48) The fundamental ethical principles identified under generally accepted government auditing
standards (GAGAS) include all of the following except:
A) Public interest.
B) Proper use of government information, resources, and position.
C) Oath of office.
D) Professional behavior.
49) An auditor performing nonaudit work for a client may be in danger of violating the
independence rules in Government Auditing Standards when he or she provides:
A) Valuation services.
B) Advice on establishing or improving internal controls.
C) Benchmarking information to the client.
D) The client with answers to technical questions.
50) Under a single audit:
A) An annual audit must be performed encompassing the nonfederal entity’s financial statements
and schedule of expenditures of federal awards.
B) The audit must be conducted by an independent auditor in accordance with generally accepted
government auditing standards (GAGAS) and cover the operations of the entire nonfederal entity.
C) For each major program, the auditor must obtain an understanding of the internal controls
pertaining to the compliance requirements for the program, assess control risk, and perform tests
of controls, unless the controls are deemed to be ineffective.
D) All of the given statements regarding a single audit are true.
51) Under a single audit, low-risk Type A programs are identified as those:
A) Audited in at least one of the three most recent audit periods as a major program.
B) With no significant changes in personnel or systems that would have significantly increased
risk.
C) Considered low-risk by a cognizant agency.
D) All of these choices are correct.
52) When conducting a single audit:
A) All federal grant programs must be audited.
B) All major programs must be audited.
C) At a minimum, all Type A major programs not identified as low-risk and certain high-risk Type
B programs must be considered for audit.
D) All programs not identified as low-risk must be audited.
53) Which of the following statements regarding audit findings is true?
A) A significant deficiency is a deficiency in internal control such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented, or
detected and corrected on a timely basis.
B) A material weakness is a deficiency in internal control important enough to merit attention by
those charged with governance.
C) A deficiency exists when the design or operation of a control does not allow management or
employees to prevent, or detect and correct misstatements on a timely basis.
D) All of the given statements are true.
54) Cognizant agencies:
A) Are responsible for conducting government single audits.
B) Are assigned to each nonfederal agency expending more than $50 million of federal funds per
year.
C) Are also referred to as oversight agencies.
D) Are responsible for issuing Government Auditing Standards.
55) Select the key term that relate to auditing of government and not-for-profit organizations from
the list that best matches with the following definition.
A. Attestation engagement
B. Generally accepted auditing standards (GAAS)
C. Opinion units
D. Materiality
E. Financial audit
F. Generally accepted government auditing standards (GAGAS)
G. Performance audits
________ 1. A process that culminates in an opinion that financial statements present fairly an
entity’s financial position and results of operations in conformity with GAAP
________ 2. An auditor’s judgment as to the level at which the quantitative or qualitative effects of
misstatements will have a significant impact on user’s evaluations
________ 3. Standards prescribed by the AICPA to provide guidance for planning, conducting,
and reporting on audits by CPAs
________ 4. Professional services related to internal control, compliance, MD&A presentation,
allowability and reasonableness of proposed contract amounts, final contract costs, and reliability
of performance measures
________ 5. Units of the government on which the auditor expresses an opinion (e.g.,
governmental activities, each major governmental fund, etc.)
56) Select the key term that relate to single audits from the list that best matches with the following
definition.
A. Risk-based approach
B. Single audit
C. Questioned cost
D. Material weakness
E. Oversight agency
F. Major programs
G. Cognizant agency
H. Significant deficiency
________ 1. The federal agency that makes the predominant amount of direct funding to the
nonfederal entity receiving less than $50 million in federal awards
________ 2. A deficiency in internal control such that there is a reasonable possibility that a
material misstatement of the entity’s financial statements will not be prevented, or detected and
corrected on a timely basis
________ 3. An audit prescribed by federal law for state and local governments and not-for-profit
organizations that expend more than $750,000 in a fiscal year
________ 4. Used by auditors to determine which programs will be audited as part of the single
audit
________ 5. A monetary item identified by an auditor in an audit finding that generally relates to
noncompliance with a law, regulation, or agreement, where the costs are either not supported by
adequate documentation or appear unreasonable