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.

---

Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost of the variable overhead allotted for the actual production level.

Supplies

Materials and items that are used in the day-to-day operations of a business but are not directly tied to the production of goods or services.

Variable Overhead Efficiency Variance

The difference between the expected (standard) cost of variable overheads based on actual production and the actual cost incurred.

Variable Overhead Efficiency Variance

A measure that reflects the efficiency of variable overhead resource usage by comparing the standard hours allowed with the actual hours used.