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Government-wide statements use accrual accounting and economic resources focus, reporting capital assets and long-term liabilities. Cash (Option A) is not GAAP. Modified accrual (Option C) applies to governmental funds. Budgetary (Option D) is compliance-based. Exam 2 highlights accrual at government-wide level. Option B is correct.

The GAO Yellow Book (Generally Accepted Government Auditing Standards, or GAGAS) applies to federal, state, and local audits when federal funds are involved. COSO (Option A) is an internal control framework. PCAOB (Option C) applies to public companies. AICPA (Option D) governs private-sector audits but Yellow Book expands requirements for governments. Exam 3 emphasizes Yellow Book standards. Option B is correct.

The GAO Yellow Book general standards emphasize auditor independence, professional judgment, competence, and quality control. COSO (Option B) is a control framework. OMB Uniform Guidance (Option C) governs grant audits. PCAOB (Option D) oversees public company audits. Exam 3 stresses general standards in Yellow Book. Option A is correct.

GAO is the U.S. Congress’s audit, evaluation, and investigative arm. It issues the Yellow Book audit standards and conducts audits of federal agencies, programs, and spending. It does not set state/local standards (Option A, GASB does). It does not manage the federal budget (Option C, OMB does). It does not issue tax regulations (Option D, IRS does). Exam 1 emphasizes federal oversight roles. Option B is correct.

Encumbrances are budgetary accounting tools representing commitments, such as purchase orders, that reserve resources for future spending. They are not actual liabilities under GAAP but are disclosed to help ensure compliance with appropriations. Option A is incorrect—encumbrances do not create legal liabilities until goods/services are received. Option C misstates encumbrances as revenues. Option D is wrong because encumbrances are used in governmental funds, not proprietary funds. CGFM Exam 2 emphasizes encumbrances as part of budgetary control systems. Therefore, Option B is correct.