GAC Auditing Principles & Procedures 3

Question 1

Which risk model component represents the probability that a material misstatement will not be prevented or detected by internal control?

Accepted Answer

Control risk

Answer

Control risk is the probability that a material misstatement will not be prevented, or detected and corrected, on a timely basis by internal controls.

Question 2

A governmental auditor notes that the same employee approves purchase orders and signs vendor checks. This violates which internal control principle?

Accepted Answer

Segregation of duties

Answer

Having one employee both approve purchases and issue payments violates segregation of duties, which requires incompatible functions be performed by different individuals.

Question 3

Under the Uniform Guidance (2 CFR Part 200), what is the threshold for a non-federal entity to be classified as a 'large' auditee subject to Single Audit?

Accepted Answer

$750,000 in federal expenditures

Answer

Under 2 CFR Part 200, non-federal entities that expend $750,000 or more in federal awards during a fiscal year must have a Single Audit.

Question 4

When auditing a government's pension obligations under GASB 68, which data source is most critical to verify?

Accepted Answer

Actuarial reports from the pension plan

Answer

Actuarial reports are the primary source for verifying pension obligations under GASB 68 because they contain the net pension liability calculations and key assumptions.

Question 5

An auditor finds that a city improperly recorded a capital lease as an operating expense. Which financial statement assertion is violated?

Accepted Answer

Classification

Answer

Recording a capital lease as an operating expense violates the classification assertion, which requires transactions to be recorded in the proper accounts.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Auditing Principles & Procedures 3