Certified Government Financial Manager (CGFM) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

A compliance audit is specifically designed to assess an entity's adherence to applicable laws, regulations, and policies. This type of audit evaluates whether the financial activities and transactions of the organization align with established legal standards and guidelines. Compliance audits are essential in governmental settings to ensure that agencies and departments operate within the frameworks set by governing bodies, ensuring accountability and transparency in the use of public funds.

In the context of government financial management, compliance audits help identify any instances of non-compliance, which can lead to corrective actions being taken. This is crucial not only for legal adherence but also for maintaining public trust and ensuring effective governance. On the other hand, financial audits primarily focus on evaluating the accuracy and reliability of financial statements, whereas performance and operational audits assess the efficiency and effectiveness of programs and processes, not specifically targeting adherence to laws and regulations.