Free AGA CGFM Exam Actual Questions

The questions for CGFM were last updated On Mar 29, 2025

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Question No. 1

As a way to ensure fiduciary responsiblity, a government entity should include which of the following in its investment

policy?

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Correct Answer: B

Why Include Permissible and Non-Permissible Investment Securities?

An investment policy outlines the guidelines and restrictions for managing an entity's investments, ensuring compliance with laws and protecting public funds.

Listing permissible (e.g., government bonds, treasury securities) and non-permissible investments ensures clarity about what the entity can and cannot invest in, helping to mitigate risk and maintain fiduciary responsibility.

Why Other Options Are Incorrect:

A . Prices and performance of investment securities: This information is important for monitoring investments but does not belong in the policy itself.

C . Historical allocations of investment securities: Historical data informs decision-making but is not relevant to the rules governing investments.

D . Key and non-key investment security controls: While controls are critical, they are part of the implementation process, not the investment policy.

Reference and Documents:

GAO Investment Policy Guidelines: Recommends specifying permissible investments to ensure fiduciary responsibility.

GFOA Best Practices in Investment Management: Emphasizes clear investment guidelines in the policy.


Question No. 2

An analyst has identified several variables that may be impacting state lottery ticket sales, including investments in

advertising, potential pay-out amounts and the size of lottery cards. Which of the following techniques would help

determine the extent to which each variable is impacting sales?

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Correct Answer: C

Regression Analysis:

Regression analysis is a statistical technique used to examine the relationships between a dependent variable (e.g., lottery ticket sales) and one or more independent variables (e.g., advertising, potential payouts, size of lottery cards).

This method helps quantify the extent to which each variable impacts sales.

Explanation of Answer Choices:

A . Content analysis: Incorrect. This method is used to analyze qualitative data (e.g., text or media) rather than numerical relationships.

B . Cost-benefit analysis: Incorrect. This technique evaluates the costs and benefits of a decision but does not identify the relationships between variables.

C . Regression analysis: Correct. This technique determines the impact of multiple variables on a single outcome.

D . Narrative analysis: Incorrect. This is used to analyze stories or qualitative information, not numerical data.


Association of Government Accountants (AGA), Data Analytics and Predictive Techniques in Government.

Question No. 3

Under the control environment component of internal control, management should

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Correct Answer: A

Control Environment Component:

The control environment is the foundation of an internal control system, setting the tone at the top.

Demonstrating integrity and ethical values is the first principle of the control environment, as outlined in the COSO Internal Control Framework.

Explanation of Answer Choices:

A . Demonstrate a commitment to integrity and ethical values: Correct. This is a foundational principle of the control environment.

B . Implement control activities through policies: This relates to the 'Control Activities' component, not the control environment.

C . Communicate quality information to achieve the entity's objectives: This relates to the 'Information and Communication' component.

D . Establish and operate activities to monitor the internal control system: This relates to the 'Monitoring Activities' component.


COSO, Internal Control - Integrated Framework.

GAO, Standards for Internal Control in the Federal Government (Green Book).

Question No. 4

What is the most fupdamental cash control?

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Correct Answer: D

Cash Control Fundamentals:

The primary goal of cash controls is to safeguard assets and prevent fraud, errors, or misappropriation.

Frequent bank reconciliations ensure that recorded cash balances match actual bank balances, detecting discrepancies quickly.

Explanation of Answer Choices:

A . Segregation of duties: While critical for cash management, it is not the most fundamental cash control.

B . Use of automated systems: Helpful for efficiency but not a fundamental control.

C . Analysis of cash reports: Important, but reconciling bank accounts is more critical for detecting errors or fraud.

D . Frequent reconciliation of bank accounts: Correct. This is the most fundamental and widely recognized control for safeguarding cash.


Association of Government Accountants (AGA), Cash Management Best Practices.

Government Finance Officers Association (GFOA), Bank Reconciliation Best Practices.

Question No. 5

In the context of audit risk, which type of risk is primarily influenced by the effectiveness of an organization's internal

controls?

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Correct Answer: B

What Is Control Risk?

Control risk refers to the risk that an organization's internal controls will fail to prevent or detect material misstatements in a timely manner.

The effectiveness of internal controls directly influences control risk. If controls are weak or poorly designed, the risk increases.

Why Is Option B Correct?

The primary focus of control risk is the adequacy and effectiveness of an entity's internal controls. Effective controls reduce the likelihood of material misstatements, while deficiencies increase control risk.

Why Other Options Are Incorrect:

A . Inherent Risk: This is the risk of material misstatements due to the nature of the business or transactions, independent of controls.

C . Detection Risk: This refers to the risk that auditors will fail to detect material misstatements. It is influenced by the nature and extent of audit procedures, not internal controls.

D . Audit Risk: This is the overall risk that an auditor will issue an incorrect opinion. It combines inherent, control, and detection risks.

Reference and Documents:

AICPA Standards on Audit Risk (AU-C 315): Explains control risk and its relationship to the effectiveness of internal controls.

GAO Yellow Book: Emphasizes assessing control risk when evaluating internal controls in audits.