Certified Government Auditing Professional (CGAP) Practice Exam

What is the most appropriate recommendation for an auditor who finds that loans are being used ineffectively to purchase US products?

1. Directly advise US manufacturers against future loans

2. Send a reminder and provide training to loan officers

3. Require a formal determination and certification

4. Decrease the loan amounts authorized for foreign countries

The correct answer is: Require a formal determination and certification

The recommendation to require a formal determination and certification is the most appropriate approach as it establishes a clear framework for accountability and verification. This process ensures that there is an official assessment of how loans are utilized and whether they align with their intended purpose of supporting the purchase of US products. By implementing this requirement, the auditor is promoting transparency and enforcing guidelines that can lead to better monitoring and evaluation of loan effectiveness. This formalized process can help to identify issues in the loan usage and encourage adherence to strategic goals aimed at economic growth and support for US manufacturing. In contrast, directly advising US manufacturers against future loans lacks a constructive solution to the problem and may hinder economic opportunities. Sending reminders and providing training to loan officers addresses the issue but may not lead to the necessary accountability for assessing loan effectiveness. Decreasing loan amounts for foreign countries is a punitive measure that does not actively resolve the underlying issue regarding the misuse of loans. It may limit potential economic support without addressing how existing loans are managed or utilized.