CGAP Types of Auditing 2 — Questions and Answers
Question 1: A government auditor is asked to evaluate whether a state agency's workforce development program is achieving its stated goal of reducing unemployment. Which audit type is most appropriate?
- Financial audit
- Compliance audit
- Performance audit (Correct answer)
- Investigative audit
Correct answer: Performance audit
A performance audit evaluates whether programs are achieving their intended outcomes, such as reducing unemployment.
Question 2: Which of the following best distinguishes an attestation engagement from a performance audit?
- Attestation engagements always examine financial data, while performance audits examine programs
- In attestation engagements, the auditor reports on a subject matter or assertion made by another party (Correct answer)
- Performance audits require a written management response, while attestation engagements do not
- Attestation engagements are conducted only by external auditors
Correct answer: In attestation engagements, the auditor reports on a subject matter or assertion made by another party
In attestation engagements, the auditor provides assurance on a subject matter or an assertion made by a responsible party, not the auditor's own findings.
Question 3: An audit team reviews a city's grant expenditures to ensure federal funds were spent in accordance with the grant agreement. This is an example of:
- Economy and efficiency audit
- Program audit
- Compliance audit (Correct answer)
- Operational audit
Correct answer: Compliance audit
Compliance audits determine whether entities are following applicable laws, regulations, and agreements such as grant requirements.
Question 4: Under the Yellow Book, which type of audit work includes examining financial statements to determine whether they are presented fairly in conformity with GAAP?
- Financial audits (Correct answer)
- Performance audits
- Attestation engagements
- Investigative audits
Correct answer: Financial audits
Financial audits under the Yellow Book include examination of financial statements for fair presentation in accordance with GAAP or other applicable frameworks.
Question 5: A county internal auditor conducts an engagement to assess whether the purchasing department is following competitive bidding procedures. Which audit classification best applies?
- Financial audit
- Compliance audit (Correct answer)
- Economy audit
- Fraud examination
Correct answer: Compliance audit
Checking adherence to bidding procedures is a compliance audit, as it measures conformity with established rules.
Question 6: An auditor is evaluating whether a public transit agency is acquiring fuel at the lowest reasonable cost while maintaining service quality. This audit addresses which performance audit objective?
- Effectiveness
- Compliance
- Economy (Correct answer)
- Equity
Correct answer: Economy
Economy audits assess whether resources are acquired at minimum cost while meeting quality requirements.
Question 7: Which statement is true about operational audits in government?
- They are limited to reviewing internal controls over financial reporting
- They focus on the efficiency and effectiveness of government operations and programs (Correct answer)
- They are only conducted by external audit firms
- They cannot include recommendations for process improvement
Correct answer: They focus on the efficiency and effectiveness of government operations and programs
Operational audits broadly examine how well government operations function, including efficiency, effectiveness, and management practices.
CGAP Types of Auditing 2
A government auditor is asked to evaluate whether a state agency's workforce development program is achieving its stated goal of reducing unemployment.
Which audit type is most appropriate?