A. Management identifies risks, auditors assess control effectiveness.

Answer DescriptionExplanation: Role of Management in Internal Control Evaluation:

• Responsibility for Risk Identification: Management has the primary responsibility for designing, implementing, and maintaining an effective system of internal controls. As part of this process, management identifies the risks related to fraud, waste, and abuse that could impact financial reporting or operational efficiency.
• Mitigating Risks: Once risks are identified, management is responsible for mitigating them by developing appropriate policies, procedures, and controls.

Role of the Auditor in Internal Control Evaluation:

• Assessing Control Effectiveness: Auditors are not responsible for designing or implementing controls; rather, their role is to evaluate whether the controls put in place by management are effective. They do this through testing, observation, and other audit procedures.
• Fraud Risk Assessment: As part of their duties under Generally Accepted Government Auditing Standards (GAGAS), auditors must assess the risk of material misstatement due to fraud and evaluate how management’s controls address those risks.

Why Other Options Are Incorrect:

• B. Auditors do not identify risks—this is management's job. Auditors evaluate and assess the controls already in place.
• C. Determining risk tolerance is a governance and management responsibility, not the joint responsibility of auditors and management.
• D. Management mitigates risks, but auditors don’t monitor compliance with controls—they test and evaluate the controls as part of their audit procedures.

A. a regression analysis.

C. develop an inventory of the applicable laws and regulations.

D. requesting records from a random sample of employees to verify they used transit on the day they used the taxi services.

Answer DescriptionExplanation:

B. an annual performance report.

Answer DescriptionExplanation:
What Does GPRA Require?
The government Performance and Results Act (GPRA) mandates that federal agencies prepare:
A strategic plan outlining long-term goals.
An annual performance plan detailing the objectives and performance measures for the upcoming year.
An annual performance report evaluating the agency’s success in meeting the goals outlined in the annual performance plan.
Why Is the Annual Performance Report Important?
The annual performance report provides accountability and transparency by comparing actual results to planned goals. It allows Congress and the public to assess how effectively the agency is achieving its mission.
Why Other Options Are Incorrect:
A. A five-year performance plan: GPRA requires a strategic plan (updated every four years), not a separate five-year performance plan.
C. SEA Report: This refers to Service Efforts and Accomplishments reporting, which is not mandated by GPRA.
D. The prior year’s audited financial report: While financial reports are important, they are separate from the performance reporting requirements of GPRA.

B. The auditor establishes materiality based on whether a misstatement would influence the judgement made by a reasonable user of the financial statements.

A. the mayor's high school classmate’s company with the lowest qualified bid

Answer DescriptionExplanation:
Why Select the Lowest Qualified Bidder?
Procurement rules in government require selecting the lowest qualified bidder to ensure fairness, cost-efficiency, and compliance with procurement regulations. If the mayor’s high school classmate’s company meets the qualification criteria and provides the lowest bid, there is no conflict of interest unless favoritism or improper influence is proven.
Why Other Options Are Incorrect:
B. Second lowest priced qualified bidder: Selecting the second lowest bidder without justification violates the principle of fairness and cost-efficiency.
C. Third lowest bidder pending state disbarment: This vendor is not a qualified bidder due to pending disbarment.
D. Highest priced qualified bidder with the highest quality products: If quality specifications are already met by lower bidders, selecting the highest-priced bidder is unjustifiable.

A. inventory control

Answer DescriptionExplanation: What Is Inventory Control?
Inventory control refers to the processes and systems used to manage stock levels, including determining how much inventory to keep on hand, reordering stock, and maintaining optimal levels to meet operational needs while minimizing costs.
Determining stock levels is a central function of inventory control, ensuring the organization has the right amount of inventory to meet demand without overstocking or understocking.