CGFM Exam Dumps : CGFM Certified Government Financial Manager

Definition of a Material Weakness:According to auditing standards, a material weakness in internal control over financial reporting is a deficiency or combination of deficiencies that creates a reasonable possibility of a material misstatement in the financial statements that will not be prevented or detected on a timely basis.

Key Characteristics of a Material Weakness:

Reasonable Possibility:The likelihood of a misstatement is more than remote but less than certain.

Material Misstatement:The error or omission could impact the decisions of users relying on the financial statements.

Timely Detection:The deficiency allows errors to go undetected for an extended period, potentially affecting financial statement reliability.

Why Other Options Are Incorrect:

A.A misstatement in the basic financial statements may result from a material weakness, but the definition focuses on the reasonable possibility, not the actual result.

B.A material weakness impacts the financial statements, not "other accompanying financial information."

C.While timely detection is part of the issue, the definition focuses on the reasonable possibility of a misstatement, not management’s inability to perform specific duties.

References and Documents:

GAAS (AICPA SAS No. 115):Provides the formal definition of material weaknesses and guidance for auditors in evaluating control deficiencies.

COSO Framework:Emphasizes the need for effective internal controls to mitigate material misstatement risks.

Definition of Cost-Effectiveness Measures:

Cost-effectiveness measures assess therelationship between inputs (resources used)andoutcomes (results achieved)to determine whether a program delivers value for the resources invested.

Explanation of Answer Choices:

A. Efficiency measures: Incorrect. These relate inputs to outputs, focusing on how efficiently resources are used to produce services, but not directly tied to outcomes.

B. Process measures: Incorrect. These measure activities or steps within a program but do not assess outcomes.

C. Cost-effectiveness measures: Correct. These directly link inputs to outcomes, measuring the program’s effectiveness in achieving its objectives relative to costs.

D. Activity measures: Incorrect. These track the level of activity or effort but not outcomes or effectiveness.

References:

GASB,Performance Measurement and Reporting for Government Programs.

GAO,Best Practices in Measuring Program Effectiveness.

Responsibilities in Resolving Single Audit Findings:

Single audits assess compliance with federal program requirements.

Findings often highlight deficiencies or noncompliance issues that must be resolved by the entity receiving the federal funds.

Explanation of Answer Choices:

A. Awarding agency: The agency provides oversight and guidance but does not directly resolve findings.

B. Recipient agency: Correct. The entity receiving the funds is responsible for addressing and resolving findings to comply with federal regulations.

C. Audit committee: May oversee the process but doesn’t take direct responsibility for resolving findings.

D. External auditors: Identify the findings but do not resolve them.

References:

Uniform Guidance (2 CFR Part 200),Single Audit Requirements.

Association of Government Accountants (AGA),Government Auditing Standards.