Exam 12: Budgeting and Performance Measurement

Astor City,a small city that is not required to have independent audit,voluntarily decided to have an audit of its financial records.Currently,the city generates $900,000 in revenues.Of the revenue generated,10% is from state sources and 2% is from federal sources.Janice Murphy,a CPA who serves on the city council has orally agreed to conduct the audit for a small gratuitous fee.Murphy decided not to accept a full fee since in the last three years she has gotten away from doing audit work and has concentrated her time on tax preparation and small business consulting.Murphy conducts the audit and presents the city with the following audit report: Required (a)At a minimum what audit standards apply to Astor City (GAAS,GAS or Single Audit Act)? Why? (b)Discuss any potential violations of the applicable audit standards.

Attestation engagements include

Which of the following is one of the overarching principles in Government Auditing Standards related to auditors performing nonaudit work for clients?

In the auditor's report the financial statements on which the opinion is being expressed are specified in the

The scope paragraph of an independent auditor's report on a financial audit of a local government

All of the following reports are included in the reporting package resulting from the single audit except

The following are key terms in Chapter 12 that relate to auditing of governmental and not-for-profit organizations: 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.Nonaudit work H.Performance audits For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

Generally accepted government auditing standards (GAGAS)

Audits of governments' financial statements are performed to determine if the financial statements are fair and in accordance with generally accepted accounting principles,but not to determine if there is compliance with laws and regulations.

A common reason why a government might receive a "qualified opinion" from the external auditors is

The scope paragraph of an audit report identifies the audit standards used in performing the audit and describes any limitations imposed on the audit.

Though used historically by corporate boards of directors,audit committees have great potential in a government setting to improve the quality of financial reporting through the audit process.

Audit objectives set forth by the United States Comptroller General in Government Auditing Standards (GAS)differ from the AICPA view (GAAS)as discussed in Chapter 12.Explain briefly how GAS audits might meet the information needs of taxpayers better than GAAS audits.Make clear what the two sets of objectives cover.

A significant deficiency of such magnitude that internal control components do not reduce the risk of detection or prevention of material misstatement to an acceptably low level is called a(an)

Explain what an "attestation engagement" is and contrast that to financial audits and performance audits.

Which of the following is not a requirement imposed on auditors by the AICPA risk assessment standards to enhance auditors' application of the audit risk model?

The opinion paragraph of the independent auditor's standard report states the auditor's opinion that the financial statements are free of errors.

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.