AGA GFMC Exam Practice Test Instant Access

Question 1

Management's need for real-time access to data is facilitated when

Adata is represented visually and includes information that indirectly relates to the subject matter.

Bdata supporting dashboards are updated every quarter.

Cthe prior year's financial statement data underlies the management reports used to decide on future
expenditures.

Dcomplex data sets are available on demand, presented with minimal distractions.

Answer : D

Why Does Management Need Real-Time Data Access?

Real-time access to data enables managers to make timely and informed decisions.

Complex data sets presented clearly and concisely (with minimal distractions) allow decision-makers to focus on the critical insights necessary for strategic and operational planning.

Why Is Option D Correct?

On-demand access ensures managers can retrieve updated data whenever needed. Presenting the data in a focused and distraction-free format facilitates quick comprehension and decision-making.

Why Other Options Are Incorrect:

A . Visual representation with indirect information: Including unrelated data can overwhelm users and detract from effective decision-making.

B . Dashboards updated quarterly: Quarterly updates do not meet the need for real-time access.

C . Prior year's financial data: Decisions based solely on historical data are not responsive to real-time needs.

Reference and Documents:

GAO Data Analytics and Visualization Framework: Stresses the importance of real-time, actionable, and distraction-free data for decision-making.

AICPA Dashboard Guidelines: Recommends presenting complex data sets in a clear and accessible format for management use.

Question 2

Entity management's appointment of a senior official to ensure the resolution of audit recommendations is a

demonstration of management's

Aagreement with the audit findings.

Bdisagreement with the audit findings.

Cdelegation of authority.

Dsupport for the audit process.

Answer : D

Management's Role in Resolving Audit Recommendations:

By appointing a senior official to oversee the resolution of audit recommendations, management demonstrates its commitment and support for the audit process.

This action indicates a proactive approach to addressing findings and improving operations.

Explanation of Answer Choices:

A . Agreement with the audit findings: While this may indicate agreement, appointing a senior official is more about ensuring action is taken rather than expressing agreement.

B . Disagreement with the audit findings: Incorrect. Appointing a senior official is a constructive step, not an indication of disagreement.

C . Delegation of authority: Incorrect. Delegation is involved, but the key point is the demonstration of management's support for addressing audit findings.

D . Support for the audit process: Correct. This action underscores management's commitment to resolving audit findings and improving accountability.

GAO, Standards for Internal Control in the Federal Government (Green Book).

OMB Circular A-50, Audit Follow-Up.

Question 3

The Federal Credit Reform Act of 1990 prescribes a special budget treatment for direct loans and loan guarantees

that measures cash flows to and from the government using which financial analytical technique?

Afuture value

Bnet present value

Ccurrent value

Dregression analysis

Answer : B

Federal Credit Reform Act of 1990: This Act established a new accounting framework for federal credit programs, such as direct loans and loan guarantees. It requires using the net present value (NPV) method to measure the costs of loans and guarantees by discounting future cash flows (e.g., loan repayments, defaults) to their present value.

Explanation of Financial Analytical Technique:

Net Present Value (NPV): Accounts for the time value of money by discounting future cash flows to the present. It provides an accurate measure of the economic cost to the government.

Other options:

A . Future value: Focuses on future cash flows, not their present cost.

C . Current value: Not a recognized technique for analyzing long-term cash flows.

D . Regression analysis: A statistical method, unrelated to calculating loan program costs.

Federal Credit Reform Act of 1990, Section 502.

Congressional Budget Office (CBO), Federal Credit Program Cost Analysis.

Office of Management and Budget (OMB), Circular A-11: Credit Reform Accounting.

Question 4

Federal entities primarily assess internal controls to A. confirm that all management objectives will be met. B. identify program areas where efficiencies may be gained. C. ensure there is no fraud, waste or abuse within the entity. D. determine what legislation is not applicable to the entity.

AConfirm that all management objectives will be met: Internal controls reduce risk but do not guarantee all objectives will be achieved.

BIdentify program areas where efficiencies may be gained: Correct. Internal controls are assessed to optimize operations and identify improvements.

CEnsure there is no fraud, waste, or abuse within the entity: While controls mitigate risks of fraud, waste, or abuse, assessments aim to identify opportunities for efficiency.

DDetermine what legislation is not applicable to the entity: This is unrelated to internal control assessments.

Answer : B

Federal Entities and Internal Controls:

Federal entities assess internal controls to ensure efficient, effective, and economical use of resources while achieving program objectives.

Internal control assessments often identify areas for improvement, such as reducing waste or increasing operational efficiency.

Explanation of Answer Choices:

GAO, Standards for Internal Control in the Federal Government (Green Book).

Office of Management and Budget (OMB), Circular A-123, Internal Control Systems.

Question 5

A federal government agency that expends beyond its appropriation is in violation of the

AFederal Managers' Financial Integrity Act.

BFederal Financial Management Improvement Act.

CAntideficiency Act.

DSarbanes-Oxley Act.

Answer : C

Antideficiency Act Overview:

The Antideficiency Act (31 U.S.C. 1341, 1342, 1517) prohibits federal agencies from:

Obligating or expending funds in excess of their appropriations.

Entering into contracts without sufficient appropriated funds.

Violating the Act is a serious matter, and agencies are required to report such violations to Congress and the President.

Explanation of Answer Choices:

A . Federal Managers' Financial Integrity Act: Incorrect. This Act requires agencies to assess internal controls, not monitor appropriations.

B . Federal Financial Management Improvement Act: Incorrect. This Act focuses on improving financial systems, not budgetary compliance.

C . Antideficiency Act: Correct. This Act directly prohibits expenditures beyond appropriations.

D . Sarbanes-Oxley Act: Incorrect. This Act applies to corporate financial reporting, not federal appropriations.

Antideficiency Act (31 U.S.C. 1341, 1342, 1517).

GAO, Principles of Federal Appropriations Law.

Question 6

Who holds primary responsibility for establishing internal controls?

Accountants

Binternal auditors

Cmanagement

Daudit committee

Answer : C

Responsibility for Internal Controls:

Management holds the primary responsibility for establishing, implementing, and maintaining an organization's internal control system.

This responsibility is outlined in frameworks such as COSO's Internal Control - Integrated Framework and the GAO's Green Book.

Roles of Other Parties:

A . Accountants: While accountants may assist in designing or assessing controls, they are not primarily responsible.

B . Internal auditors: Their role is to evaluate the effectiveness of controls, not establish them.

D . Audit committee: Provides oversight but does not implement or design controls.

COSO, Internal Control - Integrated Framework.

GAO, Standards for Internal Control in the Federal Government (Green Book).

Question 7

According to OMB Circular A-11, what analytical method should be used to measure the cost, schedule and performance goals of a capital asset acquisition project?

Aearned value management

Bnet present value

Cfuture value

Dregression analysis

US. General Services Administration (GSA), Earned Value Management Implementation.

Answer : A

OMB Circular A-11 and Capital Asset Acquisition:

OMB Circular A-11 mandates the use of earned value management (EVM) for measuring cost, schedule, and performance goals in capital asset acquisition projects.

EVM integrates project scope, schedule, and cost data to assess project performance and forecast outcomes.

Explanation of Answer Choices:

A . Earned value management: Correct. EVM is the prescribed method for tracking progress on capital projects under OMB Circular A-11.

B . Net present value: Used for financial analysis, such as determining the economic value of future cash flows, but not for tracking project progress.

C . Future value: Measures the value of an investment at a future point, not applicable to project tracking.

D . Regression analysis: A statistical method for identifying relationships between variables, not for measuring project performance.

OMB Circular A-11, Capital Programming Guide.

AGA Examination 3: Governmental Financial Management and Control (GFMC) GFMC Exam Practice Test