Deck 15: Financial Reportingthe Comprehensive Annual Financial Report and the Financial Reporting Entity

Question 1

Which of the following statements is false?

A) Governments that do not prepare a CAFR are not required to prepare a Management's Discussion and Analysis.
B) The Governmental Accounting Standards Board has established requirements for the statistical section of a CAFR.
C) Governments have some latitude in selecting major funds to be reported in the CAFR.
D) Governments are allowed to have additional information in their statistical section that is not required information.

Answer 1

A

Question 2

In the statistical section, the required demographic and economic information includes all of the following except

A) Unemployment rate.
B) Total personal income.
C) Debt per capita.
D) Population.

Answer 2

C

Question 3

Which of the following financial statements would not be reported anywhere in the fund financial statements presented as part of the basic financial statements?

A) Statement of net position.
B) Statement of cash flows.
C) Balance sheet.
D) Statement of Changes in Assets and Liabilities.

Answer 3

D

Question 4

The introductory section of a CAFR typically includes all of the following except

A) The letter of transmittal.
B) An organizational chart.
C) The independent auditor's opinion.
D) The table of contents.

Question 5

Which fund types report the results of operations using a Statement of Revenues, Expenditures, and Changes in Fund Balances?

A) General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Enterprise Funds, and Internal Service Funds.
B) General Fund, Special Revenue Funds, Debt Service Funds, and Enterprise Funds.
C) General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds.
D) General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Permanent Funds.

Question 6

In reviewing their governmental funds, a local municipality determines that three of the funds including the General Fund are considered major funds and the remaining six governmental funds are nonmajor. However, management prefers to report all of its governmental funds as major funds. What is the maximum number of fund columns that could be presented on the governmental fund balance sheet?

A) 3.
B) 4.
C) 6.
D) 9.

Question 7

All of the following statistical tables should include ten individual years of trend information except

A) Demographic and economic indicators.
B) Information about net position.
C) Information about government employees.
D) Information about principal revenue payers.

Question 8

Which of the following must be included to meet the minimum requirements for general purpose external financial reporting?

A) Basic financial statements, notes to the financial statements, management's discussion and analysis, and other required supplementary information.
B) Basic financial statements, notes to the financial statements, and other required supplementary information.
C) Basic financial statements, notes to the financial statements, narrative explanations, and required supplementary information.
D) Basic financial statements, notes to the financial statements, management's discussion and analysis, other required supplementary information, and combining statements.

Question 9

Assume that a government has three nonmajor Enterprise Funds. Which of the following statements regarding the reporting requirements in a CAFR is false?

A) Nonmajor funds are not reported on an Enterprise Fund statement of cash flows.
B) Even if the funds are nonmajor, the government may choose to declare them as major funds and report each in a separate column on the appropriate fund statements.
C) The CAFR must include combining financial statements for any nonmajor fund columns that include more than one fund.
D) Nonmajor funds are reported in the aggregate on all proprietary fund financial statements.

Question 10

Management's Discussion and Analysis is

A) Part of the basic financial statements.
B) Included in the introductory section of a CAFR.
C) Required supplementary information.
D) Optional in a CAFR.

Question 11

Requirements:
1. Describe discrete presentation in the context of the government-wide statements. Assume that a government has five major discretely presented component units. Include the reporting and disclosures required for each of the major component units.
2. Describe blending. When is it required? Is it permitted under other circumstances-i.e., when is it not required?

Question 12

Footnote information that duplicates information in financial statements included in the CAFR

A) May be eliminated.
B) May be eliminated if the government does not issue its basic financial statements separately.
C) May be eliminated if the government does issue its basic financial statements.
D) Is common and must be presented despite the duplication.

Question 13

Which of the following is not part of the financial section of a comprehensive annual financial report?

A) Transmittal letter.
B) Management's discussion and analysis.
C) Required supplementary information.
D) Notes to the financial statements.

Question 14

Listed below are various statements, schedules, notes, and other elements that appear in a Comprehensive Annual Financial Report CAFR.
A. Demographic and Economic Information
B. Organization Chart
C. Table of Contents
D. Statement of Net Position
E. Schedule of Revenues, Expenditures, and Change in Fund Balance - Budget-to-Actual
1. Identify the major section of the CAFR in which each element is found.
a. Introductory
b. Financial
c. Statistical
2. Identify the major subsection of the CAFR in which each element is found.
a. Introductory
b. Required Supplementary Information
c. Basic Financial Statements
d. Notes to the Financial Statements
e. Other Required Supplementary Information
f. Supplementary or Other Information
g. Statistical Section
3. List each element in the proper order that they are found in the CAFR.
A. Demographic and Economic Information
B. Organization Chart
C. Table of Contents
D. Statement of Net Position
E. Schedule of Revenues, Expenditures, and Change in Fund Balance - Budget-to-Actual
F. Proprietary Fund Statement of Cash Flows
G. Summary of Significant Accounting Policies
H. Letter of Transmittal
I. Governmental Funds Balance Sheet
J. Capital Asset note disclosure
K. Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities
L. Management's Discussion and Analysis
M. Statement of Net Position - Component Units
N. GFOA Certificate of Achievement for Excellence in Financial Reporting
O. Schedule of Employer Contributions
P. Statement of Fiduciary Net Position
Q. Parks and Recreation Special Revenue Fund Balance Sheet
R. Changes in Net Position, Last 10 Years
S. Statement of Activities
T. Auditor's Report

Question 15

Statistical tables are

A) Required in the basic financial statements and in the CAFR.
B) Optional in the basic financial statements but required in the CAFR.
C) Optional in the basic financial statements and optional in the CAFR.
D) Required in the CAFR.

Question 16

The independent auditor's opinion covers, at a minimum, the

A) Basic financial statements.
B) CAFR.
C) Financial section of the CAFR.
D) Primary government.

Question 17

A "dual opinion" audit is one where

A) The auditors render an opinion on the primary government and any component units.
B) The auditors render an opinion on both the basic financial statements and the combining and individual fund financial statements.
C) The auditors render an opinion on both the financial and statistical sections of the CAFR.
D) The auditors render an opinion on the primary government, component units, and the CAFR as a whole.

Question 18

A city has three related entities. Its finance and accounting staff is trying to determine which, if any, of those entities must be included in the city reporting entity. Also, for the entities that are included the staff must determine whether they are to be blended or discretely presented. Explain how each of the related entities should be treated and why.
Situations:
1. The first entity is the city school district. The district has a separately elected board and is legally separate from the city. The school board can establish its own budget except that its property tax levy must be approved by the city council. The city does not guarantee the debt of the schools or have any other authority over the school district.
2. The second entity is the municipal gas utility. The city appoints the seven members of the utility governing board and can remove them at will. The city must approve the budget and the rate structure of the utility. The utility cannot issue bonded debt without the city council's prior approval. The city is entitled to, and regularly receives, the operating surpluses of the utility.
3. The third entity is the City Library Commission. According to the commission's charter, the commission board consists of the city mayor, the city finance director, and the superintendent of the city schools, and two other members of city council besides the mayor. City council consists of the mayor and four other council members. The library commission budget must be approved by the city council, and all long-term debt issued by the Library Commission is to be repaid by the city.

Question 19

GAAP do not require

A) A management's discussion and analysis.
B) Governments to prepare a CAFR.
C) A statistical section to be included within a CAFR.
D) Discretely presented component units to be included in the government-wide financial statements.

Question 20

The independent auditor's report is normally included within

A) The introductory section of a CAFR.
B) Management's discussion and analysis.
C) The financial section of a CAFR.
D) The statistical section of a CAFR.

Question 21

Whether or not to declare a fund as being major is not optional for

A) The General Fund.
B) A Capital Projects Fund.
C) Debt Service Fund.
D) Enterprise Fund.

Question 22

Britt County has seven discretely presented component units. Three of the component units are considered "governmental" in nature and the remaining four are considered "business-type" in nature. How many columns for the discretely presented component units would be reported on the General Fund balance sheet?

A) 0.
B) 1.
C) 2.
D) 7.

Question 23

Substantively the same governing body means that

A) Virtually the entire governing body of the primary government serves, in an ex officio capacity, as virtually the entire governing body of a component unit.
B) A voting majority of the component unit governing body is made up of a voting majority of the primary government governing body.
C) A voting majority of the primary government governing body serves on the component unit governing body.
D) A voting majority of the component unit governing body also serves on the primary government governing body.

Question 24

If a governmental entity has a blended component unit, the note disclosures should include all of the following except

A) How the component unit met the blending criteria.
B) A statement that identifies the component units as a being blended.
C) How to access separately issued external financial statements.
D) The number of component unit governing board members.

Question 25

When there are more than two funds of the relevant fund type, combining financial statements would not be required in the CAFR for which types of funds?

A) Nonmajor governmental funds.
B) Major Enterprise Funds.
C) Internal Service Funds.
D) Agency Funds.

Question 26

An entity is a component unit of another entity if

A) A voting majority of its governing body is appointed by the other entity.
B) It is fiscally dependent on the other entity and a benefit or burden relationship exists with the other entity.
C) It has a financial benefit or burden relationship with the other entity.
D) The other entity is obligated in some manner on its debt.

Question 27

If a primary government reports a discretely presented component unit, then the primary government must

A) Prepare two separate Management's Discussion and Analyses.
B) Prepare two sets of note disclosures.
C) Include the financial information of the discretely presented component unit in the government-wide financial statements.
D) Include information related to the discretely presented component unit within the statistical section of the CAFR.

Question 28

What is the maximum number of columns that could appear on the statement of fiduciary net position in the fund financial statements presented as part of the basic financial statements?

A) 1.
B) 2.
C) 3.
D) 4.

Question 29

The Mount Pilot Airport Authority is governed by a seven-member board. Four of the board members are appointed by the town of Mount Pilot and the remaining three are appointed by the governing board of Griffith County. Neither the town nor the county share in any profits, nor are required to fund any deficits, of the Authority. The town, however, does approve the Authority's proposed budget. The county may make budgetary recommendations to the Authority, but they are not required to approve the proposed budget. The Authority should be reported as

A) A jointly governed organization by both the town and the county.
B) A joint venture by both the town and the county.
C) Discrete component units of both the town and the county.
D) A discretely presented component unit of the town.

Question 30

How should information about each major discretely presented component unit be presented in the financial statements?

A) Report only as condensed financial statements reported in the notes to the financial statements.
B) Report only in single column in the government-wide statements.
C) Report only in combining financial statements which are included in the primary government's basic financial statements after the fund financial statements.
D) Report only in a single column in the government-wide statements with condensed financial statements in the notes.

Question 31

In discrete presentation, component unit

A) Funds are reported as the same type of funds of the primary government.
B) Funds are treated as Special Revenue Funds of the primary government since the resources can only be used for the component unit's programs.
C) Data is presented in the government-wide financial statements separate from the primary government data.
D) Basic financial statements must always be included in the primary government's comprehensive annual financial report.

Question 32

The governing board of the City of Wheaton is also the governing board of Mosquito Abatement District, a business-type activity. A benefit or burden relationship exists between the city and the district. Which of the following statements regarding the financial reporting options is false?

A) The District is a blended component unit and is reported in both the fund financial statements and the government-wide financial statements.
B) The District is not subject to major fund reporting criteria.
C) The District may be reported in a separate column on the Proprietary Fund financial statements, but would most likely be reported within the business-type activities column in the government-wide financial statements.
D) The District is not to be reported as a discretely presented component unit.

Question 33

In the basic financial statements, separate sets of fund financial statements should be presented for

A) Each fund.
B) Each major fund
C) Each fund type.
D) Each fund category.

Question 34

Which fund type would be reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance?

A) Enterprise Funds.
B) Internal Service Funds.
C) Permanent Funds.
D) Pension trust funds.

Question 35

Assume that a blended component unit of the town has its own General Fund, Special Revenue Fund, and Capital Projects Fund. All funds meet the major fund criteria. The primary government has a General Fund, three Special Revenue Funds, one Permanent Fund, one Debt Service Fund, and three Capital Projects Funds. All but the Permanent Fund and two Special Revenue Funds of the primary government are major funds. How many fund columns would be presented on the governmental funds' balance sheet?

A) 4.
B) 5.
C) 9.
D) 12.

Question 36

The City of Newport appointed the original governing board of the Newport Historical Association, at which point the board became self-sustaining. The city has historically but voluntarily provided funding for the Association for the past several years. The city of Newport should

A) Not report the Association as a component unit.
B) Report the Association as a blended component unit.
C) Report the Association as discretely presented component unit.
D) Disclose that the Association is a joint venture.

Question 37

Which of the following criteria is not required to be met for a government to be considered fiscally independent?

A) Has separate legal standing.
B) Has the authority to adopt its own budget without the substantive approval of any other entity.
C) Has the authority to issue bonded debt without the substantive approval of any other entity.
D) Has the authority to set its own fees and charges without substantive approval of any other entity.

Question 38

Blended and discretely presented component units may issue separate financial statements. Which of the following statements is false related to this provision in GAAP?

A) If a blended or discretely presented component unit issues separate financial statements, they are not required to be reported as part of the primary government's reporting entity.
B) GAAP require component units to report any component units they may have as part of their separately issued financial statements.
C) GAAP do not prevent component units from separately issuing their own financial statements.
D) The primary government must include any component units in their external financial reporting to comply with GAAP.

Question 39

In which of the following situations would a component unit be required to prepare a CAFR, not just the basic financial statements?

A) The primary government prepares a CAFR.
B) The component unit will be issuing general obligation bonds in the coming year.
C) The component unit has prepared a CAFR in the past.
D) There are no situations in GAAP where any entity is required to prepare a CAFR.

Question 40

If a state has three discretely presented component units, two of which are "governmental" in nature and one of which is "business-type" in nature, what is the minimum number of discretely presented component unit columns that can be reported in the government-wide statements?

A) 0.
B) 1.
C) 2.
D) 3.

Question 41

Wakefield Village and Wakefield County were partners in the development of the Wakefield Water Authority, which is a separate legal entity. Neither the village nor the county will share in any profits of the Authority. Both, however, are obligated to fund any deficits or debt defaults that may occur, though this scenario is considered to be highly unlikely. Both the village and the county appoint three of the seven Water Authority board members. The seventh is appointed by another village in the county. Both the Wakefield Village and Wakefield County should report the Authority as

A) A related organization.
B) A jointly governed organization.
C) A joint venture.
D) A discretely presented component unit.

Question 42

Which of the following scenarios does not describe governing boards of a primary government and a potential component unit that are substantially the same?

A) A city's governing board members are the ex-officio governing board members of the Library District.
B) A county has a seven-member board. Five of these board members serve on an eight-member authority board.
C) A county has a seven-member board. Three of these board members serve on a five-member authority board.
D) There are seven members serving on the city council. Five of these council members are the entire governing board of a historical district board.

Question 43

Which of the following potential component units would not be reported as blended component unit of the county?

A) A hospital which is the primary health care provider for the county residents and whose board is appointed by the county.
B) A recreation district where the governing board of the county serves as its governing board and the management of the country operates the recreation district.
C) A financing authority that exclusively serves the county.
D) A school district whose debt will be repaid by the county.