CGFM EXAM 2 QUESTIONS WITH
100% CORRECT ANSWERS
What is the importance of the MD&A? - Answer- communicating managers' insights
about the reporting entity;
increasing the understandability and usefulness of the general purpose financial report;
providing understandable an accessible info about the reporting entity and it's
operations, service levels, etc.
What should the MD&A address? - Answer- 1) entity's mission and org structure
2) entity's performance goals and results
3) an analysis of the entity's f/S
4) status of the entity's systems, controls, and legal compliance
5) future effects of the entity of existing or known risks, uncertainties, events, conditions,
and trends
6) limitations on the GAAP-based F/S
What is reported in Required Supplementary Information (RSI)? - Answer- Statement of
Budgetary Resources
Deferred Maintenance and Repairs (activity that was not performed when it should have
been or was scheduled to be)
Discussion memorandum - Answer- Outlines the results of research from staff on a
particular project. Respondents are asked to comment but the board has no particular
direction or view. Very rare.
Invitation to comment - Answer- Staff document. Respondents are asked to comment
on a research report by another standard-setting body.
Preliminary views - Answer- Board's initial proposal for a standard
Exposure draft - Answer- Last due process document that must be published before a
standard is issued and constituents have an opportunity to comment.
Concept statement - Answer- Doesn't establish a standard. It describes the concepts
the board will use as the framework.
Interpretations or technical bulletins - Answer- Clarify points that may be ambiguous in a
previous standard
,What I the statement of custodial activity? - Answer- required for entities that collect
material amounts of nonexchange revenue (or other resources) on behalf of the general
fund of the government
What are the five federal social insurance programs? - Answer- social security;
medicare; railroad retirement benefits; black lung benefits; and unemployment
insurance
What are some common note disclosures? - Answer- fund balance of the Treasury;
cash and other monetary assets; accounts and interest receivable; direct loans and loan
guarantees; inventory and related property; leases, etc.
What are examples of "other financing sources (uses)?" - Answer- Issuance of debt,
transfers, capital leases, payments to escrow agents, and proceeds from the sale of
capital assets.
What is the difference in budgets between Government and the private sector? -
Answer- 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? - Answer- No, but common requirements
are: executive branch functions, legislative branch, and how local govt are formed
What is the cornerstone of financial reporting? - Answer- accountability
What are four types of accountability? - Answer- 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? - Answer- paying current-years services
to future-year taxpayers
What is one way the federal gov't tries to balance a budget? - Answer- debt ceiling
(public debt that can be outstanding)
What are the common users of governmental financial reports? - Answer- legislators,
other oversight org's, citizens, investors, creditors, media, financial mangers and
program managers
What is an example of intergovernmental revenues? - Answer- grants
, What are the two types of government financial reports? - Answer- 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? - Answer-
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?" - Answer- 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? - Answer- 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. - Answer- 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? - Answer- 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? - Answer- free from
bias; views of constituents; benefits exceed costs; changes the minimize disruption
What are the characteristics of the "Due Process" of standard setting? - Answer- 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)
100% CORRECT ANSWERS
What is the importance of the MD&A? - Answer- communicating managers' insights
about the reporting entity;
increasing the understandability and usefulness of the general purpose financial report;
providing understandable an accessible info about the reporting entity and it's
operations, service levels, etc.
What should the MD&A address? - Answer- 1) entity's mission and org structure
2) entity's performance goals and results
3) an analysis of the entity's f/S
4) status of the entity's systems, controls, and legal compliance
5) future effects of the entity of existing or known risks, uncertainties, events, conditions,
and trends
6) limitations on the GAAP-based F/S
What is reported in Required Supplementary Information (RSI)? - Answer- Statement of
Budgetary Resources
Deferred Maintenance and Repairs (activity that was not performed when it should have
been or was scheduled to be)
Discussion memorandum - Answer- Outlines the results of research from staff on a
particular project. Respondents are asked to comment but the board has no particular
direction or view. Very rare.
Invitation to comment - Answer- Staff document. Respondents are asked to comment
on a research report by another standard-setting body.
Preliminary views - Answer- Board's initial proposal for a standard
Exposure draft - Answer- Last due process document that must be published before a
standard is issued and constituents have an opportunity to comment.
Concept statement - Answer- Doesn't establish a standard. It describes the concepts
the board will use as the framework.
Interpretations or technical bulletins - Answer- Clarify points that may be ambiguous in a
previous standard
,What I the statement of custodial activity? - Answer- required for entities that collect
material amounts of nonexchange revenue (or other resources) on behalf of the general
fund of the government
What are the five federal social insurance programs? - Answer- social security;
medicare; railroad retirement benefits; black lung benefits; and unemployment
insurance
What are some common note disclosures? - Answer- fund balance of the Treasury;
cash and other monetary assets; accounts and interest receivable; direct loans and loan
guarantees; inventory and related property; leases, etc.
What are examples of "other financing sources (uses)?" - Answer- Issuance of debt,
transfers, capital leases, payments to escrow agents, and proceeds from the sale of
capital assets.
What is the difference in budgets between Government and the private sector? -
Answer- 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? - Answer- No, but common requirements
are: executive branch functions, legislative branch, and how local govt are formed
What is the cornerstone of financial reporting? - Answer- accountability
What are four types of accountability? - Answer- 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? - Answer- paying current-years services
to future-year taxpayers
What is one way the federal gov't tries to balance a budget? - Answer- debt ceiling
(public debt that can be outstanding)
What are the common users of governmental financial reports? - Answer- legislators,
other oversight org's, citizens, investors, creditors, media, financial mangers and
program managers
What is an example of intergovernmental revenues? - Answer- grants
, What are the two types of government financial reports? - Answer- 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? - Answer-
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?" - Answer- 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? - Answer- 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. - Answer- 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? - Answer- 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? - Answer- free from
bias; views of constituents; benefits exceed costs; changes the minimize disruption
What are the characteristics of the "Due Process" of standard setting? - Answer- 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)
