ACCT353 Chapter 13
19. Which of the following is true regarding the Single Audit Act and its amendments? A) A risk-based approach is used. B) An opinion is required on compliance of all programs. C) Both A and B above. D) Neither A nor B above.
A) A risk-based approach is used.
20. Which of the following is true regarding the Single Audit Act and its amendments? A) All governmental entities with expenditures of federal funds in excess of $500,000 must have a single audit, if more than one program exists. B) An audit must be designed to cover 25 percent of federal funds expended, unless the organization is deemed to be low risk. C) Both A and B above. D) Neither A nor B above.
A) All governmental entities with expenditures of federal funds in excess of $500,000 must have a single audit, if more than one program exists.
14. Which of the following would be a financial audit (or a part of a financial audit) under the Government Auditing Standards? A) An audit expressing an opinion on the basic financial statements of a state or local government audit. B) An examination to determine whether purchasing procedures are appropriately designed to assure program supplies meet standards. C) Both A and B above. D) Neither A nor B above.
A) An audit expressing an opinion on the basic financial statements of a state or local government audit.
26. Which of the following provisions of the Sarbanes-Oxley Act already existed in governmental auditing standards? A) Auditors are required to report deficiencies in the design or operation of internal controls. B) Not-for-profit organizations are required to establish audit committees composed of non-management board members. C) All nonaudit services performed by the auditors must be approved by the audit committee. D) All of the above.
A) Auditors are required to report deficiencies in the design or operation of internal controls.
27. Which type of audit opinion is appropriate if an auditor is not deemed to be independent? A) Disclaimer of opinion. B) Unqualified. C) Qualified. D) Adverse.
A) Disclaimer of opinion.
36. Which of the following is not prohibited of organizations receiving tax-exempt status under IRS Section 501(c)3? A) Earning a profit (increase in net assets). B) Distributing earnings to the benefit of members or officers. C) Endorsing political candidates or attempting to influence legislation. D) None of the above. All of these are prohibited of Tax-exempt organizations.
A) Earning a profit (increase in net assets).
67. A measure of performance that expresses how much an organization expends in raising a dollar of donations is: A) Fund-raising efficiency. B) Program expense ratio. C) Working capital ratio. D) None of the above.
A) Fund-raising efficiency.
1. What organization oversees the promulgation of Government Auditing Standards? A) Government Accountability Office. B) Governmental Accounting Standards Board. C) Public Companies Accounting Oversight Board. D) Government Accounting Oversight Committee.
A) Government Accountability Office.
12. Government Auditing Standards, published in a document called the Yellow Book, incorporate the AICPA standards and provide extensions that are necessary due to the unique nature of public entities. Which of the following is not one of the extensions? A) Higher materiality thresholds than in the private sector. B) Public availability of audit reports. C) Written evaluation of internal controls. D) Requirement that auditors have knowledge of government accounting and auditing.
A) Higher materiality thresholds than in the private sector.
30. In a governmental audit the auditor: A) Is required to report directly to appropriate officials in addition to the board or audit committee B) Is only required to report to the board or audit committee C) Is only required to report directly to the appropriate officials D) None of the above
A) Is required to report directly to appropriate officials in addition to the board or audit committee
18. Which of the following is true regarding the Single Audit Act and its amendments? A) Major programs selected for audit must equal 50 percent or more of federal expenditures, unless the organization is deemed to be low risk. B) Separate reports are filed with every federal agency from which the audited organization receives funds. C) Both A and B above. D) Neither A nor B above.
A) Major programs selected for audit must equal 50 percent or more of federal expenditures, unless the organization is deemed to be low risk.
61. Service Efforts and Accomplishments reporting is relevant because: A) SEA reporting provides more complete information about a government entity's performance than can be provided by the basic financial statements. B) The GASB requires supplemental reporting of service efforts and accomplishments. C) Enterprise fund statements do not do a good job of measuring efficiency or effectiveness. D) All of the above.
A) SEA reporting provides more complete information about a government entity's performance than can be provided by the basic financial statements.
60. Which of the following is true regarding Service Efforts and Accomplishments Reporting? A) SEA reporting utilizes both financial and non-financial performance measures. B) GASB standards require the reporting of service efforts and accomplishments for public school systems. C) Service efforts and accomplishments reporting is commonly covered by the auditor's opinion. D) All of the above.
A) SEA reporting utilizes both financial and non-financial performance measures.
2. Government auditing standards are commonly known as: A) The Yellow book. B) The Green Book. C) The Blue Book. D) The Red book.
A) The Yellow book.
49. Which of the following conditions would exempt income-producing activities from the Unrelated Business Income Tax (UBIT)? A) The business is carried on regularly but sells donated merchandise. B) Majority of labor is performed by paid employees. C) The business is carried on regularly but is unrelated to the organization's tax-exempt purpose. D) The business is operated for a profit.
A) The business is carried on regularly but sells donated merchandise.
38. What is the maximum threshold for a tax-exempt organization to file a form 990-N (electronic postcard) for tax years after 2011? A) A charity with gross receipts of < $25,000. B) A charity with gross receipts of < $50,000. C) A charity with gross receipts of < $500,000. D) A charity with gross receipts of < $500,000 and total assets of < 2.5 $million.
B) A charity with gross receipts of < $50,000.
9. Which of the following is a governmental audit that is concerned with examining, reviewing, or performing agreed upon procedures on a subject matter of an assertion and reporting on the results? A) Financial Audit. B) Attestation Engagement. C) Performance Audits. D) Nonaudit Services.
B) Attestation Engagement.
34. Which of the following is not true of Tax-exempt Entities having 501(c) (3) status? A) Donors to the organization may deduct their contributions as charitable donations. B) Churches and public charities with tax-exempt status must file an information return (Form 990, 990EZ or 990-N) with the IRS annually. C) Tax-exempt entities are prohibited from certain activities such as supporting political candidates. D) None of the above, these are all true of tax-exempt entities.
B) Churches and public charities with tax-exempt status must file an information return (Form 990, 990EZ or 990-N) with the IRS annually.
7. Which of the following is not a type of governmental audit? A) Attestation engagements. B) Consulting engagements. C) Financial audits. D) Performance audits.
B) Consulting engagements.
37. What is the principle advantage of obtaining section 501(c)3 status? A) The charitable organization is permitted to engage in a trade or business unrelated to its mission without having to pay income taxes. B) Donors to the charitable organization are permitted to deduct contributions to the organization in computing their income taxes. C) Both (a) and (b) above. D) Neither (a) nor (b) above.
B) Donors to the charitable organization are permitted to deduct contributions to the organization in computing their income taxes.
63. All of the following are examples of service outputs, except: A) Enrollment increases. B) Dropout rates. C) The number of gifted or alternative programs. D) Degrees conferred.
B) Dropout rates.
40. Which of the following is true regarding the Internal Revenue Service's concern regarding tax-exempt organizations? A) Organizations are charging many of their program expenses to fund-raising. B) Executives of tax-exempt organizations are receiving excessive salaries and benefits. C) Both (a) and (b). D) Neither (a) nor (b).
B) Executives of tax-exempt organizations are receiving excessive salaries and benefits.
56. To compute the operating ratio-enterprise funds, one would need to look in the CAFR for the: A) Government-wide Statement of Net Assets. B) Proprietary funds Statement of Revenues, Expenses, and Changes in Fund Net Assets. C) Both A and B above. D) Neither A nor B above.
B) Proprietary funds Statement of Revenues, Expenses, and Changes in Fund Net Assets.
8. The use of opinion units allows the auditor to A) Only allow one opinion for entire entity not its components. B) Provide different opinions on different components of the reporting entity. C) Plan the audit better and increase the effectiveness of substantive procedures. D) Eliminate the need for Test of Controls.
B) Provide different opinions on different components of the reporting entity.
4. Public sector audits differ from those of commercial businesses in which of the following ways? A) The auditor is not required to be independent. B) The auditor reports to outside agencies as well as management of the organization. C) The auditor does not use sampling D) All of the above.
B) The auditor reports to outside agencies as well as management of the organization.
50. Which of the following is true concerning tax-exempt organizations with unrelated business income? A) They may deduct the first $1,000 of unrelated business income. B) They must include income from donated merchandise. C) They must include investment income in computing their tax liability. D) All of the above are true.
B) They must include income from donated merchandise.
42. A tax-exempt organization is required to pay income taxes on A) Profit that is earned. B) Unrelated business income. C) Investment gains or losses. D) Contributions received.
B) Unrelated business income.
54. The document often relied on for financial analysis by investors and creditors for bonds in the secondary market is: A) the official statement issued by the government issuing the bonds. B) the comprehensive annual financial report. C) an analysis prepared by the government's auditor. D) none of the above.
B) the comprehensive annual financial report.
28. If an auditee is not considered low-risk, what percent of federal funds expended are auditors required to express an opinion on? A) 100%. B) 70%. C) 50%. D) 25%.
C) 50%.
29. Currently, a single audit is required for organizations receiving what amount of federal funds? A) > $100,000. B) > $300,000. C) > $500,000. D) > $700,000.
C) > $500,000.
24. The term "opinion unit" refers to which of the following: A) A division of a CPA firm B) A state or local government together with its component units C) A level of reporting of a government that requires a separate materiality level D) One of the four statements required in the second paragraph of an unqualified audit opinion
C) A level of reporting of a government that requires a separate materiality level
52. The highest bond rating assigned by Moody's is: A) A+ B) A C) AAA D) AAA+
C) AAA
15. Which of the following would be considered a performance audit under the Government Auditing Standards? A) An investigation into whether a purchasing department of a government was operated efficiently. B) An investigation into whether a social service agency of a state government improved the lives of its clients. C) Both A and B above. D) Neither A nor B above.
C) Both A and B above.
16. Which of the following is true regarding the Single Audit Act and its amendments? A) Governments and not-for-profit organizations that exceed $50 million in federal awards are normally assigned a cognizant agency to provide guidance. B) Smaller governments report to oversight agencies; typically the agency providing more funding than any other agency. C) Both A and B above. D) Neither A nor B above.
C) Both A and B above.
5. The Single Audit Act intends that auditors conducting regular financial audits of state and local governments and not-for-profits organizations provide assurance to the federal government that: A) Federal funds have been expended in accordance with laws and regulations. B) Federal funds are protected through a system of internal controls and sound financial management practices. C) Both A and B above. D) Neither A nor B above.
C) Both A and B above.
55. To compute the unassigned fund balance/revenues—General Fund, one would need to look in the CAFR for the: A) Governmental funds Balance Sheet. B) Governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. C) Both A and B above. D) Neither A nor B above.
C) Both A and B above.
3. Government financial audits must comply with the following: A) Generally Accepted Auditing Standards. B) Government Auditing Standards. C) Both A and B. D) Generally Accepted Accounting Principles.
C) Both A and B.
47. A public charity is: A) An organization founded and operated exclusively for public benefit. B) An organization that receives more than one-third of its support from a combination of contributions, membership fees, and gross receipts from exempt activities. C) Both A and B. D) Neither A nor B.
C) Both A and B.
33. What is the principal advantage to an organization of having 501(c) (3) status? A) The organization does not have to pay federal income tax. B) The organization does not have to pay state sales taxes on purchases. C) Donors to the organization may deduct their contributions as charitable donations. D) All of the above.
C) Donors to the organization may deduct their contributions as charitable donations.
25. Which of the following audit opinions is issued when a government fails to comply with generally accepted accounting principles? A) Qualified B) Adverse C) Either of the above, depending on the severity of the noncompliance D) Neither (a) or (b) above
C) Either of the above, depending on the severity of the noncompliance
11. Which of the following is a governmental audit type that has a primary concern with providing reasonable assurance about whether financial statements are presented fairly? A) Attestation Engagement. B) Performance Audit. C) Financial Audit. D) Nonaudit services.
C) Financial Audit.
45. To apply for tax-exempt status, a non-profit organization must file: A) IRS Form 501(c)(3). B) IRS Form 990. C) IRS Form 1023. D) None of the above.
C) IRS Form 1023.
58. In order to compute the operating ratio-enterprise funds, one would look in the CAFR in which of the following sections? A) In the government-wide Statement of Net Assets. B) In the proprietary funds Statement of Net Assets. C) In the proprietary funds Statement of Revenues, Expenses, and Changes in Net Assets. D) In the proprietary funds Statement of Cash Flows.
C) In the proprietary funds Statement of Revenues, Expenses, and Changes in Net Assets.
64. A government publishes information about its fire department. What type of service efforts and accomplishments measure would Fire Loss per Capita represent? A) Input B) Output C) Outcome D) Efficiency
C) Outcome
66. The program expense ratio is calculated as follows: A) Total expenses / Program service expenses B) Program service expenses + supporting service expenses / Total expenses C) Program service expenses / Total expenses D) Total expenses / (Program service expenses + supporting service expenses)
C) Program service expenses / Total expenses
13. Which organization promulgates the Government Auditing Standards? A) The American Institute of Certified Public Accountants. B) The U.S. Office of Management and Budget. C) The U.S. Government Accountability Office. D) The U.S. Congressional Budget Office.
C) The U.S. Government Accountability Office.
65. A ratio that measures a not-for-profit organization's solvency is: A) Net assets/expenses. B) Program expense ratio. C) Working capital ratio. D) Fund-raising efficiency.
C) Working capital ratio.
22. Under the terms of the Single Audit Act and its amendments, what percentage of federal awards expenditures must be selected for audit? A) High Risk Auditee: 100%; Low Risk Auditee: 50% B) High Risk Auditee: 100%; Low Risk Auditee: 25% C) High Risk Auditee: 50%; Low Risk Auditee: 25% D) High Risk Auditee: 50%; Low Risk Auditee: 0%
C)High Risk Auditee: 50%; Low Risk Auditee: 25% 23.
68. The Museum of Creative Arts had the following expenses: $5,000 of membership development expense, $3,000 of Fund-raising expense, $2,000 of Instructional Classes expense, and $1,500 of general and administrative expense. What is the program expense ratio (rounded)? A) 70%. B) 43%. C) 39%. D) 17%.
D) 17%.
39. What is the maximum threshold for a tax-exempt organization to file a form 990-EZ? A) A charity with gross receipts of < $25,000. B) A charity with gross receipts of < $50,000. C) A charity with gross receipts of < $500,000. D) A charity with gross receipts of < $500,000 and total assets of < 2.5 $million.
D) A charity with gross receipts of < $500,000 and total assets of < 2.5 $million.
62. Service Efforts and Accomplishments Reporting is best completed by using A) A standard single measure to evaluate or present information. B) A variety of measures which vary from year to year in order to evaluate and present information. C) Only the information that is favorable to the organization. D) A variety of measures which are consistent from year to year.
D) A variety of measures which are consistent from year to year.
21. Which of the following would be an example of an attestation engagement? A) Report on cost under contract B) Report on prospective financial information C) Report on internal controls D) All of the above
D) All of the above
31. Which of the following would not be an opinion unit of a general purpose government? A) Governmental activities B) Business-type activities C) Each Major Fund D) All of the above are opinion units
D) All of the above are opinion units
44. Which of the following may be deducted in computing income from unrelated business activities? A) Ordinary and necessary business expenses. B) $1,000 exemption. C) Charitable contributions. D) All of the above.
D) All of the above.
53. Which of the following items, helpful for analysis, could be found in the statistical section of the CAFR? A) Assessed and actual (market) value of property. B) Population trends. C) Debt limit and margin. D) All of the above.
D) All of the above.
48. Which of the following is an area of concern by the IRS with respect to tax-exempt organizations? A) Cost allocations. B) Excess executive compensation. C) Organizations operating out of their tax-exempt purpose. D) All the above
D) All the above
23. Which of the following is not part of a financial audit? A) Forming judgments about internal controls B) Testing compliance with laws and regulations C) Providing an opinion on compliance with GAAP D) Assessing the degree to which program objectives have been met
D) Assessing the degree to which program objectives have been met
59. In order to compute the interest coverage on revenue bonds, one would look in the CAFR at the: A) Government-wide Statement of Activities. B) Government-wide Statement of Activities. C) Budgetary Comparison Schedule. D) Enterprise funds Statement of Revenues, Expenses, and Changes in Net Assets.
D) Enterprise funds Statement of Revenues, Expenses, and Changes in Net Assets.
10. Government Auditing Standards identify which of the following categories of professional engagements: A) Financial audits. B) Financial audits and performance audits. C) Financial audits, agreed-upon procedures and performance audits. D) Financial audits, attestation engagements, performance audits, and nonaudit services.
D) Financial audits, attestation engagements, performance audits, and nonaudit services.
51. Which of the following is not considered to be a major user group by the GASB? A) Citizen groups. B) Investors and creditors. C) Legislative and oversight officials. D) Government executive branch officials.
D) Government executive branch officials.
46. Which of the following is a prohibited activity for a Tax-exempt Organization? A) Make a Profit. B) File a tax return. C) Give money away. D) Make financial contributions to a political candidate.
D) Make financial contributions to a political candidate.
17. Which of the following is true regarding the Single Audit Act and its amendments? A) An auditor is expected to express an opinion on "major programs," which are chosen based on size. B) An auditor is required to select all "Type A" programs as major programs. C) Both A and B above. D) Neither A nor B above.
D) Neither A nor B above.
43. Which of the following activities give rise to Unrelated Business Income Tax? A) Investment income arising from investment of unrestricted funds. B) Business operated for the convenience of employees and patients. C) Sale of donated merchandise. D) None of the above.
D) None of the above.
41. Which of the following are not required disclosures in a Form 990? A) A Statement of Functional Expense. B) A discussion of program effectiveness. C) A Statement of Revenues, Expenses and Changes in Net Assets. D) None of the above. They are all required disclosures.
D) None of the above. They are all required disclosures.
6. Which of the following is not a difference between private sector auditing and governmental auditing? A) The public availability of audit reports. B) Testing of compliance with laws and regulations. C) Governmental audits require auditor knowledge of government accounting and auditing. D) None of the above; these are all differences between private sector auditing and governmental auditing.
D) None of the above; these are all differences between private sector auditing and governmental auditing.
32. To qualify for tax-exempt status, an organization must do all of the following except: A) Have an Employer's Identification Number. B) Be organized as a corporation, trust, or association. C) Complete IRS form 1023. D) Receive most of its income from contributions rather than by providing goods or services.
D) Receive most of its income from contributions rather than by providing goods or services.
35. Form 990, Return of Organization Exempt From Income Tax, requires all of the following except: A) Statement of Program Accomplishments B) Governance, Management and Disclosures C) Compensation Schedules D) Statement of Cash Flows
D) Statement of Cash Flows
57. To compute the net debt per capita, a user of financial statements would need to look at (in the CAFR): A) the government-wide Statement of Net Assets and the population from the statistical section. . B) the debt and the amount available to pay that debt in the governmental funds Balance Sheet, and the population from the statistical section. C) the debt in the governmental funds Balance Sheet, the amount available in the government-wide Statement of Net Assets, and the population from the statistical section. D) the debt in the government-wide Statement of Net Assets, the amount available to pay that debt in the governmental funds Balance Sheet, and the population from the statistical section.
D) the debt in the government-wide Statement of Net Assets, the amount available to pay that debt in the governmental funds Balance Sheet, and the population from the statistical section.
