Accounting For Governmental And Nonprofit Entities 17th Edition By Reck – Test Bank

True / False Questions

1. In order for users of financial statements to have the assurance that the statements have been prepared in conformity with accounting and financial reporting standards established by authoritative bodies, and that all material facts have been disclosed, the statements should be accompanied by the report of an independent auditor.

TRUE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-1
Topic: Auditing objectives

2. Some of the auditing issues and standards used by auditors of governmental and not-for-profit entities are unique to the public sector.

TRUE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-1
Topic: Auditing standards

3. The U.S. Office of Management and Budget issues generally accepted auditing standards which provide general guidelines for governmental audits and address the minimum responsibilities of the auditor.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-1
Topic: Auditing standards
4. Auditing standards issued by the U.S. General Accountability Office include specific reference to ethical requirements relating to an audit of financial statements, however, auditing standards issued by the Auditing Standards Board do not address ethics.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-2
Topic: Governmental auditing standards

5. Governments may engage one auditor to audit the primary government and other auditors to audit certain component units.

TRUE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-1
Topic: Auditing standards

6. Generally accepted government auditing standards (GAGAS) apply to financial audits of state and local governments only if they expend $750,000 or more in federal financial assistance.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-2
Topic: Governmental auditing standards

7. To help identify threats to independence, generally accepted government auditing standards establish a conceptual framework that requires auditors to identify, evaluate, and apply safeguards to appropriately address threats to independence.

TRUE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-2
Topic: Governmental auditing standards

8. Performance audits are independent assessments of performance against objective criteria.

TRUE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-3
Topic: Performance audits

9. Only state and local governments and their component units must have single audits; colleges and universities and other not-for-profit organizations that expend federal financial awards are not required to have single audits.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-4
Topic: Single Audits

10. In evaluating an entity’s system of internal controls a significant deficiency is a deficiency in the design or operation of internal controls of such magnitude that the internal control components do not reduce the risk of detection or prevention of material misstatement to an acceptably low level.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-1, 11-4
Topic: Audit findings

11. In auditing compliance with laws and regulations as part of a single audit, the auditor must render an opinion on the specific requirements applicable to each program for which the entity receives federal financial assistance.

FALSE

AACSB: Knowledge Application
AICPA: FN Reporting
Bloom’s: Remember
Difficulty: 1 Easy
Learning Objective: 11-4
Topic: Single Audits