AGA Exam GFMC Topic 5 Question 1 Discussion

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.

Reference 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.