The Scope of Audits of Recipients of Federal Financial Assistance

question 278

Multiple Choice

The scope of audits of recipients of federal financial assistance in accordance with federal audit regulations varies. Which of the following elements do these audits have in common?

• A) The auditor is required to disclose all situations and transactions that could be indicative of fraud, abuse, and illegal acts to the federal inspector general.
• B) The materiality levels are higher and are determined by the government entities that provide the federal financial assistance to the recipients.
• C) The auditor is required to document an understanding of internal control established to ensure compliance with the applicable laws and regulations.
• D) The accounts should be 100% verified by substantive tests because certain statistical sampling applications are not permitted.

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Definitions:

Fair Value Hedge

A type of hedge that protects against changes in the fair value of an asset, liability, or an unrecognized firm commitment, often due to changes in interest rates or other market variables.

Forward Contract

A financial derivative that represents a customized agreement to buy or sell an asset at a predetermined future date and price.

Spot Rate

The current market price for exchanging one currency for another for immediate delivery.

Balance Sheet Presentation

The method by which a company's financial position is detailed in its balance sheet, listing assets, liabilities, and equity.