GAC Internal Controls & Auditing in Governmental Entities 2

Question 1

Under the Yellow Book (GAGAS), which standard requires auditors to document their understanding of the entity's internal controls?

Accepted Answer

Generally Accepted Government Auditing Standards fieldwork requirements

Answer

GAGAS fieldwork standards require auditors to obtain and document sufficient understanding of internal controls relevant to the audit objectives.

Question 2

A governmental entity's internal audit function reports directly to the city council rather than management. This arrangement is BEST described as:

Accepted Answer

Organizational independence

Answer

Reporting to the governing body rather than management enhances organizational independence for the internal audit function.

Question 3

Which component of COSO's internal control framework addresses the policies and procedures that ensure management directives are carried out?

Accepted Answer

Control Activities

Answer

Control Activities are the actions established through policies and procedures that help ensure management directives to mitigate risks are carried out.

Question 4

During a Single Audit, the threshold for a program to be classified as a Type A program is federal expenditures exceeding:

Accepted Answer

$1,000,000 or 3% of total federal expenditures

Answer

Under the Uniform Guidance, Type A programs are those with federal expenditures exceeding the larger of $750,000 or 3% of total federal expenditures for larger entities, but the standard threshold is $750,000.

Question 5

A government auditor discovers that purchase orders are approved by the same employee who receives goods and processes payment. This represents a failure in:

Accepted Answer

Segregation of duties

Answer

Segregation of duties requires that authorization, custody, and recording functions be performed by different individuals to prevent errors and fraud.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Internal Controls & Auditing in Governmental Entities 2