CGFO Auditing Standards 4 — Questions and Answers
Question 1: Under GAGAS, which situation would most likely impair an auditor's independence?
- Auditing a department the firm helped design internal controls for two years ago (Correct answer)
- Having a former employee of the auditee on the audit team who left three years prior
- Performing non-audit services that are not significant to the audit subject
- Providing training on accounting software not related to the audit
Correct answer: Auditing a department the firm helped design internal controls for two years ago
Auditing systems or controls that the audit organization designed creates a self-review threat that impairs independence under GAGAS.
Question 2: What is the required CPE hours for government auditors under GAGAS every two years?
- 40 hours total, 20 in government subjects
- 80 hours total, 24 in government auditing (Correct answer)
- 60 hours total, 30 in government finance
- 100 hours total, 40 in auditing
Correct answer: 80 hours total, 24 in government auditing
GAGAS requires auditors to complete 80 hours of CPE every two years, with at least 24 hours specifically in government auditing, financial management, or the government environment.
Question 3: An auditor discovers potential fraud during a performance audit. Under GAGAS, the auditor should:
- Immediately notify law enforcement and cease the audit
- Report the fraud suspicion to an appropriate level of management and possibly external authorities (Correct answer)
- Include the suspicion in the audit report without notifying management
- Expand audit procedures and only report confirmed fraud
Correct answer: Report the fraud suspicion to an appropriate level of management and possibly external authorities
GAGAS requires auditors to communicate fraud indications to appropriate management levels and, in some cases, to external authorities such as funding agencies.
Question 4: Which of the following best describes 'program results' in the context of a government performance audit?
- The financial balances reported in the fund statements
- Whether the program achieved its intended outcomes and was cost-effective (Correct answer)
- The number of compliance violations found during testing
- The accuracy of grant expenditure reporting
Correct answer: Whether the program achieved its intended outcomes and was cost-effective
Performance audits assess whether government programs are achieving intended outcomes efficiently and effectively, not just financial accuracy.
Question 5: Under Uniform Guidance, federal auditees must submit their Single Audit reporting package within how many days after the fiscal year end?
- 120 days
- 150 days
- 180 days (Correct answer)
- 365 days
Correct answer: 180 days
The Single Audit reporting package must be submitted to the Federal Audit Clearinghouse within 30 calendar days after receipt of the auditor's reports, but no later than 9 months (approximately 270 days) — the standard submission deadline is 9 months after fiscal year end, but most agencies target the 180-day mark for timeliness.
Question 6: In government auditing, the term 'economy and efficiency' audit refers to:
- Determining whether the entity prepared its budget economically
- Assessing whether resources are acquired at reasonable cost and used without waste (Correct answer)
- Auditing whether financial efficiency ratios meet benchmarks
- Reviewing the cost of the audit itself relative to findings
Correct answer: Assessing whether resources are acquired at reasonable cost and used without waste
Economy and efficiency audits examine whether government programs acquire resources at reasonable costs and use them with minimal waste.
Question 7: Which standard governs the reporting of findings, conclusions, and recommendations in a GAGAS performance audit report?
- GAGAS fieldwork standards
- GAGAS reporting standards (Correct answer)
- OMB Circular A-123
- AICPA AU-C Section 265
Correct answer: GAGAS reporting standards
GAGAS reporting standards specify the required elements of performance audit reports, including findings, conclusions, and recommendations.
CGFO Auditing Standards 4
Under GAGAS, which situation would most likely impair an auditor's independence?