Discuss AGA GFMC Exam Topic 5 Question 1

Internal control over financial reporting means that management can reasonably make which of the following assertions?

ASufficient spending authority and financial resources exist to support reported expenditures.

BA physical inventory has been conducted of all assets meeting the jurisdiction's capitalization threshold.

CAll assets and liabilities have been properly valued and, where applicable, all costs have been properly
allocated.

DManagement has met its legislatively directed program goals.

Suggested Answer: C

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.

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26 comments · newest first

Benton 10 months ago

A seems relevant too, but C is the strongest assertion here.

Paris 10 months ago

Definitely agree with C, it’s all about proper valuation!

Lou 10 months ago

D feels a bit off, not really about financial reporting, right?

Glenna 10 months ago

Wait, are we sure about B? How often do companies really do a full inventory?

Chaya 11 months ago

I think option C is spot on for internal control assertions.

Lai 11 months ago

I vaguely remember something about management goals, but I don't think that's the main focus of internal control over financial reporting.

Ryan 11 months ago

I feel like spending authority is important too, but I can't recall if that's directly related to internal controls.

Aja 11 months ago

I remember a practice question that focused on asset valuation, so maybe option C is the right choice?

Robt 11 months ago

I think internal control is about ensuring accurate financial reporting, but I'm not sure which assertion fits best here.

Dannette 12 months ago

I'm a little confused by this question. The options seem to cover a range of management assertions, not just financial reporting. I'll have to think this through carefully before selecting an answer.

Nina 12 months ago

Okay, I've got this. Internal control over financial reporting means management can assert that the financial information is accurate, complete, and properly valued. So I'm going with option C as the best answer.

Delbert 12 months ago

Hmm, this is a tricky one. I'm not totally sure about the difference between the options, but I think C sounds the most comprehensive in terms of valuation and cost allocation for assets and liabilities.

Rolland 1 year ago

This question is asking about the management assertions that can be made with internal control over financial reporting. I think the key is to focus on the financial reporting aspects, so options A, B, and C seem more relevant than D.

Luke 1 year ago

I think the answer is A, because having sufficient spending authority is important for financial control.

Ammie 1 year ago

I believe the answer is B, as conducting a physical inventory is essential for accurate reporting.

Dana 1 year ago

C is the way to go. Although I'm tempted to choose D just to see if management has actually met their goals. That would be the real test of internal controls!

Lemuel 1 year ago

↳ replying to Dana

I agree, C is crucial for ensuring accurate financial reporting.

Gail 1 year ago

I agree with Laila, because proper valuation and allocation of costs are crucial for financial reporting.

Kenia 1 year ago

I'd go with C as well. The other options are too specific or don't directly address the core of internal control over financial reporting.

Clement 1 year ago

↳ replying to Kenia

I see your point, but I still believe option C is the most comprehensive in addressing internal control over financial reporting.

Phung 1 year ago

↳ replying to Kenia

I think option A is also important, ensuring there are sufficient resources to support expenditures is crucial.

Kanisha 1 year ago

↳ replying to Kenia

I agree, option C covers the key aspects of internal control over financial reporting.

Lonny 1 year ago

Option C definitely seems the most comprehensive and accurate. Proper valuation and cost allocation are crucial for reliable financial reporting.

Jacquelyne 1 year ago

↳ replying to Lonny

Proper valuation and cost allocation are key to ensuring the reliability of financial statements.

Jacquelyne 1 year ago

↳ replying to Lonny

I agree, option C is essential for accurate financial reporting.

Laila 1 year ago

I think the answer is C.

AGA GFMC Exam - Topic 5 Question 1 Discussion