Homework Help This preview shows page 32 - 35 out of 104 pages.
Which of the following representations does an accountant make implicitly when issuing the standardreport for the compilation of a nonissuer's financial statements?a. The financial statements have not been audited.b.The accountant is independent with respect to the entity.
c. A compilation consists principally of inquiries and analytical procedures.d. The accountant does not express any assurance on the financial statements.ExplanationChoice "b" is correct. If the accountant is not independent, he should specifically disclose the lack ofindependence. Otherwise, independence is implied.Choice "a" is incorrect. The report accompanying compiled financial statements explicitly states that thefinancial statements have not been audited.Choice "c" is incorrect. Inquiry and analytical procedures are not performed in a compilation engagement.Choice "d" is incorrect. The report accompanying compiled financial statements explicitly states that theaccountant provides no assurance on the financial statements.Which of the following inquiry or analytical procedures ordinarily is performed in an engagement to reviewa nonissuer's financial statements?
Get answer to your question and much more
d.Tests of theaccountingrecords.a.Tests ofmanagement'sassertionsregardingcontinuedexistence.b.Inquiries ofthe entity'sattorneyconcerningcontingentliabilities.
Which of the following procedures is usually performed by the accountant in a review engagement of anonissuer performed in accordance withStatements on Standards for Accounting and Review Services?
Get answer to your question and much more
Upload your study docs or become a
Course Hero member to access this document
Upload your study docs or become a
Course Hero member to access this document
End of preview. Want to read all 104 pages?
Upload your study docs or become a
Course Hero member to access this document
CPA Auditing and Attestation
You can start the exam to practice all questions related to this exam.
Question No. 1
Choose the correct option from the given list.
Inquiring about actions taken at meetings of the board of directors that may affect the financial statements.
Issuing a report stating that the review was performed in accordance with standards established by the AICPA.
Reading the financial statements to consider whether they conform with generally accepted accounting principles.
Communicating any material weaknesses discovered during the consideration of internal control.
0 Discussions
Trending Exams
Last Updated on February 1, 2022 by Admin 3
- Sending a letter of inquiry to the entity’s lawyer.
- Comparing the financial statements with statements for comparable prior periods.
- Confirming a significant percentage of receivables by direct communication with debtors.
- Communicating significant deficiencies discovered during the study of the internal control structure.
Explanation: Choice “b” is correct. Comparing the financial statements with statements for comparable prior periods (analytical procedures) is a procedure that is usually performed by the accountant in a review engagement of a nonissuer. Choice “a” is incorrect. Sending a letter of inquiry to the entity’s lawyer is a procedure generally performed only in an audit of an entity’s financial statements. Choice “c” is incorrect. Confirming a significant percentage of receivables by direct communication with debtors is a procedure generally performed only in an audit of an entity’s financial statements.
Choice “d” is incorrect. Communicating significant deficiencies discovered during the study of the internal control structure is a procedure generally performed only in an audit of an entity’s financial statements. (The internal control structure is generally not evaluated in a review engagement.)
Which of the following procedures should an accountant perform during an engagement to review the financial statements of a non issuer? An accountant performing a review should obtain a client representation letter from the owner, manager, or chief executive officer, and, if appropriate, the chief financial officer.
A compilation engagement is an attest engagement, although it is a nonassurance engagement. Which of the following procedures is more likely to be performed in a review engagement of a nonpublic entity than in a compilation engagement? Obtaining a representation letter from the chief executive officer.
Which of the following procedures is not usually performed by the accountant in a review engagement of a nonpublic entity? Communicating any material weaknesses discovered during the study and evaluation of internal control.
The review procedures that the practitioner is required to perform include:.
Inquiries on the accounting practices used by the company..
Representations from management on the accuracy of the financial statements..
Management responsibility for internal control systems..
Management responsibility to detect and prevent fraud..
Audit 7 - Compilation and Reviews - Part 1
Performing inquiry and analytical procedures is the primary basis for an accountant to issue a
Review report on comparative financial statements for a nonpublic entity in its second year of operations.
A review of historical financial statements consists principally of inquiry and analytics. Major financial assistance programs must be audited and r
Which of the following procedures is ordinarily performed by an accountant during an engagement to compile the financial statements of a nonissuer?
Consider whether the financial statements are free from obvious material mistakes in the application of accounting principles.
A compilation requires the accountant to read the financial statements and, using that knowledge, evaluate whether there are obv
An accountant has been engaged to compile the financial statements of a nonpublic entity. The financial statements contain many departures from GAAP because of inadequacies in the accounting records. The accountant believes that modification of the compil
Withdraw from the engagement and provide no further service concerning these financial statements.
When an accountant compiling financial statements becomes aware of one or more material GAAP departures, the accountant should request that the client modif
Which of the following procedures should an accountant perform during an engagement to compile prospective financial statements?
Make inquiries about the accounting principles used in the preparation of the prospective financial statements.
In a compilation of prospective financial statements, the accountant establishes an understanding with the client, inquires about the principle
Moore, CPA, has been asked to issue a review
report on the balance sheet of Dover Co., a nonpublic entity. Moore will not be reporting on Dover's statements of income, retained earnings, and cash flows. Moore may issue the review report provided the
:
Scope of the inquiry and analytical procedures has not been restricted.
An accountant is permitted to report on one financial statement so long as the scope of the work is not limited.
When engaged to review the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entity's accounting principles and practices. This requirement most likely will include obtaining a general understandi
Stated qualifications of the entity's accounting personnel.
Before performing a review engagement, the accountant is required to have a general understanding of the nature of the entity's business, including the nature of the entity's transactions, the fo
An accountant is required to comply with the provisions of the Statements on Standards for Accounting and Review Services when performing which of the following tasks?
Generating financial statements of a nonissuer.
An engagement to generate financial statements for a nonissuer is an engagement to assist management in presenting financial information in the form of financial statements, which is a financial statement pr
An accountant has been asked to issue a review report on the balance sheet of a nonpublic entity without reporting on the related statements of income, retained earnings, and cash flows. The accountant may issue the requested review report only if
The scope of the accountant's inquiry and analytical procedures has not been restricted.
An accountant may accept an engagement to review or compile a single financial statement as long as the client has not imposed scope limitations on the
accountant. Th
A CPA is performing a review of the interim financial statements of a publicly-held company. The CPA performed the annual audit for the most recent fiscal year and has already been engaged to perform the audit of the current fiscal year's financial statem
Auditing standards issued by the Public Company Accounting Oversight Board [PCAOB].
Audits and reviews of the financial statements of publicly-held companies are regulated by the
Public Company Accounting Oversight Board and their auditing standards are f
May an accountant accept an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles, but plans to obtain the required level of knowledge before
Compilation [Yes] Review [Yes]
While a CPA is required to have a certain level of knowledge about a client and the
industry in which it operates in order to perform a compilation or review, an accountant without such knowledge may accept a compilation or
Gole, CPA, is engaged to review the 20X4 financial statements of North Co., a nonpublic entity. Previously, Gole audited North's 20X3 financial statements and expressed an unqualified opinion. Gole decides to include a separate paragraph in the 20X4 revie
No auditing procedures were performed after the date of the
20X3 auditor's report.
In order to minimize a user's misunderstanding of Gole's responsibilities, a separate paragraph should be added to the report to indicate that Gole did not perform any audi
An accountant has compiled the financial statements of a nonpublic entity in accordance with Statements on Standards for Accounting and Review Services [SSARS]. Does SSARS require that the compilation report be printed on the accountant's letterhead and t
Printed
on the Accountant's the letterhead [No] Manually signed by Accountant[NO]
A compilation report is not required to be printed on the accountant's letterhead. Nor is there a requirement that the accountant manually sign the report.
Which of the following procedures would an accountant most likely perform when reviewing the financial statements of a nonissuer?
Ask management about the entity's procedures for recording transactions.
A review
consists primarily of inquiries and analytical procedures. Inquiries will be designed to enable the accountant to determine if the client's accounting can be relied upon, wh
A CPA is reporting on comparative financial statements of a nonissuer. The CPA audited the prior-year's financial statements and reviewed those of the current year in accordance with Statements on Standards for Accounting and Review Services [SSARS]. The
The type of opinion
expressed previously
When reviewed financial statements are presented in comparative form with the prior year's audited financial statements, the review report will indicate that the firm audited the prior year's statements, the date o
A CPA was engaged to compile pro forma financial information that will be presented in a document that also contains historical financial information.
The CPA may accept the engagement if the historical financial
statements have been compiled, reviewed, or audited.
A CPA may accept an engagement to compile pro forma financial information provided it is in a document that also contains or refers to the h
The inability to complete which of the following activities most likely would prevent an accountant from accepting and completing an engagement for a review of financial statements performed in accordance with Statements on Standards for Accounting and Re
Performing
inquiries and analytical procedures.
A review consists of performing analytical procedures and making inquiries of management. An accountant would not be able to perform an engagement without the ability to perform those procedures. Tests of de
Which of the following accounting services may an accountant perform without being required to issue a compilation or review report under the Statements on Standards for Accounting and Review Services?
Both
I and II
SSARS establish the standards for the performance of reviews, compilations, and financial statement preparation engagements. Preparing a trial balance and preparing monthly journal entries are nonattest services that are not subject to the r
Jones Retailing, a nonpublic entity, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements provided the
Omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report.
If financial statements omit substantially all disclosures, the CPA may perform a compilation engagement as long as the omiss
Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?
Compiling
an individual's personal financial statement to be used to obtain a mortgage.
SSARS establish the standards for financial statement preparation engagements, reviews, and compilations, which include the compilation of personal financial statement
Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonpublic entity's financial statements?
The accountant is independent
with respect to the entity.
Independence is the one implicit factor in the compilation report. When a user reads the compilation report and doesn't see any statement indicating there is an impairment of independence, the user
Which of the following inquiries or analytical procedures ordinarily is performed in an engagement to review a nonpublic entity's financial statements?
Inquiries concerning the entity's procedures for recording and summarizing
transactions.
In a review, the accountant will make inquiries relating to the entity's procedures for recording and summarizing transactions. The accountant is not required in a re
An accountant is required to comply with the provisions of Statements on Standards for Accounting and Review Services whenI] Reproducing client-prepared financial statements, without modification, as an accommodation to a client.
2] Preparing standard mo
Neither I
nor II.
Reproducing client prepared financial statements without modification as an accommodation is not an accounting service and is not subject to professional standards. Preparing monthly journal entries for a client is a nonattest service th
Which of the following is a nonattest engagement?1]An engagement to prepare financial statements.2]The work of preparing unprepared client financial statements prior to an engagement to perform a compilation of the statements.
3]A compilation engagement
I and II only.
A preparation engagement is a nonattest engagement, whether it is the highest level of service performed by the accountant for the client, or if the financial statements will subsequently be compiled. A compilation engagement is an attest e
Which of the following procedures is more likely to be performed in a review engagement of a nonpublic entity than in a compilation engagement?
Obtaining a representation letter from the chief executive officer.
In any engagement where an opinion or any other form of assurance is given, the CPA must obtain a representation letter from the client. The CPA is required to understand the entity's sig
When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, according to PCAOB requirements, the appropriate form of report to be issued must include a [an]
Disclaimer of opinion.
When a CPA is associated with the financial statements of a public entity without auditing or reviewing the information, the PCAOB requires a disclaimer of opinion to be issued.
Which of the following procedures would be generally performed when evaluating the accounts receivable balance in an engagement to review financial statements in accordance with Statements on Standards for Accounting and Review Services?
Perform a reasonableness test of the balance by computing days' sales in receivables.
A review consists of making inquiries and performing analytical procedures, one of which might be to compare the number of days' sales in accounts receivable and compare
Which of the following statements would not normally be included in a representation letter for a review of interim financial information?
We
understand that a review consists principally of performing analytical procedures and making inquiries about the interim financial information.
The client does not have to represent that they understand what a review consists of. The understanding that
When planning a review of an audit client's interim financial statements, which of the following procedures should the accountant perform to update the accountant's knowledge about the entity's business and its internal control?
Consider the results of audit procedures performed with respect to the current-year's financial statements.
To obtain, or update, an understanding of the entity and its environment, the accountant will read available documentation; read the most recent an
An accountant's standard report issued after compiling the financial statements of a nonpublic entity should state that
The objective of a compilation is assist
management in presenting financial information in the form of financial statements.
A standard compilation report states that the accountant or firm did not audit or review the financial statements nor was the acco
Before reissuing a compilation report on the financial statements of a nonissuer for the prior year, the predecessor accountant is required to
Compare the prior year's financial statements with those of the current year.
When
reissuing a compilation or review report, a predecessor will consider if the report is still appropriate and will read the current period's financial statements and related
Which of the following is an attest engagement?1]A review.2]An engagement to prepare financial statements.
3] A compilation.
I and III only.
Both compilations and reviews are considered attest engagements, although a review is also an assurance engagement and a
compilation is not. A preparation engagement is neither an attest engagement nor an assurance engagement.
When an accountant is engaged to compile a nonpublic entity's financial statements that omit substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements are
Not designed for those who are uninformed about the omitted disclosures.
If the financial statements omit
substantially all disclosures, the CPA may perform the engagement in accordance with SSARS, but will modify the compilation report by adding an expla
A CPA started to audit the financial statements of a nonissuer. After completing certain audit procedures, the client requested the CPA to change the engagement to a review because of a scope limitation. The CPA concludes that there is reasonable justific
Statement that a review is substantially less in
scope than an audit.
If an accountant accepts a downgrade in an engagement from an audit to a review, the accountant will issue a standard review report, modified only for the same reasons any review report
Clark, CPA, compiled and properly reported on the financial statements of Green Co., a nonpublic entity, for the year ended March 31, 20X1. These financial statements omitted substantially all disclosures required by generally accepted accounting principl
Clark may not report on the comparative financial statements because the 20X1 statements are not comparable to the 20X2 statements that include the GAAP disclosures.
A CPA cannot report on comparative financial statements if in fact they are not comparabl
While auditing the financial statements of a nonpublic entity, a CPA was requested to change the engagement to a review in accordance with Statements on Standards for Accounting and Review Services [SSARS] because of a scope limitation. If the CPA believe
Neither I nor II.
If an accountant accepts an engagement that is downgraded from an audit to a review, the accountant will issued a report that is unmodified as to the change in engagement. It would not refer to reasons for the change or refer to audit pr
Compiled financial statements should be accompanied by a report stating that
The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the finan
According to Statements on Standards for Accounting and Review Engagements, in which of the following situations would the accountant be required to issue a report?1]A compilation engagement where the accountant is independent of the client.
2]A review e
I only.
A report is required in a compilation engagement, regardless of whether or not the accountant is independent. Although a review report is required when the accountant reviews a client's financial statements, no report is issued when an accountant
The objective of a review of interim financial information of an issuer [public entity] is to provide an accountant with a basis for reporting whether
Material modifications
should be made to conform to generally accepted accounting principles.
A review, whether performed in relation to interim information of an issuer, or the interim or annual financial statements of a nonissuer, is designed to provide
An accountant who had begun an audit of the financial statements of a nonpublic entity was asked to change the engagement to a review because of a restriction on the scope of the audit. If there is reasonable justification for the change, the accountant's
Original Engagement that was agreed to [No]Scope limitation that cause the change engagement [No]
If there is justification for downgrading an engagement, the auditor would not need to modify the report. In this case, a standard review report would be is
Which of the following would not be found in an engagement letter for a financial statement preparation engagement performed in accordance with SSARS?
A
statement indicating that management will designate someone, preferably from senior management, to oversee and take responsibility for the accountant's services.
In any SSARS engagement, an engagement letter documenting the understanding with management
Statements on Standards for Accounting and Review Services [SSARS] would govern the conduct of which of the following?1]Beck, CPA, prepares financial statements as a necessary step prior to Beck's engagement to compile the financial statements.
2]Prepara
II and III only
When the preparation of financial statements is the highest level of service an accountant will be performing, the preparation engagement is a nonattest engagement that is subject to the requirements of SSARS. This will still be the case i
Which of the following statements is true regarding analytical procedures in a review engagement?
Analytical procedures involve the
use of both financial and nonfinancial data.
Analytical procedures involve comparing client data to the accountant's expectations and may be applied to financial and nonfinancial data. A review does require the use of ana
An accountant may compile a nonpublic entity's financial statements that omit all of the disclosures required by GAAP only if the omission isI. Clearly indicated in the accountant's report.
II. Not undertaken with the intention of misleading the financia
Both I and II
An accountant may compile financial statements that omit all disclosures as long as the omissions were not intended to mislead users and the accountant modifies the compilation report by adding an explanatory paragraph that indicates the omi
Which of the following statements is correct regarding a compilation report on financial statements issued in accordance with Statements on Standards for Accounting and Review Services [SSARS]?
The date on the report should be the date of completion of the compilation.
A compilation report is dated as of the date on which the accountant completes the compilation. A compilation report may be issued when the accountant is not independent provided
In an engagement to review the financial statements of a nonissuer, the accountant most likely would perform which of the following procedures? Analysis of inventory turnover.
Which of the following procedures is usually performed by the accountant in a review engagement of a nonissuer? Comparing the financial statements with statements for comparable prior periods.
The review procedures that the practitioner is required to perform include:.
Inquiries on the accounting practices used by the company..
Representations from management on the accuracy of the financial statements..
Management responsibility for internal control systems..
Management responsibility to detect and prevent fraud..
Which of the following inquiries or analytical procedures ordinarily is performed in an engagement to review a nonpublic entity's financial statements? Inquiries concerning the entity's procedures for recording and summarizing transactions.