Master AGA GFMC Exam with Reliable Practice Questions

Correct : B

Deterrence of Fraud:

A primary deterrent to fraud is the fear of being caught. When individuals believe there is a high likelihood of detection, they are less likely to commit fraudulent acts.

Strong internal controls, monitoring, and audits increase this fear and serve as effective deterrents.

Explanation of Answer Choices:

A . Delegation of responsibility without oversight: Incorrect. Lack of oversight increases the risk of fraud rather than deterring it.

B . The fear of detection: Correct. The fear of being caught is one of the most effective fraud deterrents.

C . Job satisfaction and sense of 'team': While these contribute to a positive work environment, they do not directly deter fraud.

D . Performance of employee background checks: Background checks are a preventive measure but are less effective as a fraud deterrent compared to detection risk.

Association of Certified Fraud Examiners (ACFE), Fraud Prevention Guidance.

GAO, Fraud Risk Management Framework.

Correct : D

What Are the Four General Government Auditing Standards?

These standards, as defined in the GAO Yellow Book (Government Auditing Standards):

Qualifications: Auditors must have the necessary professional skills and competence to perform their work.

Independence: Auditors must remain free from personal, external, and organizational impairments to maintain objectivity.

Due Professional Care: Auditors must exercise care and diligence, adhering to professional standards and ethical requirements.

Quality Control: Auditors must establish and maintain a system of quality control to ensure audit work meets professional standards.

Why Is Option D Correct?

These four elements are explicitly outlined in the GAO Yellow Book as the core principles of government auditing standards.

Why Other Options Are Incorrect:

A . Compliance, timeliness, qualifications, and due professional care: Timeliness and compliance are not part of the four general standards; they are components of audit objectives.

B . Supervision, planning, management controls, and evidence: These are aspects of audit performance, not general standards.

C . Planning, internal controls, independence, and irregularities: Planning and internal controls are part of the audit process, not general standards.

Reference and Documents:

GAO Yellow Book (Generally Accepted Government Auditing Standards - GAGAS): Lists qualifications, independence, due professional care, and quality control as the four general standards.

AICPA Audit Standards: Aligns with GAGAS in emphasizing these four principles.

Correct : B

Understanding the Procurement Process for Contractors:

When selecting contractors for government projects, the goal is to ensure the selection of a responsible and responsive bidder who meets all requirements outlined in the Request for Proposal (RFP) or bidding documents.

Key considerations include the contractor's ability to meet deadlines, quality of work, and compliance with laws and regulations.

Analyzing the Answer Options:

A . The contractor with the lowest bid who has a history of delayed projects:

While cost savings are important, a contractor with a history of delays poses a significant risk to project timelines and community satisfaction. This bidder is not considered 'responsible' based on their track record.

B . The contractor with the second-lowest bid, who has no prior violations and meets all bid specifications:

Although this is not the lowest bid, it is the best choice because the contractor meets all requirements and has a clean history. Selecting a reliable bidder ensures the project is completed on time and within acceptable quality standards. This is the most responsible and justified decision.

C . The contractor with the highest bid, who includes luxury, non-requested upgrades to the design:

Selecting a contractor who proposes unnecessary and expensive upgrades is not cost-effective. Government procurement prioritizes fulfilling project specifications within the approved budget, making this choice impractical.

D . The contractor whose bid was submitted past the deadline but offers a discount for early payment:

Late bids violate procurement rules, which emphasize fairness and transparency. Accepting this bid could lead to legal challenges or allegations of favoritism. Discounts do not justify breaching procurement guidelines.

Why Option B is Correct:

The second-lowest bid is the most responsible choice because the contractor:

Meets all bid requirements.

Has a strong history of compliance with regulations.

Avoids risks associated with unreliable or excessively expensive options.

This selection aligns with government procurement standards that prioritize balancing cost, quality, and reliability.

Reference and Documentation from the Government Financial Manager (GFM) by AGA:

Procurement Best Practices: The AGA emphasizes the importance of selecting bidders who demonstrate responsibility, reliability, and compliance with the bidding process.

Ethical Procurement Standards: The Yellow Book (Government Auditing Standards) highlights the importance of fairness, transparency, and accountability in contractor selection.

Source: AGA Certified Government Financial Manager (CGFM) study guides, Section IV: Internal Controls, Procurement, and Ethics.

Correct : A

What Is a Lockbox?

A lockbox is a service provided by banks to streamline the collection of payments. Customers send payments directly to a bank-managed P.O. box, where the bank processes and deposits them on behalf of the organization.

Why Does a Lockbox Eliminate Internal Office Processing Delays?

Payments are sent directly to the bank, bypassing the organization's internal mail and deposit processes. This eliminates delays caused by handling checks internally and ensures quicker access to funds.

Why Other Options Are Incorrect:

B . Mail and check-clearing time: Lockboxes reduce internal processing delays but do not affect the mail delivery time or bank check-clearing processes.

C . Delays in the availability of funds after transaction initiation: Fund availability depends on banking processes, not the lockbox.

D . Writing of checks against insufficient funds: Lockboxes do not prevent the issuance of bad checks.

Reference and Documents:

Treasury Financial Manual: Describes lockboxes as tools to reduce internal delays in payment processing.

GAO Financial Management Best Practices: Highlights the benefits of lockboxes in expediting deposits.

Correct : B

What Is Forensic Accounting?

Forensic accounting involves investigating financial records to detect fraud, gather evidence, and support legal proceedings. It focuses on identifying and responding to fraud rather than proactively preventing it.

Tasks Performed in Forensic Accounting:

Auditing accounting records (Option A): Forensic accountants review records to uncover irregularities or fraud.

Interviewing related parties (Option C): They conduct interviews to gather information and evidence.

Serving as an expert witness (Option D): Forensic accountants often testify in court to explain their findings.

Why Prevention Is Not Part of Forensic Accounting:

Preventing fraud is typically the responsibility of internal controls, management, and auditors, not forensic accountants. Forensic accounting is reactive, addressing fraud that has already occurred.

Reference and Documents:

GAO Forensic Auditing Standards: Highlights the role of forensic accounting in investigating, not preventing, fraud.

AICPA Forensic and Valuation Services Practice Aid: Focuses on investigative and litigation support tasks performed by forensic accountants.