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Proprietary funds must prepare a Statement of Cash Flows. Governmental funds do not prepare cash flow statements. Statements of Net Position (Option A) and Balance Sheets (Option C) are prepared by both, but in different forms. The Statement of Activities (Option D) is government-wide. Exam 2 highlights these reporting differences. Option B is correct.

The Office of Management and Budget (OMB) prepares the President’s budget proposal, issues Circulars, and oversees federal agency performance. GAO (Option A) audits programs. Treasury (Option C) manages cash and debt. CBO (Option D) provides nonpartisan analysis for Congress. Exam 1 requires knowing roles of key federal entities. Option B is correct.

Reasonable assurance recognizes that controls reduce risk to acceptable levels but cannot eliminate all risk. Risk tolerance (Option A) sets boundaries. Control environment (Option C) is cultural. Materiality (Option D) is an audit concept. Exam 3 stresses reasonable assurance in control frameworks. Option B is correct.

Segregation of duties divides incompatible functions like vendor setup and payment approval, preventing fraud. Sequential numbering (Option A) safeguards documents. Monitoring (Option C) oversees controls but doesn’t segregate. Corrective actions (Option D) respond to problems after discovery. Exam 3 emphasizes segregation. Option B is correct.

Governmental funds (General, Special Revenue, Debt Service, Capital Projects, Permanent) focus on current financial resources, emphasizing near-term inflows/outflows that are spendable. They use modified accrual basis of accounting. Economic resources (Option A) apply to government-wide and proprietary funds. Cash resources (Option C) describe cash-basis accounting, not GASB focus. Long-term capital resources (Option D) are tracked only in government-wide reporting. CGFM Exam 2 stresses recognizing differences in measurement focus. Option B is correct.