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1) Explain the essential differences between general purpose and special purpose

governments and give several examples of each.

2) Identify and explain the characteristics that distinguish governments and not-for-profit

entities from business entities.

3) GASB and FASB standards are concerned only with external financial reporting;

whereas, FASAB standards are concerned with both internal and external financial reporting. Do

you agree with this statement? Why or why not?

4) Why should persons interested in reading financial reports of governments and not-for-

profit entities be familiar with standards set by the GASB and the FASB?

5) Explain in your own words why accountability is the cornerstone of all financial

reporting in government.

6) In your own words state the primary needs the GASB believes external users have for

financial reports of state and local governments. For contrast, state the uses the FASB believes

external users have for the financial reports of not-for-profit organizations.

7) Describe the difference between a comprehensive annual financial report (CAFR) and

GASB general purpose external financial reporting for state and local governments.

8) Identify and briefly explain the four sections of the performance and accountability report

(PAR) that the Office of Management and Budget requires major federal departments and

agencies to prepare.

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9) Explain the concepts of fiscal and operational accountability and the basis of accounting

used to capture each concept.

10) Describe the comprehensive annual financial report (CAFR). What are the sections of the

report and which components of the organization should it include? Is a CAFR required?

11) The Governmental Accounting Standards Board is assigned responsibility for setting

accounting and financial reporting standards for which of the following?

A) Governments such as federal agencies, states, cities, counties, villages, and

townships.

B) State and local government entities and governmentally-related units and agencies,

such as utilities, authorities, hospitals, and colleges and universities.

C) Not-for-profit organizations.

D) State and local governments and all not-for-profit organizations.

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12) Which of the following bodies has been established to recommend accounting and

financial reporting standards for the federal government?

A) Financial Accounting Standards Board (FASB).

B) Governmental Accounting Standards Board (GASB).

C) Federal Accounting Foundation (FAF).

D) Federal Accounting Standards Advisory Board (FASAB).

13) The Financial Accounting Standards Board has the responsibility for setting accounting

and financial reporting standards for which of the following?

A) All not-for-profit organizations that are nongovernmental and business entities.

B) All not-for-profit organizations and business entities.

C) All not-for-profit organizations.

D) Special purpose governments with a business purpose.

14) You are trying to decide if an entity you are reviewing is a government or a not-for-

profit. Which of the following would indicate it is a government rather than a not-for-profit

entity?

A) Absence of profit motive.

B) A primary source of revenues is taxes.

C) Resource providers do not expect benefits proportional to the resources provided.

D) Absence of a defined ownership interest that can be sold, transferred, or redeemed.

15) Which of the following is identified by the GASB as the “cornerstone” of all financial

reporting in government?

A) Decision usefulness.

B) Stewardship.

C) Accountability.

D) Interperiod equity.

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16) Which of the following organizations issue standards that focus on both internal and

external financial reporting?

A) Federal Accounting Standards Advisory Board.

B) Governmental Accounting Standards Board.

C) Financial Accounting Standards Board.

D) American Institute of CPAs.

17) Which of the following is identified by the FASAB as the foundation for federal financial

reporting?

A) Decision usefulness.

B) Accountability.

C) Understandability.

D) Budget integrity.

18) Which of the following is not an objective of financial reporting by state and local

governments?

A) To assist users in assessing the adequacy of systems and controls.

B) To assist users in assessing financial condition and results of operations.

C) To assist financial report users in comparing actual financial results with the legally

adopted budget.

D) To assist in determining compliance with finance-related laws, rules, and regulations.

19) Which of the following groups is considered a primary user of a state or local

government’s general-purpose external financial statements?

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A) Citizens.

B) Managers and administrators.

C) Employees.

D) Special interest groups.

20) One of the minimum requirements for general purpose external financial reporting by

governments is

A) Management’s discussion and analysis (MD&A).

B) Transmittal letter.

C) Combining and individual fund statements.

D) Statistical information.

21) A comprehensive annual financial report (CAFR) prepared in conformity with the GASB

recommendations should include which of the following sections?

A) Letter of transmittal, management’s discussion and analysis (MD&A), and financial.

B) Introductory, financial, and statistical.

C) Introductory, MD&A, and financial.

D) Letter of transmittal, financial, and supplementary.

22) Which of the following would be included in a properly prepared comprehensive annual

financial report (CAFR), but not in the minimum requirements for general purpose financial

reporting specified by GASB standards?

A) Management’s discussion and analysis (MD&A).

B) Government-wide financial statements.

C) Notes to the financial statements.

D) Combining and individual fund financial statements.

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23) A statistical section should be included in

A) A comprehensive annual financial report (CAFR).

B) The basic financial statements.

C) The notes to the financial statements.

D) Required supplementary information, other than MD&A.

24) Which of the following would typically not be included in the introductory section of a

comprehensive annual financial report?

A) Title and contents page.

B) Letter of transmittal.

C) A description of the government.

D) Summary of the government’s current financial position and results of financial

activities.

25) The section of the comprehensive annual financial report that presents tables and charts

showing social and economic data in addition to financial trends, fiscal capacity, and operating

information of the government is the

A) Introductory section.

B) Management’s discussion and analysis section.

C) Statistical section.

D) Financial section.

26) Which of the following should be included in the financial section of a comprehensive

annual financial report?

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A) Transmittal letter.

B) The basic financial statements, including notes thereto.

C) Tables and charts showing demographic and economic data.

D) A description of the government.

27) On what do the government-wide financial statements primarily report?

A) Operational accountability.

B) Fiscal accountability.

C) The cost of government services.

D) Budgetary compliance.

28) Which of the following standard-setting bodies requires a management’s discussion and

analysis as a part of the financial report?

A) GASB.

B) FASB.

C) FASAB.

D) Both GASB and FASAB.

29) On what should the governmental fund financial statements report?

A) Net position and results of financial operations of the government as a whole.

B) Fiscal accountability.

C) Operational accountability.

D) Cost of government services.

30) Which of the following sections is not considered a part of a federal agency’s

performance and accountability report?

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A) Basic financial statements.

B) Annual performance report.

C) Statistical section.

D) Management’s discussion and analysis.

31) Which of the following statements is prepared by all not-for-profit organizations?

A) Statement of financial position.

B) Statement of changes in net position.

C) Statement of revenues, expenses, and changes in net position.

D) Both Statement of financial position and Statement of changes in net position.

32) Recognizing revenues when measurable and available for paying current obligations and

expenditures when incurred describes which basis of accounting?

A) Accrual.

B) Modified accrual.

C) Modified cash.

D) Budgetary.

33) The FASB requires that not-for-profits show the relationship of functional expenses to

natural classifications of expense in what format?

A) A separate statement of functional expenses.

B) As part of the statement of activities.

C) As a schedule in the notes to the financial statements.

D) Any of these formats is acceptable.

34) Which of the following is a net asset category reported by not-for-profit entities?

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A) Unrestricted net assets.

B) Net assets with donor restrictions.

C) Temporarily restricted net assets.

D) Net investment in capital assets.

35) Which of the following is not classified as a support activity reported by not-for-profit

entities?

A) Fund-raising expenses.

B) Program expenses.

C) Management expenses.

D) General expenses of operating the not-for-profit entity.

36) The FASAB’s Statement of Accounting and Reporting Concepts Statement No. 1

identifies four objectives of federal financial reporting. The requirement to be publicly

accountable for laws and regulations related to spending tax revenues relates to which of the four

objectives?

A) Stewardship.

B) Operating performance.

C) Budgetary integrity.

D) Accountability.

37) Which of the following best identifies the purpose of the government-wide financial

statements?

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A) To provide detailed financial information about different funds of government.

B) To provide an overview of the total government’s financial information.

C) To provide an overview of how government would operate as a business-type entity.

D) To provide detailed financial information on how the government’s financial

performance compares to the prior reporting period.

38) Governments and not-for-profit organizations can exist in many of the same forms.

Which of the following would most likely not be found in both a government and a not-for-profit

form?

A) A college.

B) An art museum.

C) A mental health clinic.

D) A professional association.

39) Governments and not-for-profit organizations have several characteristics that distinguish

them from business organizations. Which of the following is one of those characteristics?

A) Sources of revenue.

B) Operating purpose.

C) Ownership interest.

D) All of these characteristics.

40) The Financial Accounting Foundation (FAF) oversees and appoints board members to

which of the following standard setting bodies?