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| 1.
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Which of the following is unique to governmental auditing (compared to auditing in the private sector)? |
| | A) | testing of transactions |
| | B) | analyzing internal controls |
| | C) | issuing audit reports |
| | D) | distribution of reports and availability of working papers to federal and state funding authorities |
| | E) | none of the above |
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| 2.
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Which of the following statements about auditing standards is NOT true? |
| | A) | A state or local government is subject to Government Auditing Standards (GAGAS) and Statements on Auditing Standards (GAAS). |
| | B) | Government Auditing Standards are issued by the Governmental Accounting Standards Board. |
| | C) | Statements on Auditing Standards are issued by the American Institute of Certified Public Accountants. |
| | D) | Government Auditing Standards incorporate GAAS and provide extensions due to the unique nature of public entities. |
| | E) | All of the above are true |
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| 3.
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Which of the following engagement types might include reporting on an entity's compliance with laws and regulations or prospective financial information? |
| | A) | a financial audit |
| | B) | an attestation engagement |
| | C) | a performance audit |
| | D) | nonaudit services |
| | E) | none of the above |
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| 4.
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Which of the following is NOT one of the four categories of professional engagements identified by Government Auditing Standards? |
| | A) | compilation and review |
| | B) | attestation engagements |
| | C) | financial audits |
| | D) | nonaudit services |
| | E) | performance audits |
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| 5.
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Which of the following is true of auditing state and local governments? |
| | A) | Standards for fieldwork and reporting prescribed by the AICPA do not apply |
| | B) | Government auditing standards are less rigorous than those prescribed by the AICPA |
| | C) | Auditors communicate not only with the auditee, but also with parties having oversight responsibility |
| | D) | Nonaudit services are clearly specified in Government Auditing Standards |
| | E) | all of the above are true |
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| 6.
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Which of the following is true about government attestation engagements? |
| | A) | The AICPA's attestation standards do not apply. |
| | B) | They may include a report on an entity's internal controls. |
| | C) | Government Auditing Standards do not apply to attestation engagements. |
| | D) | They may address only financial objectives. |
| | E) | They do not address issues of compliance. |
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| 7.
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Which of the following is true about governmental performance audits? |
| | A) | They closely resemble private sector financial statement audits. |
| | B) | They typically seek to determine program effectiveness and/or efficiency. |
| | C) | They typically focus on accounting information and require only the expertise of accountants. |
| | D) | They are typically performed at least annually for a given governmental entity. |
| | E) | all of the above are true |
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| 8.
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Which of the following is true with respect to reporting on a governmental unit? |
| | A) | In no instance is a single fund considered an opinion unit. |
| | B) | Governmental activities combined with business-type activities comprise one opinion unit. |
| | C) | An auditor may not report an unqualified opinion on the aggregate of all discretely presented component units unless the government-wide statements as a whole are given an unqualified opinion. |
| | D) | An auditor may report an unqualified opinion of governmental activities even if an enterprise fund is deserving of an adverse opinion. |
| | E) | all of the above are true |
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| 9.
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In addition to an opinion on the financial statements, a government auditor might be required to report on which of the following? |
| | A) | views of responsible officials of the auditee regarding deficiencies |
| | B) | instances of fraud, illegal acts, or noncompliance |
| | C) | evaluation and testing of internal controls |
| | D) | deficiencies in internal controls |
| | E) | all of the above |
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| 10.
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Which of the following is true about the auditor's report for a state or local government? |
| | A) | The auditor's opinion only covers the government-wide financial statements. |
| | B) | The first paragraph should indicate which financial statements were audited. |
| | C) | Professional standards do not require the auditor to read the statistical section and other nonrequired portions of the comprehensive annual financial report (CAFR). |
| | D) | The auditor should express an opinion on required supplemental information only if the auditor has prepared this information. |
| | E) | All of the above are true. |
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| 11.
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Which of the following does NOT belong in the second paragraph of an audit report for a governmental entity? |
| | A) | An explanation of the extent to which the auditor evaluated required supplementary information |
| | B) | A statement that the auditor believes that the audit provides a reasonable basis for the opinion |
| | C) | A statement that the audit was conducted in accordance with generally accepted auditing standards |
| | D) | A statement that the audit includes an evaluation of the overall financial statement presentation |
| | E) | All of the above are included in the second paragraph |
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| 12.
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In which of the following situations should an auditor issue a disclaimer of opinion? |
| | A) | The records of one federal grant received by the state or local government were not available for inspection. The grant was one of several received by the auditee and was not significant in amount. |
| | B) | The financial statements depart significantly from generally accepted accounting principles. |
| | C) | The auditor is not independent. |
| | D) | A severe scope limitation exists. |
| | E) | Both C and D are grounds for a disclaimer of opinion. |
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| 13.
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The Single Audit Act, as amended in 1996, applies to |
| | A) | Any state or local government or private not-for-profit organization that receives federal financial assistance in excess of $500,000 |
| | B) | Any state or local government or private not-for-profit organization receiving federal financial assistance in excess of $100,000 |
| | C) | Only state and local governments receiving/spending federal financial assistance |
| | D) | Only non-governmental not-for-profit organizations receiving/spending federal financial assistance |
| | E) | none of the above |
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| 14.
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The objective of the Single Audit process is: |
| | A) | to ensure that a single audit firm performs the audit for an organization affected by the Act. |
| | B) | to ensure that every federal grant is audited separately. |
| | C) | to provide assurance to the federal government that governmental grants are expended in accordance with applicable laws and regulations. |
| | D) | to provide assurance that governmental or not-for-profit financial statements comply with generally accepted accounting principles (GAAP). |
| | E) | all of the above. |
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| 15.
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Which of the following would NOT be required of a cognizant agency? |
| | A) | to resolve audit findings |
| | B) | to issue the audit report |
| | C) | to resolve questioned costs |
| | D) | to monitor the audit process |
| | E) | all of the above would be required |
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| 16.
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Which of the following is true about major programs? |
| | A) | They are identified based on size and risk considerations. |
| | B) | Major programs must add up to at least 80% of the federal funds expended by the auditee. |
| | C) | A Type A program is considered low risk. |
| | D) | Type B programs are relatively large. |
| | E) | all of the above are true |
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| 17.
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Which of the following activities would NOT be classified as a 501(c)(3) organization? |
| | A) | a church |
| | B) | a literary society |
| | C) | The Society for the Prevention of Cruelty to Animals |
| | D) | a campaign committee to re-elect a city council member |
| | E) | all of the above |
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| 18.
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Which of the following would NOT be classified as a public charity? |
| | A) | a church |
| | B) | an organization funded and operated exclusively for public safety |
| | C) | a group created to pool resources to share in investment returns |
| | D) | a private not-for-profit school |
| | E) | an organization that receives more than one third of its support from a combination of contributions, membership fees, and gross receipts from exempt activities, and no more than one third of its support from a combination of investment income and net unrelated business income after taxes. |
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| 19.
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Which of the following is NOT true about a 501(c)(3) organization? |
| | A) | A 501(c)(3) organization is exempt from sales taxes. |
| | B) | Donations to a 501(c)(3) organization are tax deductible. |
| | C) | A 501(c)(3) organization must be organized as a corporation, trust, or association. |
| | D) | A 501(c)(3) organization must have an Employer Identification Number. |
| | E) | A 501(c)(3) organization is not tax exempt until notified by the IRS. |
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| 20.
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Organizations exempt under 501(c)(3) typically file Form 990 every year. Which of the following is true? |
| | A) | An exception is made if the organization has gross receipts less than $100,000. |
| | B) | Expenses reported on Form 990 are itemized by object. |
| | C) | Form 990 is filed confidentially; it is not open to public inspection. |
| | D) | Form 990 requires information about revenues and expenses, but it does not require a balance sheet. |
| | E) | Form 990 requires a list of officers, trustees, and key employees, as well as amounts paid to them. |
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| 21.
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Which of the following is true about Schedule A for a tax-exempt organization? |
| | A) | Disclosure of the five highest paid independent (professional) contractors is required. |
| | B) | The names and salaries of all employees earning over $50,000 must be disclosed. |
| | C) | It is filed separately from Form 990. |
| | D) | All of the above are true. |
| | E) | None of the above is true |
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| 22.
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Which of the following is true about public disclosures of not-for-profit organizations with 501(c)(3) status? |
| | A) | These organizations are required to provide only the most recent Form 990 filed by the organization. |
| | B) | The organization may not meet its public disclosure requirements by posting information on the Web. |
| | C) | The names and addresses of all contributors for the most recent year must be disclosed. |
| | D) | In addition to Form 990 and Schedule A, an exempt organization typically will have state filing requirements, as well. |
| | E) | All of the above are true. |
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| 23.
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Which of the following typically is NOT a condition that exempts income-producing activities from unrelated business income tax (UBIT)? |
| | A) | the activities produced income for a university from research performed for a governmental unit |
| | B) | the activities are conducted exclusively by employees of the organization |
| | C) | the activity consists of exchanging membership lists |
| | D) | the activity is not regularly carried on |
| | E) | all of the above conditions exempt income-producing activities from UBIT |
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| 24.
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The Senior Citizen Center of Salado is a 501(c)(3) organization that provides a wide variety of activities and services to senior citizens. The center formed a quilting guild for members, who began making and selling quilts to raise money for the center. The members included many skilled quilters, and the quilts soon were in high demand and a main source of revenue for the center. The quilts are made using fabric, thread, and other supplies donated by residents of the area. Much of the labor is done by volunteers, but some is done by paid staff (to meet the demand for quilts). All of the money raised from making quilts is used to support the activities of the senior citizen center. Which of the following is true? |
| | A) | Because the money from making quilts is used to support the programs of the center, it is exempt from unrelated business income tax (UBIT). |
| | B) | If volunteers perform most of the labor, the income from selling quilts would not be subject to UBIT. |
| | C) | If the quilts are made with donated materials, the income from selling them would not be subject to UBIT. |
| | D) | All of the above |
| | E) | B and C are both correct |
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| 25.
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The Internal Revenue Service considers tax-exempt organizations to be one of its four highest enforcement priorities. Which of the following is NOT identified as one of the IRS's concerns? |
| | A) | Raising too much in tax-exempt contributions |
| | B) | Cost allocations |
| | C) | Excessive executive compensatio |
| | D) | Operating outside the tax exempt purpose |
| | E) | All of the above |
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| 26.
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Which of the following is true about service efforts? |
| | A) | Service efforts are measures of costs or inputs. |
| | B) | Service efforts include financial and nonfinancial resources used to provide services. |
| | C) | Service efforts include direct costs for a program, such as salaries for employees involved in providing the services. |
| | D) | Service efforts may include indirect costs. |
| | E) | all of the above are true |
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| 27.
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Service accomplishments include outputs and outcomes. Which of the following would be true about the service accomplishments for a literacy program that serves adults? |
| | A) | An example of an outcome measure would be the number of hours of tutoring services provided. |
| | B) | An example of an output measure would be the total cost to provide tutoring services for a month. |
| | C) | An example of an output measure would be the number of adults who are able to pass a reading test after completing the program. |
| | D) | An example of an outcome measure would be the number of adults who pass a reading test after completing the program. |
| | E) | None of the above |
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| 28.
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Which of the following is true about service efforts and accomplishments (SEA) reporting? |
| | A) | The GASB has promulgated standards with regard to presenting SEA information. |
| | B) | Service efforts include outputs and outcomes. |
| | C) | Service accomplishments include the financial and nonfinancial resources applied to provide services. |
| | D) | A variety of SEA measures should be presented in a way that is easily understood. |
| | E) | All of the above are true. |
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| 29.
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What cautions should be kept in mind related to service efforts and accomplishments (SEA) reporting? |
| | A) | Because there are no standards for reporting, a government might choose to present only the information that is favorable. |
| | B) | Audit opinions are not associated with SEA reporting. |
| | C) | Measurement of service efforts can be difficult and involves allocation of costs. |
| | D) | Identifying and measuring outputs and outcomes may be difficult. |
| | E) | All of the above |
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| 30.
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Which of the following is true about public disclosures of not-for-profit organizations with 501(c)(3) status? |
| | A) | These organizations are required to provide only the most recent Form 990 filed by the organization. |
| | B) | The organization may not meet its public disclosure requirements by posting information on the Web. |
| | C) | The names and addresses of all contributors for the most recent year must be disclosed. |
| | D) | In addition to Form 990 and Schedule A, an exempt organization typically will have state filing requirements, as well. |
| | E) | All of the above are true. |
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| 31.
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Which of the following is/are objectives of citizen groups who use state and local governmental financial statements? |
| | A) | Comparison of current year's results to prior years' results |
| | B) | Advocacy for certain programs or actions |
| | C) | Evaluation of efficiency and effectiveness |
| | D) | Determination of compliance with the budget |
| | E) | all of the above |
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| 32.
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Which of the following carries the full faith and credit of the governmental unit and its taxing power? |
| | A) | general obligation bonds |
| | B) | limited obligation bonds |
| | C) | revenue bonds |
| | D) | all of the above |
| | E) | none of the above |
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| 33.
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The City of Case, population 12,000, has long-term general obligation debt outstanding of $2,000,000. To be responsible to the citizenry and the bondholders, City Council has to date accumulated a total of $800,000 to pay the debt at maturity. Which of the following is true? |
| | A) | The net debt per capita is 1% |
| | B) | The net debt per capita is $166.67 |
| | C) | The net debt per capita is $100.00 |
| | D) | The City of Case would be considered "fiscally stressed." |
| | E) | both C and D |
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| 34.
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The City of Case has long-term general obligation debt outstanding of $2,000,000. To be responsible to the citizenry and the bondholders, City Council has to date accumulated a total of $800,000 to pay the debt at maturity. The fair value of taxable property in the City is $24,000,000. Which of the following is true? |
| | A) | Net debt to fair value of property for Case City is 8.3% |
| | B) | Net debt to fair value of property for Case City is 5% |
| | C) | Net debt to fair value of property for Case City is 12% |
| | D) | A net debt to fair value of property ratio of 12% indicates medium fiscal stress |
| | E) | both C and D are true |
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| 35.
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If a county's debt service fund's expenditures for principal and interest are 8.7% of total expenditures for governmental activities, Standard & Poor's would assess the county's debt burden as relatively: |
| | A) | negligible |
| | B) | low |
| | C) | moderate |
| | D) | high |
| | E) | none of the above; Standard & Poor's does not use this ratio |
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| 36.
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A conservative measure of a government's ability to meet expenses with available resources would be: |
| | A) | net assets/expenses |
| | B) | unrestricted net assets/expenses |
| | C) | debt service to total expenditures |
| | D) | net debt to fair value of property |
| | E) | government revenues per capita |
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| 37.
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Bonds are often issued by enterprise funds with the expectation that fund revenues will be adequate to service the debt. A meaningful measure of the government's ability to accomplish this is: |
| | A) | Unreserved fund balance/revenues |
| | B) | Government revenues per capita |
| | C) | Interest coverage-revenue bonds |
| | D) | Operating ratio-enterprise funds |
| | E) | none of the above |
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| 38.
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Berling Township computed its operating ratio for its single enterprise fund at 90%. This indicates that: |
| | A) | Berling's operating expenses are relatively high. |
| | B) | Berling's profit margin is 90%. |
| | C) | Berling's depreciation expense is relatively high. |
| | D) | Berling has a significant debt burden. |
| | E) | all of the above |
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| 39.
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Which of the following is NOT true? In analyzing a government's financial statements, the analyst should: |
| | A) | look for evidence of contingent liabilities |
| | B) | examine population trends |
| | C) | rely solely on financial ratio analysis |
| | D) | consider tax rate and debt limitations |
| | E) | compare the budget to actual data |
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