CGFO Auditing Standards 5 — Questions and Answers
Question 1: A government auditor is performing a compliance audit under the Single Audit. Which document provides the compliance requirements for federal programs?
- The Yellow Book (GAGAS)
- OMB's Compliance Supplement (Correct answer)
- The Federal Register
- The entity's grant agreements only
Correct answer: OMB's Compliance Supplement
OMB's Compliance Supplement identifies applicable compliance requirements and suggested audit procedures for major federal programs.
Question 2: Under GAGAS, which of the following is considered a 'nonaudit service' that could impair independence?
- Reviewing audit documentation prepared by another team
- Preparing the financial statements subject to the audit (Correct answer)
- Providing a second review of audit opinions
- Conducting a peer review of another audit firm
Correct answer: Preparing the financial statements subject to the audit
Preparing financial statements that the auditor will then audit creates a self-review threat and is a management responsibility that impairs independence under GAGAS.
Question 3: What is 'audit risk' in the context of government financial audits?
- The risk that the government will dispute audit findings
- The risk that the auditor expresses an incorrect opinion on material misstatement (Correct answer)
- The risk that audit costs will exceed the budget
- The risk that fraud will not be detected by management
Correct answer: The risk that the auditor expresses an incorrect opinion on material misstatement
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
Question 4: Under the Single Audit Act, which entity oversees the Federal Audit Clearinghouse?
- Government Accountability Office (GAO)
- Office of Management and Budget (OMB) (Correct answer)
- Department of the Treasury
- Office of Inspector General (OIG)
Correct answer: Office of Management and Budget (OMB)
OMB oversees the Federal Audit Clearinghouse, which collects and distributes Single Audit reporting packages for federal oversight agencies.
Question 5: Which of the following best characterizes a 'repeat finding' in a government audit?
- Any finding mentioned more than once in the same audit report
- A finding that also appeared in a prior-year audit and was not fully corrected (Correct answer)
- A finding identified by both internal and external auditors
- A finding that management disputes in their corrective action plan
Correct answer: A finding that also appeared in a prior-year audit and was not fully corrected
A repeat finding is one that was reported in a prior audit period and has not been adequately corrected, indicating persistent control or compliance weaknesses.
Question 6: GAGAS requires auditors to obtain 'sufficient, appropriate evidence.' The term 'appropriate' refers to:
- The quantity of evidence gathered during fieldwork
- The relevance and reliability of the evidence (Correct answer)
- Evidence obtained only from external third parties
- Evidence that supports only the auditor's preliminary conclusions
Correct answer: The relevance and reliability of the evidence
Appropriateness relates to the quality of evidence — its relevance to the audit objective and its reliability as a basis for conclusions.
Question 7: In a Single Audit, what is the purpose of the Schedule of Expenditures of Federal Awards (SEFA)?
- To list all federal employees working on grant-funded programs
- To summarize the entity's federal award activity during the fiscal year (Correct answer)
- To document audit procedures performed on each federal program
- To report the entity's requests for future federal funding
Correct answer: To summarize the entity's federal award activity during the fiscal year
The SEFA presents a comprehensive summary of the entity's federal award expenditures by program, which is used to determine major programs and audit scope.
CGFO Auditing Standards 5
A government auditor is performing a compliance audit under the Single Audit.
Which document provides the compliance requirements for federal programs?