CGFM Exam Dumps : CGFM Certified Government Financial Manager

Role of the Independent Auditor in Financial Reporting:

Independent auditors evaluate internal controls as part of their audit procedures to support an opinion on the fair presentation of the financial statements. This includes assessing whether internal controls over financial reporting are designed and operating effectively.

This evaluation helps ensure that financial statements are free of material misstatements, whether due to error or fraud.

Why Management Does Not Do This:

Managementdesigns and implements internal controls but does not evaluate them to support the auditor’s opinion. Management’s responsibility is to certify the accuracy of the financial statements, while the auditor provides an independent opinion.

Why Other Options Are Incorrect:

C. The program office:This entity oversees operations but does not perform evaluations to support an audit opinion.

D. The audit committee:The committee provides oversight of the audit process but does not perform the evaluation itself.

References and Documents:

GAAS (Generally Accepted Auditing Standards):Outlines the responsibilities of independent auditors regarding internal control evaluation.

GAO Yellow Book:Specifies the role of external auditors in evaluating internal controls during financial audits.

What Does the Single Audit Act Require?

TheSingle Audit Actrequires non-federal entities (e.g., state and local governments, nonprofit organizations) that receive significant federal funds to undergo a single, organization-wide audit.

The audit focuses on both the entity’s financial statements and its compliance with federal program requirements.

Why Is Option A Correct?

The Single Audit Act ensures accountability and transparency in the use of federal funds by requiring financial statement audits and compliance testing for grant recipients.

Why Other Options Are Incorrect:

B. Using audits to manage acquisition risks:This relates to procurement and contract management, not the Single Audit Act.

C. Single audits of federal financial management systems:The act applies to non-federal entities, not federal agencies.

D. Establishing internal controls related to audits:While internal controls are assessed during a single audit, the act does not mandate their establishment.

References and Documents:

Single Audit Act of 1984 (Amended 1996):Specifies the requirements for audits of non-federal entities receiving federal funds.

OMB Circular A-133 (Superseded by Uniform Guidance, 2 CFR Part 200):Provides detailed guidance on single audit requirements.

What Is Internal Control Over Financial Reporting?Internal control over financial reporting (ICFR) ensures the reliability of an entity’s financial statements. It focuses on maintaining accurate, complete, and properly valued financial information that complies with accounting standards and meets the needs of users.

Why Is Option C Correct?

Proper valuation of assets and liabilities is a critical component of ICFR. It ensures that financial statements fairly represent the entity's financial position.

Cost allocation is also essential where applicable, such as assigning costs to programs or projects.

Why Other Options Are Incorrect:

A. Sufficient spending authority and financial resources exist:This relates to budgetary control, not financial reporting.

B. Physical inventory of capitalized assets:Conducting a physical inventory is part of asset management, not financial reporting assertions.

D. Legislatively directed program goals:Meeting program goals is related to performance reporting, not ICFR.

References and Documents:

GAO Standards for Internal Control (Green Book):Stresses the importance of proper valuation and cost allocation for accurate financial reporting.

COSO Framework:Emphasizes ICFR’s role in ensuring reliable and accurate financial statements.