AGA GFMC Practice Test Questions Answers

Understanding Shared Services:Shared services involve consolidating and centralizing resources, personnel, or processes to achieve efficiency and cost savings. This is common in government organizations looking to optimize operations.

Explanation of Answer Choices:

A. Reduce current staffing levels: While staff reductions may occur as a result, this is not the primary goal.

B. Transfer responsibilities to another entity: This describes outsourcing, not shared services.

C. Efficiently aggregate resources: Correct, as shared services aim to centralize resources for improved efficiency.

D. Provide private business opportunities: This is unrelated to shared services, which focus on internal government operations.

 What Did the Accountability for Tax Dollars Act Do?

This act expanded the audit requirements tovirtually all federal agencies, not just those covered under the CFO Act of 1990.

It mandated that agencies prepare audited financial statements to improve transparency, accountability, and the management of federal funds.

 Why Other Options Are Incorrect:

A. CFO Act of 1990:This act required audited financial statements but only applied to the 24 largest federal agencies (those covered under the Chief Financial Officers Act).

C. Federal Financial Management Improvement Act of 1996:Focused on financial system compliance with federal accounting standards, not expanding audit requirements.

D. Government Management Reform Act of 1994:Extended the CFO Act requirements to consolidated government-wide financial statements, not all federal agencies.

 References and Documents:

Accountability for Tax Dollars Act of 2002:Specifies the expanded audit requirements for federal agencies.

GAO Guide on Federal Financial Management Laws:Provides a comprehensive overview of key legislation.

Performance Audit Overview:

A performance audit focuses on evaluating the economy, efficiency, and effectiveness of government programs or activities.

Due professional care is a requirement inGovernment Auditing Standards (Yellow Book), ensuring auditors perform their duties responsibly and with professional judgment.

Key Requirement: Sufficient and Competent Evidence:

Auditors must collect sufficient and reliable evidence to support their findings, conclusions, and recommendations. This is the cornerstone of "due professional care."

Explanation of Answer Choices:

A. Obtain sufficient and competent evidence: Correct. This ensures audit findings are supported by reliable, documented evidence.

B. Determine scope: While part of audit planning, it is not directly related to due professional care.

C. Set materiality of financial statements: This applies to financial audits, not performance audits.

D. Present the findings in accordance with GAAP: GAAP is not a requirement for performance audits.

 Capital Asset Transfers Within the Same Government:

When a capital asset is transferred between departments within the same government, the asset’sbook value(its original cost minus accumulated depreciation) should remain in the fixed asset tracking system.

The transfer does not change the overall value of the asset for the government as a whole, but it should reflect that the asset is now under the responsibility of the receiving department.

 Why This Is Important:

Accurate tracking ensures the fixed asset system reflects the current custodian of the asset and allows for proper asset management and accountability.

 Why Other Options Are Incorrect:

A. Recorded with the original department to maximize receipts:This is incorrect because it ignores the asset's transfer and would misrepresent which department is responsible for it.

B. Recorded with the second department to minimize costs:Cost minimization is irrelevant here; the transfer should reflect the book value.

C. Retained with no change in book value to either department:While the book value doesn’t change overall, the system must reflect the transfer to the receiving department.

 References and Documents:

GAAP (Governmental Accounting Standards Board - GASB):Requires accurate fixed asset tracking to reflect departmental transfers.

GASB Statement No. 34:Discusses fixed asset tracking and reporting requirements.

 What Is Internal Control Evaluation?

Internal control evaluation is the process of assessing an organization’s internal controls to ensure they are adequate and effective in mitigating risks, ensuring compliance, and achieving objectives.

 Why Is Identifying Potential Risks the First Step?

The entire purpose of internal controls is to mitigate risks. Therefore, before evaluating the controls, you need to identify the risks they are meant to address.

Once risks are identified, the organization can evaluate whether the existing controls are adequate and effective in mitigating those risks.

This approach aligns with risk-based frameworks like theCOSO Internal Control Framework, which emphasizes risk identification as the foundation for effective controls.

 Why Other Options Are Incorrect:

A. Identifying the effectiveness of management activities:This is part of control evaluation but occurs after risks and controls are identified.

B. Assessing the adequacy of controls:Controls cannot be assessed until the risks they address are identified.

C. Documenting how transactions or events are processed:While this step is important, it comes later in the process, after risks and controls are identified.

 References and Documents:

COSO Internal Control Framework:Identifies risk assessment as the foundation for designing and evaluating controls.

GAO Standards for Internal Control (Green Book):Highlights risk identification as the first step in the control process.