CMFO Fund Financial Reporting I Exam
Questions and Answers Graded A+
What are the three groups of primary users of external financial reports identified
by GASB? - Correct answer-i. Citizens
ii. Legislative and oversight bodies
iii. Investors and creditors
What is each groups basic information needs? - Correct answer-i. Citizens need to
know the consistency achieved between the actual financial transactions of the
government and the legally adopted budget, the overall financial condition of the
government, and the efficiency and effectiveness of government operations.
ii. Legislative and oversight bodies need to monitor budget compliance, and they
need to know whether the government is complying with laws, roles, and
regulations related to financial matters and grants.
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,iii. Creditors and investors most critically need to keep informed of the financial
condition of the government; they are also interested in its efficiency and
effectiveness.
According to GASB, what are the six basic characteristics that financial reports
must have? - Correct answer-1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability
What is understandability? - Correct answer-Understandability is the concept that
users with a reasonable understanding of public financial activities will be better
equipped to comprehend the financial statements.
What is reliability? - Correct answer-The financial data presented in the financial
statements should be reliable − verifiable and free of bias.
What is relevance? - Correct answer-Financial data must be relevant to financial
statement users. Information that is insignificant or trivial is of no use to financial
statement users and only reduces the relevance of the financial data as a whole.
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, What is timeliness? - Correct answer-Financial statements must be issued timely
enough to provide decision makers with valuable information for the decision-
making process.
What is consistency? - Correct answer-Consistency in presentation of financial
data is crucial to providing adequate trend data and meaningful financial analysis.
What is comparability? - Correct answer-Comparability is important to ensure
events and transactions are viewed similarly − "apples to apples" − when compared
to other entities.
What does the goal of Understandability and Relevance entail? - Correct answer-1.
Financial reporting should assist in fulfilling government's duty to be publicly
accountable and should enable users to assess that accountability by:
a. Providing information to determine whether current-year revenues were
sufficient to pay for current-year services.
b. Demonstrating whether resources were obtained and used in accordance with the
entity's legally adopted budget and demonstrating compliance with other finance-
related legal or contractual requirements.
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Questions and Answers Graded A+
What are the three groups of primary users of external financial reports identified
by GASB? - Correct answer-i. Citizens
ii. Legislative and oversight bodies
iii. Investors and creditors
What is each groups basic information needs? - Correct answer-i. Citizens need to
know the consistency achieved between the actual financial transactions of the
government and the legally adopted budget, the overall financial condition of the
government, and the efficiency and effectiveness of government operations.
ii. Legislative and oversight bodies need to monitor budget compliance, and they
need to know whether the government is complying with laws, roles, and
regulations related to financial matters and grants.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,iii. Creditors and investors most critically need to keep informed of the financial
condition of the government; they are also interested in its efficiency and
effectiveness.
According to GASB, what are the six basic characteristics that financial reports
must have? - Correct answer-1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability
What is understandability? - Correct answer-Understandability is the concept that
users with a reasonable understanding of public financial activities will be better
equipped to comprehend the financial statements.
What is reliability? - Correct answer-The financial data presented in the financial
statements should be reliable − verifiable and free of bias.
What is relevance? - Correct answer-Financial data must be relevant to financial
statement users. Information that is insignificant or trivial is of no use to financial
statement users and only reduces the relevance of the financial data as a whole.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, What is timeliness? - Correct answer-Financial statements must be issued timely
enough to provide decision makers with valuable information for the decision-
making process.
What is consistency? - Correct answer-Consistency in presentation of financial
data is crucial to providing adequate trend data and meaningful financial analysis.
What is comparability? - Correct answer-Comparability is important to ensure
events and transactions are viewed similarly − "apples to apples" − when compared
to other entities.
What does the goal of Understandability and Relevance entail? - Correct answer-1.
Financial reporting should assist in fulfilling government's duty to be publicly
accountable and should enable users to assess that accountability by:
a. Providing information to determine whether current-year revenues were
sufficient to pay for current-year services.
b. Demonstrating whether resources were obtained and used in accordance with the
entity's legally adopted budget and demonstrating compliance with other finance-
related legal or contractual requirements.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
