Certified Government Auditing Professional (CGAP) Practice Exam

When assessing whether an entity complies with applicable laws, what should the auditor primarily focus on?

1. The efficiency of operations

2. The adequacy of internal controls

3. Compliance with specific regulations

4. The satisfaction of stakeholders

The correct answer is: Compliance with specific regulations

When assessing whether an entity complies with applicable laws, the auditor should primarily focus on compliance with specific regulations. This approach aligns directly with the auditor's primary responsibility to ensure that the entity adheres to legal and regulatory requirements relevant to its operations. Compliance relates directly to verifying that the entity has followed the laws and regulations that govern its actions, which is crucial for mitigating risks associated with non-compliance, such as legal penalties and damage to reputation. Focusing solely on the efficiency of operations or the adequacy of internal controls, while important in a broader assessment, does not specifically address the regulatory compliance aspect. The satisfaction of stakeholders is also related to the broader context of organizational performance but does not directly evaluate adherence to applicable laws. Therefore, identifying and ensuring compliance with specific regulations is the core focus required for an accurate assessment in this scenario.