CGFM Internal Controls and Government Auditing 2 — Questions and Answers
Question 1: Which federal law established Chief Financial Officers (CFOs) in major federal agencies and required audited financial statements?
- Government Performance and Results Act of 1993
- Federal Financial Management Improvement Act of 1996
- Chief Financial Officers Act of 1990 (Correct answer)
- Accountability of Tax Dollars Act of 2002
Correct 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.
Question 2: What is the primary objective of a 'performance audit' in government?
- Expressing an opinion on financial statements
- Providing an independent assessment of program economy, efficiency, and effectiveness (Correct answer)
- Detecting fraud and improper payments
- Verifying compliance with appropriations law
Correct 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.
Question 3: What is an 'attestation engagement' under government auditing standards?
- A commitment by auditors to find fraud
- An engagement in which the auditor issues a report on subject matter or assertions made by another party (Correct answer)
- A contract between the government and an audit firm
- An agreement to provide consulting services
Correct 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.
Question 4: Under OMB Circular A-123, what is the primary management tool for federal agencies regarding internal controls?
- The President's Management Agenda
- The agency's annual assurance statement on internal controls and financial systems (Correct answer)
- The Inspector General's semiannual report
- The agency's strategic plan
Correct 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.
Question 5: What is the role of Inspectors General (IGs) in the federal government?
- Setting accounting standards for federal agencies
- Conducting independent audits, investigations, and inspections to prevent and detect fraud, waste, and abuse (Correct answer)
- Approving agency budgets before submission to OMB
- Certifying financial statements for the financial report
Correct 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.
Question 6: What does 'segregation of duties' mean in the context of internal controls?
- Separating federal employees by security clearance level
- Dividing key tasks among multiple individuals so no single person controls all aspects of a transaction (Correct answer)
- Assigning different auditors to different agencies
- Separating budget execution from budget formulation
Correct 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.
CGFM Internal Controls and Government Auditing 2
Which federal law established Chief Financial Officers (CFOs) in major federal agencies and required audited financial statements?