CGFM STUDY GUIDE TEST 2 2026
COMPLETE QUESTIONS AND
VERIFIED ANSWERS
◉ 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)
◉ What is a "concept statement?" Answer: 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?" Answer: clarify
points that may be ambiguous in a previous standard
◉ What is the FASAB hierarchy? Answer: 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? Answer: If not in category a-d or something similar in a-d,
then consider "other accounting literature" (i.e FASAB concept
COMPLETE QUESTIONS AND
VERIFIED ANSWERS
◉ 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)
◉ What is a "concept statement?" Answer: 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?" Answer: clarify
points that may be ambiguous in a previous standard
◉ What is the FASAB hierarchy? Answer: 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? Answer: If not in category a-d or something similar in a-d,
then consider "other accounting literature" (i.e FASAB concept
