Governmental Accounting questions
with actual right answers.
Which of the following is one of the basic sections of a comprehensive annual financial report (CAFR)?
A. Single Audit Section
B. Actuarial section
C. Investment section
D. None of the above ANS - D - At a minimum, every CAFR comprises three basic sections: the
introductory section, the financial section, and the statistical section. (page 285) (chapter 13)
Which of the following distinguishes the contents of the cover of the CAFR from the contents of the
CAFR's title page?
A. Use of the full term "comprehensive annual financial report"
B. Reference to the primary government (if component unit)
C. Indication of the department responsible for preparing the CAFR
D. None of the above ANS - C - The title page should present all information included onthe cover of the
report. In addition, the title page should indicate the department responsible for preparing the CAFR.
(page 286) (chapter 13)
Which of the following would NOT appear in the introductory section of the CAFR?
A. Independent auditor's report
B. Management's discussion and analysis (MD&A)
C. Required supplementary information (RSI)
D. All of the above ANS - D - The financial section provides the following information: independent
auditor's report, MD&A, basic financial statements, RSI, and combining and an individual fund
presentations and supplementary information. (page 290) (chapter 13)
Which of the following is not a recommended element of the letter of transmittal?
A. Summary financial data
B. Profile of the government
,C. Information useful in assessing economic condition
D. Awards and acknowledgements ANS - A - It is recommended that the letter of transmittal contain the
following four sections: formal transmittal of the CAFR; profile of the government; information useful in
assessing the government's economic condition; and awards and acknowledgements (pages 287-288)
(chapter 13)
Which of the following BEST describes who should sign the letter of transmittal?
A. Both the CFO and the CEO must sign
B. The CFO must sign, but the CEO ideally should sign as well.
C. The CEO must sign, but the CFO ideally should sign as well.
D. Only the CFO should sign ANS - B - Ideally the letter of transmittal should be a joint communication of
the CFO and either the CEO or the COO. The letter of transmittal should, at a minimum, be signed by the
CFO. (page 290) (chapter 13)
At a MINIMUM, to whom should the letter of transmittal be addressed?
A. Legislative body
B. Mayor
C. Citizens
D. Both A and B ANS - C - At a minimum, the letter of transmittal should be addressed to the
government's citizens. It is appropriate and common to include other in the address as well (e.g.,
governing board, ceo). (page 290) (chapter 13)
What is the EARLIST possible date that may be used for the letter of transmittal?
A. Fiscal year end
B. Start of audit field work
C. Date of the independent auditor's reports
D. Date report made available to the public ANS - C - It would not be appropriate for the date of the
letter of transmittal to precede that of the independent auditor's report, even though the letter of
transmittal is not itself audited. (page 290) (chapter 13)
What is the point of reference for the opinion offered in the independent auditor's report?
A. The financial statements of the financial reporting entity, taken as a whole
,B. The financial statements of the primary government, taken as a whole
C. Activity, major fund, other data in aggregate
D. Fund types (and component units) ANS - C - At a minimum, the independent auditor's report offers
an opinion on the fair presentation of the various "opinion units" that make up the basic financial
statements: governmental activities, business-type activities, individual major governmental funds,
individual major eterprise funds, and all other funds/discretely presented component units in the
aggregate. (page 291) (chapter 13)
Which of the following statements is TRUE regarding RSI and the independent auditor's report?
A. RSI must always be mentioned.
B. RSI must sometimes be mentioned.
C. RSI need never be mentioned.
D. RSI may not be mentioned. ANS - B - RSI need not be mentioned in the independent auditor's report
unless it has been inappropriately omitted or the auditor's imited procedures associated with RSI
indicate that the presentation might in some way be deficient. (page 291) (chapter 13)
Which of the following statements is true concerning MD&A?
A. Governments may voluntarily address topics not mandated.
B. Governments may voluntarily provide additional detail on mandated topics
C. Both A and B
D. Neither A and B ANS - B - Because MD&A constitute required supplementary information, a
government may not address additional topics as part of MD&A, although a government is free to
provide whatever level of detail it deems appropriate in addressing the specific topics identified by
GAAP. (page 292) (chapter 13)
Which of the following would be provided or addressed in the letter of transmittal rather than in
MD&A?
A. Prospects for the local economy
B. Condensed, government-wide comparative financial data
C. A discussion of significant differences between the original budget for the general funds and final
amended budget
D. Currently known facts, decisions, or conditions that are expected to have a significant effect on
financial position or results of operations ANS - A - The letter of transmittal should include a brief
, description of the local economy that addresses financial trends for the previously five to ten-year
period. Management also ought to offer its assessment of the local economy prospects. (page 289)
(chapter 13)
Which of the following BEST describes the location of MD&A within the CAFR?
A. Located with other RSI
B. Located immediately following the notes to the financial statements
C. Located immediately preceding the financial statements
D. A and B ANS - C - Because MD&A is specifically intended to serve as a narrative introduction to the
basic financial statements, it should be placed in front of those statements rather than behind them.
(page 295) (chapter 13)
As of what date should a component unit data be presented in the reporting entity's financial statement
sif the component unit has a fiscal year end of December 31, 2010 and the primary government has a
fiscal year end of September 30, 2010
A. Sep 30, 2010
B. December 31, 2009
C. December 31, 2010
D. B or C ANS - D - If one or more component units included within the financial reporting entity has a
different fiscal year end that the primary government, data should be displayed through the last fiscal
year to have ended. If the component unit ends within three months of the primary unit, the get the
option of which fiscal year to report on. (page 295) (chapter 13)
Which of the following is NOT a requirement to use the modified approach for infrastructure reporting?
A. The government must make an annual estimate of the amount needed to maintain and preserve
infrastructure assets at a condition level established and disclosed by the government
B. The government must expend the amount estimated to be needed to maintain and preserve
infrastructure assets at or above the condition level established and disclosed by the government.
C. The government must document that infrastructure assets are being preserved at or above the
condition level established and disclosed by the government
D. A and C ANS - B - Disparities between estimated and actual maintenance and preservation expense
would not, of themselves, disqualify a government from continuing to use the modified approach. Only
a decline in the condition of infrastructure assets below targetd levels would disqualify a government
from the continued use of the modified approach. (page 297) (chapter 13)
with actual right answers.
Which of the following is one of the basic sections of a comprehensive annual financial report (CAFR)?
A. Single Audit Section
B. Actuarial section
C. Investment section
D. None of the above ANS - D - At a minimum, every CAFR comprises three basic sections: the
introductory section, the financial section, and the statistical section. (page 285) (chapter 13)
Which of the following distinguishes the contents of the cover of the CAFR from the contents of the
CAFR's title page?
A. Use of the full term "comprehensive annual financial report"
B. Reference to the primary government (if component unit)
C. Indication of the department responsible for preparing the CAFR
D. None of the above ANS - C - The title page should present all information included onthe cover of the
report. In addition, the title page should indicate the department responsible for preparing the CAFR.
(page 286) (chapter 13)
Which of the following would NOT appear in the introductory section of the CAFR?
A. Independent auditor's report
B. Management's discussion and analysis (MD&A)
C. Required supplementary information (RSI)
D. All of the above ANS - D - The financial section provides the following information: independent
auditor's report, MD&A, basic financial statements, RSI, and combining and an individual fund
presentations and supplementary information. (page 290) (chapter 13)
Which of the following is not a recommended element of the letter of transmittal?
A. Summary financial data
B. Profile of the government
,C. Information useful in assessing economic condition
D. Awards and acknowledgements ANS - A - It is recommended that the letter of transmittal contain the
following four sections: formal transmittal of the CAFR; profile of the government; information useful in
assessing the government's economic condition; and awards and acknowledgements (pages 287-288)
(chapter 13)
Which of the following BEST describes who should sign the letter of transmittal?
A. Both the CFO and the CEO must sign
B. The CFO must sign, but the CEO ideally should sign as well.
C. The CEO must sign, but the CFO ideally should sign as well.
D. Only the CFO should sign ANS - B - Ideally the letter of transmittal should be a joint communication of
the CFO and either the CEO or the COO. The letter of transmittal should, at a minimum, be signed by the
CFO. (page 290) (chapter 13)
At a MINIMUM, to whom should the letter of transmittal be addressed?
A. Legislative body
B. Mayor
C. Citizens
D. Both A and B ANS - C - At a minimum, the letter of transmittal should be addressed to the
government's citizens. It is appropriate and common to include other in the address as well (e.g.,
governing board, ceo). (page 290) (chapter 13)
What is the EARLIST possible date that may be used for the letter of transmittal?
A. Fiscal year end
B. Start of audit field work
C. Date of the independent auditor's reports
D. Date report made available to the public ANS - C - It would not be appropriate for the date of the
letter of transmittal to precede that of the independent auditor's report, even though the letter of
transmittal is not itself audited. (page 290) (chapter 13)
What is the point of reference for the opinion offered in the independent auditor's report?
A. The financial statements of the financial reporting entity, taken as a whole
,B. The financial statements of the primary government, taken as a whole
C. Activity, major fund, other data in aggregate
D. Fund types (and component units) ANS - C - At a minimum, the independent auditor's report offers
an opinion on the fair presentation of the various "opinion units" that make up the basic financial
statements: governmental activities, business-type activities, individual major governmental funds,
individual major eterprise funds, and all other funds/discretely presented component units in the
aggregate. (page 291) (chapter 13)
Which of the following statements is TRUE regarding RSI and the independent auditor's report?
A. RSI must always be mentioned.
B. RSI must sometimes be mentioned.
C. RSI need never be mentioned.
D. RSI may not be mentioned. ANS - B - RSI need not be mentioned in the independent auditor's report
unless it has been inappropriately omitted or the auditor's imited procedures associated with RSI
indicate that the presentation might in some way be deficient. (page 291) (chapter 13)
Which of the following statements is true concerning MD&A?
A. Governments may voluntarily address topics not mandated.
B. Governments may voluntarily provide additional detail on mandated topics
C. Both A and B
D. Neither A and B ANS - B - Because MD&A constitute required supplementary information, a
government may not address additional topics as part of MD&A, although a government is free to
provide whatever level of detail it deems appropriate in addressing the specific topics identified by
GAAP. (page 292) (chapter 13)
Which of the following would be provided or addressed in the letter of transmittal rather than in
MD&A?
A. Prospects for the local economy
B. Condensed, government-wide comparative financial data
C. A discussion of significant differences between the original budget for the general funds and final
amended budget
D. Currently known facts, decisions, or conditions that are expected to have a significant effect on
financial position or results of operations ANS - A - The letter of transmittal should include a brief
, description of the local economy that addresses financial trends for the previously five to ten-year
period. Management also ought to offer its assessment of the local economy prospects. (page 289)
(chapter 13)
Which of the following BEST describes the location of MD&A within the CAFR?
A. Located with other RSI
B. Located immediately following the notes to the financial statements
C. Located immediately preceding the financial statements
D. A and B ANS - C - Because MD&A is specifically intended to serve as a narrative introduction to the
basic financial statements, it should be placed in front of those statements rather than behind them.
(page 295) (chapter 13)
As of what date should a component unit data be presented in the reporting entity's financial statement
sif the component unit has a fiscal year end of December 31, 2010 and the primary government has a
fiscal year end of September 30, 2010
A. Sep 30, 2010
B. December 31, 2009
C. December 31, 2010
D. B or C ANS - D - If one or more component units included within the financial reporting entity has a
different fiscal year end that the primary government, data should be displayed through the last fiscal
year to have ended. If the component unit ends within three months of the primary unit, the get the
option of which fiscal year to report on. (page 295) (chapter 13)
Which of the following is NOT a requirement to use the modified approach for infrastructure reporting?
A. The government must make an annual estimate of the amount needed to maintain and preserve
infrastructure assets at a condition level established and disclosed by the government
B. The government must expend the amount estimated to be needed to maintain and preserve
infrastructure assets at or above the condition level established and disclosed by the government.
C. The government must document that infrastructure assets are being preserved at or above the
condition level established and disclosed by the government
D. A and C ANS - B - Disparities between estimated and actual maintenance and preservation expense
would not, of themselves, disqualify a government from continuing to use the modified approach. Only
a decline in the condition of infrastructure assets below targetd levels would disqualify a government
from the continued use of the modified approach. (page 297) (chapter 13)
