Examination 3: Governmental Financial Management and Control (GFMC) Questions and Answers
Question 33
Which action represents an internal control deficiency in an agency responsible for building and maintaining dams?
Options:
A.
The agency inspects the completed work to assure compliance with the contract specifications.
B.
The agency releases the contractor's bond only after assuring that all work is performed satisfactorily.
C.
The agency responds to the maintenance needs only as complaints are received or as employees
report problems.
D.
The agency checks the references of bidders.
Answer:
C
Explanation:
What Is an Internal Control Deficiency?
Aninternal control deficiencyoccurs when an organization fails to implement controls to prevent or detect risks effectively.
In this case, responding only to maintenance needs when complaints are received demonstrates a lack of proactive controls, increasing the risk of issues going unnoticed or escalating over time.
Why Is Option C Correct?
Proactive maintenance schedules and inspections are essential for ensuring the safety and functionality of critical infrastructure like dams. Relying solely on complaints or employee reports is a reactive approach and represents a deficiency in internal controls.
Why Other Options Are Incorrect:
A. Inspecting completed work:This is a proper control to ensure compliance with contract specifications.
B. Releasing the bond after work completion:This ensures contractual obligations are met and is a good control practice.
D. Checking bidder references:This is part of the procurement process and a valid internal control.
References and Documents:
GAO Standards for Internal Control (Green Book):Emphasizes proactive controls and monitoring for critical operations.
Federal Infrastructure Maintenance Best Practices:Highlights proactive inspections and maintenance as essential controls.
Question 34
Which of the following statements from an audit finding is the condition?
Options:
A.
We identified multiple credit card purchases without receipts to support them.
B.
Government policy requires a cardholder to submit receipts for all purchases.
C.
Finance Department personnel did not regularly review purchases to ensure compliance.
D.
We recommend that the government implements a timely review of all credit card purchases.
Answer:
A
Explanation:
Definition of the Condition in an Audit Finding:
The "condition" describes the actual state observed during the audit. It highlights what occurred in practice, serving as the factual basis for the finding.
In this case, the condition is theabsence of receiptsfor multiple credit card purchases.
Explanation of Answer Choices:
A. We identified multiple credit card purchases without receipts to support them: Correct. This is the observed issue (condition).
B. Government policy requires a cardholder to submit receipts for all purchases: This is the "criteria," which defines the standard or rule being audited against.
C. Finance Department personnel did not regularly review purchases to ensure compliance: This is the "cause," explaining why the condition occurred.
D. We recommend that the government implements a timely review of all credit card purchases: This is the "recommendation," not the condition.
[:, GAO,Government Auditing Standards (Yellow Book)., AICPA,Elements of an Audit Finding Guidance., ]
