Internal Controls and Government Auditing Flashcards

Which federal law established Chief Financial Officers (CFOs) in major federal agencies and required audited financial statements?

Answer: Chief Financial Officers Act of 1990

The CFO Act of 1990 established CFO positions in 24 major federal agencies and required the preparation and audit of agency financial statements.

What is the primary objective of a 'performance audit' in government?

Answer: Providing an independent assessment of program economy, efficiency, and effectiveness

A performance audit objectively examines whether government programs and activities are achieving their intended results economically, efficiently, and effectively.

What is an 'attestation engagement' under government auditing standards?

Answer: An engagement in which the auditor issues a report on subject matter or assertions made by another party

An attestation engagement is an examination, review, or agreed-upon procedures engagement in which an auditor reports on subject matter or assertions made by another party.

Under OMB Circular A-123, what is the primary management tool for federal agencies regarding internal controls?

Answer: The agency's annual assurance statement on internal controls and financial systems

OMB Circular A-123 requires agency heads to assess, improve, and report on internal controls, culminating in an annual assurance statement included in the agency's Performance and Accountability Report.

What is the role of Inspectors General (IGs) in the federal government?

Answer: Conducting independent audits, investigations, and inspections to prevent and detect fraud, waste, and abuse

Inspectors General conduct independent oversight of their agencies through audits and investigations to detect fraud, waste, and abuse and improve efficiency.

What does 'segregation of duties' mean in the context of internal controls?

Answer: Dividing key tasks among multiple individuals so no single person controls all aspects of a transaction

Segregation of duties divides transaction responsibilities — such as authorization, recording, and custody — among different individuals to reduce the risk of error or fraud.