Showing 1 to 20 of 10283 Questions

Question & Answer:

  • What is meant by the term level of assurance? How does the level of assurance differ for an audit of historical financial statements, a review, and a compilation?

  • What is negative assurance? Why is it used in a review engagement report?

  • Distinguish between compilation and review of financial statements. What is the level of assurance for each?

  • Distinguish the three forms of compilation reports that a CPA can provide to clients.

  • List five things that are required of an auditor by SSARS for a compilation.

  • What steps should auditors take if during a compilation engagement they become aware that the financial statements are misleading?

  • What procedures should the auditor use to obtain the information necessary to give the level of assurance required of reviews of financial statements?

  • What should auditors do if during a review of financial statements they discover that applicable accounting standards are not being followed?

  • What are the differences between the review reports for a private company under SSARS and for the interim financial statements of a public company?

  • Explain why a review of interim financial statements for a public company may provide a greater level of assurance than an SSARS review.

  • Define what is meant by attestation standards. Distinguish between attestation standards and auditing standards.

  • List the five Trust Services principles and explain whether a WebTrust licensed CPA can report on an entity's compliance with those principles individually or in combination.

  • Describe the purpose of a SysTrust assurance services engagement.

  • An audit client has engaged a third party service organization to host its payroll software package on servers located at the service organization. What options do you have to obtain assurance about the controls embedded in the payroll application?

  • Explain what is meant by prospective financial statements and distinguish between forecasts and projections. What four things are involved in an examination of prospective financial statements?

  • State the reporting requirements for statements prepared on a basis other than GAAP.

  • The Absco Corporation has requested that Herb Germany, CPA, provide a report to the Northern State Bank as to the existence or nonexistence of certain loan conditions. The conditions to be reported on are the working capital ratio, dividends paid on preferred stock, aging of accounts receivable, and competence of management.
    This is Herb's first experience with Absco. Should Herb accept this engagement? Substantiate your answer.

  • Multiple Choice Questions
    The following are miscellaneous questions about compilation and review services. Choose the best response.
    a. It is acceptable for a CPA to be associated with financial statements when not independent with respect to the client and still issue a substantially unmodified report for which of the following:
    (1) Audits of companies following GAAP.
    (2) Audits of companies on a comprehensive basis of accounting other than GAAP.
    (3) Review of financial statements following GAAP.
    (4) Compilation of financial statements following GAAP.
    b. A CPA is performing review services for a small, closely held manufacturing company.
    As a part of the follow-up of a significant decrease in the gross margin for the current year, the CPA discovers that there are no supporting documents for $40,000 of disbursements. The chief financial officer assures her that the disbursements are proper. What should the CPA do?
    (1) Include the unsupported disbursements without further work in the statements on the grounds that she is not doing an audit.
    (2) Modify the review opinion or withdraw from the engagement unless the unsupported disbursements are satisfactorily explained.
    (3) Exclude the unsupported disbursements from the statements.
    (4) Obtain a written representation from the chief financial officer that the disbursements are proper and should be included in the current financial statements.
    c. Which of the following best describes the responsibility of the CPA in performing compilation services for a company?
    (1) The CPA has to satisfy only himself or herself that the financial statements were prepared in conformity with accounting standards.
    (2) The CPA must understand the client's business and accounting methods and read the financial statements for reasonableness.
    (3) The CPA should obtain an understanding of internal control and perform tests of controls.
    (4) The CPA is relieved of any responsibility to third parties.

  • Multiple Choice Questions
    The following questions concern attestation engagements.
    Choose the best response.
    a. Which of the following professional services is considered an attestation engagement? (1) A management consulting engagement to provide IT advice to a client.
    (2) An income tax engagement to prepare federal and state tax returns.
    (3) An engagement to report on compliance with statutory requirements.
    (4) A compilation of financial statements from a client's accounting records.
    b. A Type 1 service auditor's report on internal controls at a service organization
    (1) Includes an opinion about the suitability of the design of controls at the service organization.
    (2) Is based on the performance of tests of controls and substantive tests of transactions at the service organization.
    (3) Contains an opinion about the operating effectiveness of internal controls at the service organization.
    (4) Provides an opinion about the fair presentation of the service organization's financial statements in accordance with accounting standards.
    c. Which of the following statements concerning prospective financial statements is correct?
    (1) Only a financial forecast is normally appropriate for limited use.
    (2) Any type of prospective financial statement is normally appropriate for limited use.
    (3) Only a financial projection is normally appropriate for general use.
    (4) Any type of prospective financial statement is normally appropriate for general use.

  • Multiple Choice Questions
    The following questions concern reports issued by auditors, other than those on historical financial statements. Choose the best response.
    a. An auditor is reporting on cash basis financial statements. These statements are best referred to in the opinion of the auditor by which of the following descriptions?
    (1) Cash receipts and disbursements and the assets and liabilities arising from cash transactions.
    (2) Financial position and results of operations arising from cash transactions.
    (3) Balance sheet and income statements resulting from cash transactions.
    (4) Cash balance sheet and the source and application of funds.
    b. Which of the following statements with respect to an auditor's report expressing an opinion on a specific item on a financial statement is correct?
    (1) Such a report can be expressed only if the auditor is also engaged to audit the entire set of financial statements.
    (2) Materiality must be related to the specific item rather than to the financial statements taken as a whole.
    (3) The attention devoted to the specified item is usually less than it would be if the financial statements taken as a whole were being audited.
    (4) The auditor who has issued an adverse opinion on the financial statements taken as a whole can never express an opinion on a specified item in these financial statements.
    c. When asked to perform an audit to express an opinion on one or more specified elements, accounts, or items of a financial statement, the auditor
    (1) May not describe auditing procedures applied.
    (2) Should advise the client that the opinion can be issued only if the financial statements have been audited and found to be fairly presented.
    (3) May assume that the first standard of reporting with respect to GAAP does not apply.
    (4) Should comply with the request only if they constitute a major portion of the financial statements on which an auditor has disclaimed an opinion based on an audit.