Helping Hand Questions for CGFM

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.

GAO and External Audit Standards:The Government Accountability Office (GAO) uses the Yellow Book as its primary standard. However, it may also reference external standards from recognized international and professional auditing organizations. INTOSAI is specifically mentioned in the Yellow Book as a source of additional standards for governmental audits.

Explanation of Answer Choices:

A. Public Company Accounting Oversight Board (PCAOB): This regulates audits of publicly traded companies, not government entities.

B. International Auditing and Assurance Standards Board (IAASB): This focuses on global private-sector audits, not specifically government-related.

C. International Organization of Supreme Audit Institutions (INTOSAI): Correct. INTOSAI sets audit standards for public-sector auditors worldwide and is relevant for the GAO.

D. AICPA: While the AICPA sets standards for U.S. auditors, INTOSAI is more relevant for international public-sector audits.

References:

GAO,Government Auditing Standards (Yellow Book).

INTOSAI,Framework of Professional Standards for Supreme Audit Institutions.