of the legal requirement.
Question 5: Which element is NOT typically included in a government audit report prepared under GAGAS?
- A statement on compliance with GAGAS
- The auditor's opinion or findings
- Management's corrective action plan (Correct answer)
- The scope of the audit
Correct answer: Management's corrective action plan
Management's corrective action plan may be included as a response but is not a required element of the auditor's report under GAGAS.
Question 6: The concept of 'economy' in government performance auditing refers to:
- Achieving program goals with minimum output
- Acquiring resources at the lowest appropriate cost (Correct answer)
- Maximizing revenues collected
- Balancing the government budget
Correct answer: Acquiring resources at the lowest appropriate cost
Economy means acquiring the right resources in the right quantity and quality at the best price at the right time.
Question 7: When a CGAP auditor identifies a significant deficiency in internal controls, the auditor must:
- Immediately suspend the audit
- Report it only to the audit committee
- Communicate it in writing to management and those charged with governance (Correct answer)
- Keep it confidential until the final report
Correct answer: Communicate it in writing to management and those charged with governance
GAGAS requires written communication of significant deficiencies to management and those charged with governance.
CGAP MCQ 2
Which type of government audit focuses on whether programs are achieving their intended results?