CGAP Types of Auditing 4 — Questions and Answers
Question 1: Which of the following is NOT typically an objective of a financial audit under Government Auditing Standards?
- Expressing an opinion on the fair presentation of financial statements
- Evaluating internal controls over financial reporting
- Assessing whether program goals are being achieved (Correct answer)
- Reporting on compliance with laws affecting financial statements
Correct answer: Assessing whether program goals are being achieved
Assessing program goal achievement is a performance audit objective, not a financial audit objective.
Question 2: An audit that examines whether a public school district's special education program reaches all eligible students and serves them equitably addresses which performance audit criterion?
- Economy
- Efficiency
- Effectiveness
- Equity (Correct answer)
Correct answer: Equity
Equity audits assess whether government services are provided fairly and reach all segments of the population entitled to them.
Question 3: The Single Audit Act requires that recipients of federal awards above a certain threshold undergo which type of audit?
- A performance audit focused on program outcomes
- A financial audit and compliance audit covering federal programs (Correct answer)
- An investigative audit for fraud detection
- An operational audit of internal processes
Correct answer: A financial audit and compliance audit covering federal programs
The Single Audit combines financial statement auditing with compliance testing for federal programs to provide assurance to federal grantor agencies.
Question 4: Which concept best explains why a performance audit of a job training program might examine both the number of graduates placed in jobs and the quality of those jobs?
- Economy requires tracking costs per participant
- Effectiveness requires measuring both outputs and outcomes (Correct answer)
- Compliance requires verifying participant eligibility
- Efficiency requires benchmarking against similar programs
Correct answer: Effectiveness requires measuring both outputs and outcomes
Effectiveness audits measure whether programs achieve intended outcomes, including quality of results, not just numerical counts.
Question 5: A government auditor reviews payroll records, interviews employees, and analyzes timekeeping systems to determine whether the agency is overpaying for labor. This is primarily an example of:
- Compliance audit
- Financial audit
- Economy and efficiency audit (Correct answer)
- Investigative audit
Correct answer: Economy and efficiency audit
Analyzing labor costs and whether the agency is overpaying examines the economy of resource use, a key objective of economy audits.
Question 6: Which of the following best describes the role of criteria in a performance audit?
- Criteria are audit findings that must be reported to management
- Criteria are the standards or benchmarks against which auditor evidence is compared to form conclusions (Correct answer)
- Criteria are the laws and regulations that determine compliance
- Criteria are the audit objectives established by the legislature
Correct answer: Criteria are the standards or benchmarks against which auditor evidence is compared to form conclusions
In performance audits, criteria are the standards, benchmarks, or expectations against which actual conditions are measured.
Question 7: An auditor discovers irregularities suggesting that a public official may have diverted grant funds for personal use. The auditor should:
- Immediately suspend the audit and await law enforcement direction
- Document the indicators, notify appropriate officials, and consider referring the matter for investigation (Correct answer)
- Include the finding in the routine performance audit report without special treatment
- Ignore the finding if it does not affect the financial statements materially
Correct answer: Document the indicators, notify appropriate officials, and consider referring the matter for investigation
When auditors detect indications of fraud, they must document indicators, notify management or those charged with governance, and consider referral for investigation.
CGAP Types of Auditing 4
Which of the following is NOT typically an objective of a financial audit under Government Auditing Standards?