Certified Government Auditing Professional (CGAP) Practice Exam

Which law is most likely to be reviewed for compliance during a financial statement audit?

1. Occupational Safety and Health Act

2. Appropriations Acts

3. Superfund (environment)

4. Freedom of Information Act

The correct answer is: Appropriations Acts

The Appropriations Acts are significant pieces of legislation that govern how federal funds are allocated and spent by various government agencies. During a financial statement audit, the compliance with appropriations law is critically examined because these acts determine the legal authority for expenditures within a given budget period. Auditors assess whether funds were used in accordance with statutory requirements, confirming that the agency has not overspent its budget, and is adhering to the specific purposes for which funds were appropriated. Thus, the relevance of the Appropriations Acts to financial accountability and efficiency in government operations makes them a focal point during compliance reviews in financial statement audits. The other laws, while they have their own compliance mandates, do not directly relate to the financial transactions and reporting that are the primary focus in a financial statement audit. For instance, the Occupational Safety and Health Act is concerned with workplace safety and health standards, Superfund deals with hazardous waste cleanup, and the Freedom of Information Act is aimed at ensuring public access to government records. These areas are not central to the examination of financial statements and expenditures, which is why the Appropriations Acts stand out in this context.