Chapter 20

The following are statements relating to two additional standards under Government Auditing Standards. Some words or phrases have been replaced with numbers (e.g., [1], [2], etc.). Select from the option list provided the appropriate word(s) to complete the statements. Each choice may be used once or not at all. In addition to the [1] requirements, auditors should [2] pertinent information that in the auditors' [3] needs to be communicated to individuals contracting for or requesting the audit, and to cognizant legislative committees when auditors perform the audit pursuant to a law or regulation. Auditors should evaluate whether the audited entity has taken appropriate [4] to address findings and recommendations from previous engagements that could have a [5] on the financial statements.

1. AICPA 2. Communicate 3. Professional judgment 4. Corrective action 5. Material effect

1. A statement that the audit was conducted in accordance with GAAS and with Government Auditing Standards issued by the Comptroller General of the United States. 2. A statement that the auditor's procedures included tests of compliance.​ 3. A statement that the purpose of the report is to describe the scope of testing compliance and the results of testing. 4. A statement that the standards require the auditor to plan and to perform the audit to detect all instances of noncompliance with applicable laws and regulations. 5. A statement that the auditor's objective was to provide an opinion on compliance with the provisions of laws and regulations equivalent to that to be expressed on the financial statements. 6. A statement of negative assurance that, with respect to items tested, nothing came to the auditor's attention that caused the auditor to believe that the entity had not complied, in all material respects, with the provisions of laws, regulations, contracts, and grants. 7. A statement that the report is intended only for the information of the specific legislative or regulatory bodies and that this restriction is intended to limit the distribution of the report.

1. Appropriate 2. Appropriate 3. Appropriate 4.Inappropriate because the auditor is required to plan and perform the audit to detect instances of noncompliance having a direct and material effect on the financial statements, not all instances of noncompliance 5. Inappropriate because the report does not express an opinion 6. Inappropriate because no assurance should be provided 7. Inappropriate because the report is silent as to limiting its distribution

Competence 1. The staff assigned to perform the audit or attestation engagement must collectively possess adequate professional competence for the tasks required. Competence requires each auditor to attain _____ of CPE directly related to government auditing every 2 years. Quality control and assurance 2. Each audit organization performing audits or attestation engagements in accordance with GAGAS must (a) establish a system of quality control that is designed to provide the audit organization with reasonable assurance that the organization and its personnel comply with professional standards and applicable legal and regulatory requirements, and (b) have an external peer review _____. Independence 3. In all matters relating to the audit work, the audit organization and the individual auditor, whether government or public, must be independent in _____. Reporting 4. Audit reports should state that the audit was performed in accordance with _____. Detecting material misstatements 5. The objectives of the auditor include obtaining sufficient appropriate audit evidence regarding A amounts and disclosures in the financial statements that are determined by the provisions of contracts or grant agreements generally recognized to have a B effect on their determination.

1. At least 24 hours 2. At least once every 3 years 3. Mind and appearance 4. Generally accepted government auditing standards 5. (a) material and (b) direct

1. An engagement to report on prospective financial statements of a city summer camp program 2. An engagement to report on the economy and efficiency of a county library system 3. An engagement to report on whether a city homeless shelter met its goals set by the city 4. An engagement to report on compliance with requirements relating to government programs 5. An engagement to report on the fairness of general-purpose financial statements for a sheriff's department using an applicable financial reporting framework other than GAAP 6. An engagement to report on whether the internal controls are cost-effective collections from the water department of a city 7. An engagement to report on whether certain labor costs are allowable under the waste-collection contract of a city 8. An engagement to report on the fairness of the financial statements of a county that includes related reporting on internal control and compliance with provisions of laws, regulations, contracts, and grant agreements

1. Attestation engagement 2. Performance audit 3. Performance audit 4. Financial audit 5. Financial audit 6. Performance audit 7. Attestation engagement 8. Financial audit

1. Travel advances were provided to a number of people who failed to provide adequate documentation. 2. The organization overpaid for employee travel by $10,000 over the past 6 months due to unrecovered travel advances. 3. The organization books flights for travelers who require air travel. 4. Travelers who seek travel advances are required to provide documented costs before they travel. 5. There are too few employees in the travel department to process the requests for travel advances. 6. If the condition is not corrected, the cost to the organization in the coming year could result in the travel budget being exceeded.

1. Condition 2. Effect or potential effect 3. Not an element of a finding 4. Criteria 5. Cause 6. Effect or potential effect

1. The scope of the audit extends to _____ the schedule of expenditures of federal awards. 2. Nonfederal entities that expend _____ or more of federal awards in a fiscal year must have a single audit. 3. _____ is responsible for identifying federal rewards and the related programs. 4. _____ is within the scope of the single audit. 5. The auditor _____ determine which federal programs are major programs. 6. _____ may, upon request, obtain access to the auditor's working papers to provide information for a quality review.

1. Expressing an opinion on 2. 750,000 3. Auditee management 4. Following up 5. Uses a risk-based approach to 6. The Comptroller General or a federal agency

1. Auditing internal control that is integrated with an audit of the financial statements. 2. Performing agreed-upon procedures on management discussion and analysis. 3. Examining the accuracy or reliability of performance measures. 4. Reporting on the fairness of a balance sheet. 5. Reviewing allowable, reasonable, or final contract costs. 6. Assessing economy and efficiency. 7. Reporting on the quantity or condition of inventory or assets. 8. Assessing compliance with legal requirements.

1. Financial audit 2. Attestation engagement 3. Attestation engagement 4. Financial audit 5. Attestation engagement 6. Performance audit 7. Attestation engagement 8. Performance audit

Indicate whether each statement below represents potential responsibilities of the auditor, the management of Toxic Waste Disposal Co., or neither in accordance with AU-C 935, Compliance Audits, by selecting the appropriate circle. Each choice may be used once, more than once, or not at all. 1. Ensure compliance with laws and regulations. 2. Consider laws and regulations to plan and perform the audit. 3. Determine whether applicable laws and regulations are fair. 4. Identify the risks that have a pervasive effect on compliance. 5. Obtain written representations about laws and regulations. 6. Review minutes of meetings for evidence concerning compliance with laws and regulations. 7. Identify laws and regulations requiring compliance. 8. Suggest new regulations to authorities. 9. Establish internal controls pertaining to compliance with laws and regulations. 10. Provide positive assurance that no laws or regulations have been violated by employees.

1. Management 2. Auditor 3. Neither management nor the auditor 4. Auditor 5. Auditor 6. Auditor 7. Management 8. Neither management nor the auditor 9. Management 10. Neither management nor the auditor

Below is the text of an unmodified auditor's report. Some words or phrases have been replaced with numbers (e.g., [1], [2], etc.). Select from the option list provided the word or phrase that best matches each number in the draft report. Each choice may be used once, more than once, or not at all. Report on the Financial Statements We have audited the accompanying general-purpose financial statements of the City of Example, Any State, as of and for the year ended June 30, 20X1. Management's Responsibility for the Financial Statements [1] is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in [2] , issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain [3] assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes [4] the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above fairly present, in all [5] respects, the financial position of the City of Example, Any State, as of June 30, 20X1, and the results of its operations and cash flows of its proprietary fund types and trust funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated [date of report] on our consideration of the City of Example's [6] over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Example's internal control over financial reporting and compliance.

1. Management 2. Government Auditing Standards 3. Reasonable 4. Evaluating 5. Material 6. Internal control

1. Audit organizations and auditors must be independent in ____________. 2. Governmental auditors are required to acquire 80 hours of ____________. 3. A governmental audit organization must have a ____________ every 3 years. 4. Auditors should eliminate threats to assure that they can be ____________. 5. Auditors should evaluate whether clients have taken ____________ based on findings of previous audits. 6. Auditors should state in their report that the audit was performed in accordance with ____________. 7. If the audit report discloses fraud or noncompliance, the auditor should obtain the views of ____________ of the audited entity. 8. At least 24 hours of continuing education each cycle should pertain directly to ____________.

1. Mind and appearance 2. Continuing education 3. Peer review 4. Independent 5. Corrective action 6. GAGAS 7. Responsible officials 8. Governmental auditing

1. A compliance audit is a ___________ or organization-wide audit of compliance with compliance requirements. 2. The auditor should be specifically engaged to perform a compliance audit in addition to a(n) _____________. 3. _____________ apply to compliance auditing. 4. An objective of a compliance audit is to obtain sufficient appropriate evidence to _____________ on whether the entity complied, in all material respects, with the compliance requirements. 5. The auditor should assess _____________. 6. The auditor should obtain an understanding of ___________ to plan the audit. 7. The audit should be planned to detect material ___________ noncompliance. 8. Part of the process of considering evidence in a compliance audit includes evaluating _____________.

1. Program specific audit 2. Financial statement audit 3. Generally accepted auditing standards 4. Form an opinion 5. Risks of material noncompliance 6. Internal control over compliance 7. Intentional and unintentional 8. Questioned costs and likely questioned costs

1. The auditor is required to issue a report on compliance with laws and regulations. 2. The auditor must be independent in mind and appearance. 3. Audit organizations are required to establish a system of quality control. 4. The auditor should request personal financial statements from members of management. 5. The auditor should state that the audit was performed in accordance with GAAS. 6. The auditor should report the views of responsible officials. 7. The auditor should modify the opinion when material misstatements persist in the financial statements. 8. The auditor should state that the audit was performed in accordance with GAS.

1. Required by GAS only 2. Required by both GAAS and GAS 3. Require by both GAAS and GAS 4. Required by neither GAAS nor GAS 5. Required by both GAAS and GAS 6. Required by GAS only 7. Required by both GAAS and GAS 8. Required by GAS only

Which generally accepted auditing standard describes management's responsibilities in a governmental compliance audit? Enter your response in the answer fields below. Guidance on correctly structuring your response appears above and below the answer fields.

AU-C 935.08

Roberson & Roberson, CPAs, have accepted an audit engagement to examine and report on compliance of contractual agreements for a government agency. Which section of the AICPA's generally accepted auditing standards identifies the objectives of a governmental compliance audit? Enter your response in the answer fields below. Guidance on correctly structuring your response appears above and below the answer fields.

AU-C 935.10

Which section of generally accepted auditing standards best describes the risk assessment procedures required in the audit of the client's compliance with applicable requirements? Enter your response in the answer fields below. Guidance on correctly structuring your response appears above and below the answer fields.

AU-C 935.16