EXAM 2 CGFM QUESTIONS WITH
COMPLETE SOLUTIONS
What is the difference in budgets between Government and the private sector? -
Correct Answers -Its the primary control device in governement (accountability) but in
the private sector its a guide to operations
Is every State constitution the same? Why? - Correct Answers -No, but common
requirements are: executive branch functions, legislative branch, and how local govt are
formed
What is the cornerstone of financial reporting? - Correct Answers -accountability
What are four types of accountability? - Correct Answers -legal accountability - need to
comply with rules/regulations
performance accountability - gov't acts in an efficient and effective manner
Fiscal accountability - raising of resources and the allocation of those resources to
accomplish objectives
operational accountability - stewardship of public resources
What is interperiod or intergenerational equity? - Correct Answers -paying current-years
services to future-year taxpayers
What is one way the federal gov't tries to balance a budget? - Correct Answers -debt
ceiling (public debt that can be outstanding)
What are the common users of governmental financial reports? - Correct Answers -
legislators, other oversight org's, citizens, investors, creditors, media, financial mangers
and program managers
What is an example of intergovernmental revenues? - Correct Answers -grants
What are the two types of government financial reports? - Correct Answers -point-in-
time (aka stock reports) - current info as of the date of the report (example: balance
sheet)
period report (aka flow reports) - covers the entire fiscal year
,What do the general purpose external financial reports (GPEFR) consist of? - Correct
Answers -audited financial statements, notes, required supplemental info. Other
accompanying info isn't required but can be included
What is an example of "other financial reports?" - Correct Answers -budget, budget
comparison reports, reports that disclose condition of operations (report on cash, a/r
O/s, revenues generated), offering reports, project reports, and popular reports
All aka "special purpose financial reports"
What are the characteristics of all reports? - Correct Answers -Understandability -
explanations and interpretations to help users understand
Reliability - verifiable, free from bias
Relevance - s/b capable of making a difference
Timeliness - reported on a time frame
Consistency - principles are used in current and future reports
Comparability - like entities should report same info the same way
Describe the steps it took to get to the reporting standards today. - Correct Answers -
1929 stock market crash due to companies inducing public on their "profitability."
1934 SEC was established to regulate securities. SEC granted authority to FASB for
standards. But no standards for local & state govt's
1934-1941 municipal finance officers association advocated reporting principles
1968 GAAFR issued ("blue book")
1970 fiscal crises in NY and Cleveland
1974 AICPA issued audit guide
1984 GASB was created but no requirement for state/local gov't although they adopted
it; however, nothing for federal
1990 MOU established FASAB
What are the standard setting organizations? - Correct Answers -GASB - set and
improve standards of state and local gov't
FASAB - improving federal financial reporting
FASB - set and improve financial acct & reporting standards in the private sector
What are common objectives with the GASB and FASAB boards? - Correct Answers -
free from bias; views of constituents; benefits exceed costs; changes the minimize
disruption
What are the characteristics of the "Due Process" of standard setting? - Correct
Answers -time & location of board meetings are publicly announced; task force may be
established; documents are issued (discussion memo; invitation to comment;
preliminary reviews; exposure draft)
What is a "concept statement?" - Correct Answers -does not establish standards but it
describes a concept the board will use as a framework for evaluating existing or
establishing a new standard
, What are "interpretations" and "technical bulletins?" - Correct Answers -clarify points
that may be ambiguous in a previous standard
What is the FASAB hierarchy? - Correct Answers -Category (a) - officially established
acct principles and interpretations
Category (b) - FASAB technical bulletins and if specific the AICPA industry audit and
accounting guide
Category (c) - Technical releases
Category (d) - implementation guides published by FASAB staff
What happens if an accounting treatment is not in the FASAB hierarchy? - Correct
Answers -If not in category a-d or something similar in a-d, then consider "other
accounting literature" (i.e FASAB concept statements, pronouncements of other
standard-setting bodies, professional associations, accounting textbooks, handbooks,
and articles
What is the GASB hierarchy? - Correct Answers -Category (a) - officially established
acct principles and interpretations
Category (b) - GASB technical bulletins and if specific the AICPA industry audit and
accounting guide
Category (c) - AICPA practice bulletins if specifically made applicable to state/local govt
entities and cleared by GASB; consensus groups established by GASB
Category (d) - implementation guides published by GASB staff
What happens if an accounting treatment is not in the GASB hierarchy? - Correct
Answers -If not in category a-d or something similar in a-d, then consider "other
accounting literature" (i.e GASB concept statements, issue papers, textbooks, and
pronouncements of professional associations or regulatory agencies, handbooks, or
articles
What is a major factor in the establishment of user fees? - Correct Answers -cost
accounting
What are examples of cost outputs? - Correct Answers -direct and indirect cost
What is the preferred sequence of assigning cost? - Correct Answers -direct, cause-
and-effect, allocated on a reasonable and consistent basis
What are the five standards for providing full cost of federal programs information for
cost accounting? - Correct Answers -requirement for cost accounting; responsibility of
segments; full cost; inter-entity costs; costing methodologies
What does OMB Circular A-87 set forth? - Correct Answers -procedures that state,
local, and tribal govt's can be reimbursed for appropriate direct and indirect cost as a
result of accepting a grant
COMPLETE SOLUTIONS
What is the difference in budgets between Government and the private sector? -
Correct Answers -Its the primary control device in governement (accountability) but in
the private sector its a guide to operations
Is every State constitution the same? Why? - Correct Answers -No, but common
requirements are: executive branch functions, legislative branch, and how local govt are
formed
What is the cornerstone of financial reporting? - Correct Answers -accountability
What are four types of accountability? - Correct Answers -legal accountability - need to
comply with rules/regulations
performance accountability - gov't acts in an efficient and effective manner
Fiscal accountability - raising of resources and the allocation of those resources to
accomplish objectives
operational accountability - stewardship of public resources
What is interperiod or intergenerational equity? - Correct Answers -paying current-years
services to future-year taxpayers
What is one way the federal gov't tries to balance a budget? - Correct Answers -debt
ceiling (public debt that can be outstanding)
What are the common users of governmental financial reports? - Correct Answers -
legislators, other oversight org's, citizens, investors, creditors, media, financial mangers
and program managers
What is an example of intergovernmental revenues? - Correct Answers -grants
What are the two types of government financial reports? - Correct Answers -point-in-
time (aka stock reports) - current info as of the date of the report (example: balance
sheet)
period report (aka flow reports) - covers the entire fiscal year
,What do the general purpose external financial reports (GPEFR) consist of? - Correct
Answers -audited financial statements, notes, required supplemental info. Other
accompanying info isn't required but can be included
What is an example of "other financial reports?" - Correct Answers -budget, budget
comparison reports, reports that disclose condition of operations (report on cash, a/r
O/s, revenues generated), offering reports, project reports, and popular reports
All aka "special purpose financial reports"
What are the characteristics of all reports? - Correct Answers -Understandability -
explanations and interpretations to help users understand
Reliability - verifiable, free from bias
Relevance - s/b capable of making a difference
Timeliness - reported on a time frame
Consistency - principles are used in current and future reports
Comparability - like entities should report same info the same way
Describe the steps it took to get to the reporting standards today. - Correct Answers -
1929 stock market crash due to companies inducing public on their "profitability."
1934 SEC was established to regulate securities. SEC granted authority to FASB for
standards. But no standards for local & state govt's
1934-1941 municipal finance officers association advocated reporting principles
1968 GAAFR issued ("blue book")
1970 fiscal crises in NY and Cleveland
1974 AICPA issued audit guide
1984 GASB was created but no requirement for state/local gov't although they adopted
it; however, nothing for federal
1990 MOU established FASAB
What are the standard setting organizations? - Correct Answers -GASB - set and
improve standards of state and local gov't
FASAB - improving federal financial reporting
FASB - set and improve financial acct & reporting standards in the private sector
What are common objectives with the GASB and FASAB boards? - Correct Answers -
free from bias; views of constituents; benefits exceed costs; changes the minimize
disruption
What are the characteristics of the "Due Process" of standard setting? - Correct
Answers -time & location of board meetings are publicly announced; task force may be
established; documents are issued (discussion memo; invitation to comment;
preliminary reviews; exposure draft)
What is a "concept statement?" - Correct Answers -does not establish standards but it
describes a concept the board will use as a framework for evaluating existing or
establishing a new standard
, What are "interpretations" and "technical bulletins?" - Correct Answers -clarify points
that may be ambiguous in a previous standard
What is the FASAB hierarchy? - Correct Answers -Category (a) - officially established
acct principles and interpretations
Category (b) - FASAB technical bulletins and if specific the AICPA industry audit and
accounting guide
Category (c) - Technical releases
Category (d) - implementation guides published by FASAB staff
What happens if an accounting treatment is not in the FASAB hierarchy? - Correct
Answers -If not in category a-d or something similar in a-d, then consider "other
accounting literature" (i.e FASAB concept statements, pronouncements of other
standard-setting bodies, professional associations, accounting textbooks, handbooks,
and articles
What is the GASB hierarchy? - Correct Answers -Category (a) - officially established
acct principles and interpretations
Category (b) - GASB technical bulletins and if specific the AICPA industry audit and
accounting guide
Category (c) - AICPA practice bulletins if specifically made applicable to state/local govt
entities and cleared by GASB; consensus groups established by GASB
Category (d) - implementation guides published by GASB staff
What happens if an accounting treatment is not in the GASB hierarchy? - Correct
Answers -If not in category a-d or something similar in a-d, then consider "other
accounting literature" (i.e GASB concept statements, issue papers, textbooks, and
pronouncements of professional associations or regulatory agencies, handbooks, or
articles
What is a major factor in the establishment of user fees? - Correct Answers -cost
accounting
What are examples of cost outputs? - Correct Answers -direct and indirect cost
What is the preferred sequence of assigning cost? - Correct Answers -direct, cause-
and-effect, allocated on a reasonable and consistent basis
What are the five standards for providing full cost of federal programs information for
cost accounting? - Correct Answers -requirement for cost accounting; responsibility of
segments; full cost; inter-entity costs; costing methodologies
What does OMB Circular A-87 set forth? - Correct Answers -procedures that state,
local, and tribal govt's can be reimbursed for appropriate direct and indirect cost as a
result of accepting a grant
