Chap012 - Chapter 12 Auditing of Governmental and...

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Chapter 12 - Auditing of Governmental and Not-for-Profit Organizations Chapter 12 Auditing of Governmental and Not-for-Profit Organizations True / False Questions 1. The AICPA's suite of risk assessment audit standards requires that auditors conduct a more rigorous assessment of the risk of material misstatement of the client's financial statements. True False 2. The introductory paragraph of an audit report introduces the auditor and his/her background and qualifications to perform the auditor. True False 3. The scope paragraph of an audit report identifies the audit standards used in performing the audit and describes any limitations imposed on the audit. True False 4. The opinion paragraph of the independent auditor's standard report states the auditor's opinion that the financial statements are free of errors. True False 5. Governments often engage one auditor to audit the primary government and other auditors to audit certain component units. In such cases the auditor of the primary government is permitted under generally accepted auditing standards (GAAS) to rely on the work of the other auditors. True False 6. Audits of governments' financial statements are performed to determine if the financial statements are fair and in accordance with generally accepted accounting principles, but not to determine if there is compliance with laws and regulations. True False 12-1
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Chapter 12 - Auditing of Governmental and Not-for-Profit Organizations 7. Generally accepted government auditing standards (GAGAS) apply to audits of state and local governments only if they expend $500,000 or more in federal financial assistance. True False 8. The yellow book (i.e., GAGAS) independence standard prescribes two overarching principles—Auditors should not perform management functions or make management decisions and auditors should not audit their own work or provide nonaudit services in situations where the nonaudit services are significant to audit subject matter. True False 9. Performance audits provide an auditor's independent assessment of the performance and the management of an entity, program, service, or activity against objective criteria. True False 10. Only state and local governments and their component units must have single audits; colleges and universities and other not-for-profit organizations that expend federal financial awards are not required to have single audits. True False 11. In evaluating an entity's system of internal controls a significant deficiency is a deficiency in the design or operation of internal controls of such magnitude that the internal control components do not reduce the risk of detection or prevention of material misstatement to an acceptably low level. True False 12. In auditing compliance with laws and regulations as part of a single audit, the auditor must render an opinion on the specific requirements applicable to each program for which the entity receives federal financial assistance.
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