AGA GFMC Exam With Confidence Using Practice Dumps

GAO and External Audit Standards:The Government Accountability Office (GAO) uses the Yellow Book as its primary standard. However, it may also reference external standards from recognized international and professional auditing organizations. INTOSAI is specifically mentioned in the Yellow Book as a source of additional standards for governmental audits.

Explanation of Answer Choices:

A. Public Company Accounting Oversight Board (PCAOB): This regulates audits of publicly traded companies, not government entities.

B. International Auditing and Assurance Standards Board (IAASB): This focuses on global private-sector audits, not specifically government-related.

C. International Organization of Supreme Audit Institutions (INTOSAI): Correct. INTOSAI sets audit standards for public-sector auditors worldwide and is relevant for the GAO.

D. AICPA: While the AICPA sets standards for U.S. auditors, INTOSAI is more relevant for international public-sector audits.

Government Auditing Standards (GAS):

GAS, often referred to as theYellow Book, outlines the responsibilities of auditors conducting financial statement audits for government entities.

One core requirement is that auditors must consider compliance with applicable laws, regulations, contracts, and grant agreements that could materially affect financial statements.

Explanation of Answer Choices:

A. Design tests to assess compliance with laws, regulations, contracts, and grant agreements: Correct. This is a required component under GAS to ensure financial statements are materially accurate and comply with legal and regulatory frameworks.

B. Identify violations of laws which could be punishable by monetary penalties: Incorrect. Auditors are not required to investigate or pursue penalties but to focus on material misstatements or risks.

C. Identify expenditures that exceed the related obligations: Incorrect. While this could indicate an issue, auditors are not required to specifically test for this unless it relates to material misstatements or compliance issues.

D. Design tests to detect fraud, waste, and abuse: Incorrect. Auditors are not specifically required to detect fraud, waste, and abuse, though they should be alert to indicators.

 Why Pay on the Discount Date?

Discount termsare offered by vendors to encourage early payment, such as "2/10, net 30" (2% discount if paid within 10 days). Paying on the discount date ensures the organization takes advantage of cost savings while still making timely payments.

This approach optimizes cash management by reducing payment obligations while maintaining good vendor relationships.

 Why Other Options Are Incorrect:

A. After the due date:Late payments can damage vendor relationships and incur penalties.

B. Prior to the due date:Paying too early does not provide additional benefits and can unnecessarily deplete cash reserves.

C. On the due date:If a discount is offered, waiting until the due date means missing the opportunity to save money.

 References and Documents:

GAO Financial Management Guide:Recommends paying invoices with discounts on the discount date to maximize cost savings.

Best Practices in Governmental Cash Management (AGA):Highlights the importance of managing vendor payments to take advantage of discounts.