CGFO Auditing Standards 2 — Questions and Answers
Question 1: Which GAGAS standard requires auditors to maintain independence in both fact and appearance?
- Field work standard
- General standard (Correct answer)
- Reporting standard
- Performance standard
Correct answer: General standard
GAGAS general standards require auditors to be independent in fact and appearance throughout the audit.
Question 2: Under Yellow Book standards, a financial audit of a government entity must be performed in accordance with:
- GAAS only
- GAGAS and GAAS (Correct answer)
- GAGAS only
- IFRS auditing standards
Correct answer: GAGAS and GAAS
Government financial audits must comply with both GAGAS (Yellow Book) and GAAS (AU-C sections), as GAGAS builds upon GAAS.
Question 3: A performance audit finding must contain which four elements according to GAGAS?
- Condition, criteria, cause, effect (Correct answer)
- Opinion, scope, timing, evidence
- Risk, control, test, result
- Objective, approach, sample, conclusion
Correct answer: Condition, criteria, cause, effect
GAGAS requires performance audit findings to include condition, criteria, cause, and effect to give a complete picture.
Question 4: What is the primary purpose of an attestation engagement under GAGAS?
- To issue an opinion on internal controls only
- To report on a subject matter or assertion made by another party (Correct answer)
- To conduct a comprehensive performance review
- To audit financial statements prepared by management
Correct answer: To report on a subject matter or assertion made by another party
Attestation engagements involve reporting on subject matter or an assertion about that subject matter that is the responsibility of another party.
Question 5: Under GAGAS, which type of audit opinion indicates that financial statements are presented fairly in all material respects?
- Adverse opinion
- Disclaimer of opinion
- Qualified opinion
- Unmodified opinion (Correct answer)
Correct answer: Unmodified opinion
An unmodified (clean) opinion means the financial statements conform to GAAP and are free of material misstatement.
Question 6: The concept of 'materiality' in government auditing refers to:
- The physical size of financial records
- The significance of a misstatement that could influence decisions of users (Correct answer)
- The number of transactions tested during fieldwork
- The dollar threshold set by the Government Accountability Office
Correct answer: The significance of a misstatement that could influence decisions of users
Materiality is the magnitude of an omission or misstatement that would likely influence decisions made by users of the financial statements.
Question 7: Which GAGAS requirement mandates that auditors document their quality control procedures?
- Fieldwork standards
- Reporting standards
- General standards (Correct answer)
- Supplemental standards
Correct answer: General standards
GAGAS general standards include the requirement for audit organizations to establish and document a system of quality control.
CGFO Auditing Standards 2
Which GAGAS standard requires auditors to maintain independence in both fact and appearance?