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AGA CGFM Exam Questions
- Topic 1: Governmental Financial Accounting
- Topic 2: Reporting and Budgeting: General Knowledge
- Topic 3: Demonstrate an Understanding of State and Local Financial Accounting and Reporting
- Topic 4: Demonstrate an Understanding of Federal Financial Accounting and Reporting.
Free AGA CGFM Exam Actual Questions
Note: Premium Questions for CGFM were last updated On Aug. 28, 2026 (see below)
When planning for local government financial statement audit, what data source should the auditor consider first?
Importance of Prior Audit Findings:
When planning a local government financial statement audit, auditors should first review previous audit findings to identify recurring issues, control weaknesses, or non-compliance areas. This helps auditors focus on areas of higher risk and guides the development of an effective audit strategy.
Explanation of Answer Choices:
A . Government-wide financial statements: Important, but these are reviewed after identifying risk areas from prior findings.
B . Fund financial statements: These are part of the audit process but not the starting point for planning.
C . Reconciliations between fund financial statements: These are analyzed during the audit but come later in the process.
D . Previous audit findings: Correct. Reviewing past findings ensures the auditor addresses previously identified risks and compliance issues.
GAO, Government Auditing Standards (Yellow Book).
AICPA, Audit Planning and Risk Assessment Best Practices.
Which of the following acts requires federal agencies to pay interest to state government funds for entitlements that
are not provided in a timely manner?
* What Does the Cash Management Improvement Act (CMIA) Do?
CMIA governs the transfer of federal funds to state governments and ensures timely and efficient use of these funds.
If federal agencies fail to provide funds for entitlements (e.g., Medicaid) in a timely manner, CMIA requires them to pay interest to state governments for the delays.
This ensures states are compensated for any financial burden caused by delayed federal transfers.
* Why Other Options Are Incorrect:
A . Debt Collection Improvement Act: Focuses on improving debt collection practices for the federal government, not entitlements or interest payments to states.
B . CFO Act: Improves federal financial management but does not address payment timeliness or interest.
C . Accountability for Tax Dollars Act: Expands audit requirements but does not involve compensation for delays.
* Reference and Documents:
CMIA (1990): Requires federal agencies to pay interest on late entitlement payments to states.
Treasury Financial Manual: Details CMIA interest payment provisions.
In relation to financial reporting, who evaluates internal controls to support an opinion on a fair presentation of the financial statements?
* Role of the Independent Auditor in Financial Reporting:
Independent auditors evaluate internal controls as part of their audit procedures to support an opinion on the fair presentation of the financial statements. This includes assessing whether internal controls over financial reporting are designed and operating effectively.
This evaluation helps ensure that financial statements are free of material misstatements, whether due to error or fraud.
* Why Management Does Not Do This:
Management designs and implements internal controls but does not evaluate them to support the auditor's opinion. Management's responsibility is to certify the accuracy of the financial statements, while the auditor provides an independent opinion.
* Why Other Options Are Incorrect:
C . The program office: This entity oversees operations but does not perform evaluations to support an audit opinion.
D . The audit committee: The committee provides oversight of the audit process but does not perform the evaluation itself.
* Reference and Documents:
GAAS (Generally Accepted Auditing Standards): Outlines the responsibilities of independent auditors regarding internal control evaluation.
GAO Yellow Book: Specifies the role of external auditors in evaluating internal controls during financial audits.
In state and local financial audits, material weaknesses must be reported to the
* What Are Material Weaknesses?
A material weakness in internal control is a deficiency or combination of deficiencies that creates a reasonable possibility of a material misstatement in the financial statements that would not be prevented or detected in a timely manner.
In the context of state and local financial audits, material weaknesses must be reported to those charged with governance, as they are responsible for oversight and corrective actions.
* Why Is the Governing Body the Correct Answer?
The governing body (e.g., city council, county board, or state commission) is directly responsible for overseeing the entity's financial operations and ensuring accountability. Reporting material weaknesses to them ensures that corrective actions can be implemented to strengthen internal controls.
Auditors communicate such findings through an audit report or a management letter addressed to the governing body.
* Why Other Options Are Incorrect:
A . Legislature: The legislature may have oversight of state budgets and appropriations but is not the direct governing body for financial audits.
C . Taxpayers: While transparency is important, material weaknesses are not directly reported to taxpayers. They may be disclosed in public audit reports, but taxpayers are not the primary audience.
D . Local media: Material weaknesses are not formally reported to the media; their disclosure depends on the entity's public reporting processes.
* Reference and Documents:
GAO Yellow Book (GAGAS): Requires auditors to report material weaknesses to those charged with governance.
GASB (Governmental Accounting Standards Board): Emphasizes the importance of communicating significant audit findings to governing bodies.
AICPA Audit Standards (AU-C 265): Requires auditors to communicate material weaknesses to management and those charged with governance.
A performance measurement that is measured the same way over several periods is
. timely.
* What Is Consistency in Performance Measurement?
A consistent performance measure is one that is calculated and reported in the same way over several periods. Consistency allows for meaningful comparisons and trend analysis, making it easier to evaluate performance over time.
* Why Consistency Is the Correct Answer :
Performance metrics must remain consistent in methodology, definitions, and scope to ensure the results are comparable across time periods. Without consistency, the reliability and usefulness of the data are diminished.
* Why Other Options Are Incorrect:
A . Timely: Timeliness refers to how quickly the information is reported, not whether it is measured consistently.
B . Relevant: Relevance ensures the measure is meaningful to the decision-making process, but it does not address consistency.
C . Reliable: Reliability refers to the accuracy and trustworthiness of the data, not its consistency over time.
* Reference and Documents:
GAO Performance Measurement Guide: Stresses the importance of consistency in tracking and reporting metrics over time.
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