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Wiley CPA Examination Review Outlines And Study Guides Volume 1 - 2012-2013 39th Edition Patrick R. Delaney, O. Ray Whittington - Solutions
Which of the following is correct relating to service organization control (SOC) reports referred to as “SOC 2”reports?a. They are primarily to assist financial statement auditors when processing services have been outsourced to a service provider.b. They are generally available to anyone.c.
A client’s refusal to provide a written assertion in a Trust Services engagement is most likely to result in which of the following types of opinions?a. Adverse.b. Disclaimer.c. Qualified.d. Unqualified with explanatory language.C.3.g. Service Organization Control (SOC) Reports
An engagement in which a CPA considers security, availability, processing integrity, online privacy, and/or confidentiality over any type of defined electronic system is most likely to considered which of the following types of engagements?a. Internal control over financial reporting.b. SysTrust.c.
A CPA’s examination report relating to a WebTrust engagement is most likely to includea. An opinion on whether the site is “hackproof.”b. An opinion on whether the site meets the Web-Trust criteria.c. Negative assurance on whether the site is electronically secure.d. No opinion or other
The WebTrust seal of assurance relates most directly toa. Financial statements maintained on the Internet.b. Health care facilities.c. Risk assurance procedures.d. Websites.
Trust Service engagements are performed under the provisions ofa. Statements on Assurance Standards.b. Statements on Standards for Attestation Engagements.c. Statements on Standards for Trust Engagementsd. Statements on Auditing Standards.
Which of the following is a term for an attest engagement in which a CPA assesses a client’s commercial Internet site for predefined criteria such as those over online privacy?a. ElectroNet.b. EDIFACT.c. TechSafe.d. WebTrust.
Which of the following statements is correct relating to an auditor’s review engagements on an entity’s management discussion and analysis (MD&A)?a. A review consists principally of applying analytical procedures and search and verification procedures.b. The review report of a public entity
Which of the following is an assertion embodied in management’s discussion and analysis (MD&A)?a. Valuation.b. Reliability.c. Consistency with the financial statements.d. Rights and obligations.
Which of the following is not an objective of a CPA’s examination of a client’s management discussion and analysis(MD&A) prepared pursuant to Securities and Exchange Commission rules and regulations?a. The historical amounts have been accurately derived, in all material respects, from the
An accountant’s report on a review of pro forma financial information should include aa. Statement that the entity’s internal control was not relied on in the review.b. Disclaimer of opinion on the financial statements from which the pro forma financial information is derived.c. Caveat that it
When an accountant examines a financial forecast that fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumptions in the accountant’s report and issue a(n)a. “Except for” qualified opinion.b. “Subject to” qualified
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided thata. The prospective financial statements are also examined.b. Responsibility for the adequacy of the procedures performed is taken by the accountant.c. Negative assurance is
Given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, an entity’s expected financial position, results of operations, and changes in financial position. Such prospective financial statements are known asa. Pro forma financial
Which of the following is a prospective financial statement for general use upon which an accountant may appropriately report?a. Financial projection.b. Partial presentation.c. Pro forma financial statement.d. Financial forecast.
An accountant’s compilation report on a financial forecast should include a statement that thea. Compilation does not include evaluation of the support of the assumptions underlying the forecast.b. Hypothetical assumptions used in the forecast are reasonable.c. Range of assumptions selected is
A CPA in public practice is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when Testifying as an expert witness in accounting and auditing matters given stipulated facts Compiling a client’s financial projection that presents a
Accepting an engagement to examine an entity’s financial projection most likely would be appropriate if the projection were to be distributed toa. All employees who work for the entity.b. Potential stockholders who request a prospectus or a registration statement.c. A bank with which the entity
An accountant’s compilation report on a financial forecast should include a statement thata. The forecast should be read only in conjunction with the audited historical financial statements.b. The accountant expresses only limited assurance on the forecasted statements and their assumptions.c.
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided thata. Use of the report is restricted to the specified parties.b. The prospective financial statements are also examined.c. Responsibility for the adequacy of the procedures
When an accountant examines projected financial statements, the accountant’s report should include a separate paragraph thata. Describes the limitations on the usefulness of the presentation.b. Provides an explanation of the differences between an examination and an audit.c. States that the
Which of the following is not correct concerning“specified parties” of an agreed-upon procedures report under either the auditing or attestation standards?a. They must agree on the procedures to be performed.b. They must take responsibility for the adequacy of the procedures performed.c. They
A summary of findings rather than assurance is most likely to be included ina. Agreed-upon procedures report.b. Compilation report.c. Examination report.d. Review report.C.3.b. Agreed-Upon Procedures Engagements
Which of the following is least likely to be included in an agreed-upon procedures attestation engagement report?a. The specified party takes responsibility for the sufficiency of procedures.b. Use of the report is restricted.c. Limited assurance on the information presented.d. A summary of
Which of the following is least likely to result in a restricted use attest report?a. Criteria suitable only for a limited number of parties.b. Subject matter available only to specified parties.c. A written assertion has not been obtained.d. Criteria developed by an industry association.
Suitable criteria in an attestation engagement may be available Publicly In CPA’s reporta. Yes Yesb. Yes Noc. No Yesd. No No
When performing an attestation engagement, which of the following is least likely to be present?a. Assertion.b. Practitioner independence.c. Subject matter.d. Suitable criteria.
Conditions exist that result in a material deviation from the criteria against which the subject matter was evaluated during an examination. The CPA’s conclusion may be on Subject matter Written assertiona. Yes Yesb. Yes Noc. No Yesd. No No
A practitioner is issuing a standard unqualified examination report under the attestation standards. The CPA’s conclusion may be on Subject matter Management’s written assertiona. Yes Yesb. Yes Noc. No Yesd. No No
An unqualified attestation report ordinarily may refer toa. Only the assertion.b. Only the subject matter to which the assertion relates.c. Either the assertion or the subject matter to which the assertion relates.d. Neither the assertion nor the subject matter to which the assertion relates.
Which of the following services would be most likely to be structured as an attest engagement?a. Advocating a client’s position in tax matter.b. A consulting engagement to develop a new database system for the revenue cycle.c. An engagement to issue a report addressing an entity’s compliance
Which of the following statements is not included in an accountant’s report on the application of accounting principles?a. The engagement was performed following standards established by the American Institute of Certified Public Accountants.b. The report is based on a hypothetical transaction
Blue, CPA, has been asked to render an opinion on the application of accounting principles to a specific transaction by an entity that is audited by another CPA. Blue may accept this engagement, but shoulda. Consult with the continuing CPA to obtain information relevant to the transaction.b. Report
In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant’s report should include a statement thata. Any difference in the facts, circumstances,
In connection with a proposal to obtain a new audit client, a CPA in public practice is asked to prepare a report on the application of accounting principles to a specific transaction. The CPA’s report should include a statement thata. The engagement was performed in accordance with Statements on
When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the Securities and Exchange Commission, such statements should be Marked as“unaudited”Withheld until audited Referred to in the auditor’s reporta. Yes No Nob. Yes
Which of the following matters is covered in a typical comfort letter?a. Negative assurance concerning whether the entity’s internal control procedures operated as designed during the period being audited.b. An opinion regarding whether the entity complied with laws and regulations under
When an independent audit report is incorporated by reference in a SEC registration statement, a prospectus that includes a statement about the independent accountant’s involvement should refer to the independent accountant asa. Auditor of the financial reports.b. Management’s designate before
When an accountant issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receivea. Negative assurance on capsule information.b. Positive assurance on supplementary disclosures.c. A limited opinion on pro forma financial
Comfort letters ordinarily are addressed toa. Creditor financial institutions.b. The client’s audit committee.c. The Securities and Exchange Commission.d. Underwriters of securities.
Comfort letters ordinarily are signed by the client’sa. Independent auditor.b. Underwriter of securities.c. Audit committee.d. Senior management.
Which of the following statements is correct concerning letters for underwriters, commonly referred to as comfort letters?a. Letters for underwriters are required by the Securities Act of 1933 for the initial public sale of registered securities.b. Letters for underwriters typically give negative
A registration statement filed with the SEC contains the reports of two independent auditors on their audits of financial statements for different periods. The predecessor auditor who audited the prior period financial statements generally should obtain a letter of representation from thea.
Financial information is presented in a printed form that prescribes the wording of the independent auditor’s report. The form is not acceptable to the auditor because the form calls for statements that are inconsistent with the auditor’s responsibility. Under these circumstances, the auditor
A CPA is permitted to accept a separate engagement(not in conjunction with an audit of financial statements) to audit an entity’s Schedule of accounts receivable Schedule of royaltiesa. Yes Yesb. Yes Noc. No Yesd. No No
Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta’s auditor, discovers that the statements are not suitably titled, Wall shoulda. Disclose any reservations in an
An auditor’s report would be designated a special report when it is issued in connection witha. Interim financial information of a publicly held company that is subject to a limited review.b. Compliance with aspects of regulatory requirements related to audited financial statements.c. Application
An auditor’s special report on financial statements prepared in conformity with the cash basis of accounting should include a separate explanatory paragraph before the opinion paragraph thata. Justifies the reasons for departing from generally accepted accounting principles.b. States whether the
Helpful Co., a nonprofit entity, prepared its financial statements on an accounting basis prescribed by a regulatory agency solely for filing with that agency. Green audited the financial statements in accordance with generally accepted auditing standards and concluded that the financial statements
When an auditor reports on financial statements prepared on an entity’s income tax basis, the auditor’s report shoulda. Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards.b. Not express an opinion on whether the statements are
Field is an employee of Gold Enterprises. Hardy, CPA, is asked to express an opinion on Field’s profit participation in Gold’s net income. Hardy may accept this engagement only ifa. Hardy also audits Gold’s complete financial statements.b. Gold’s financial statements are prepared in
The financial statements of KCP America, a US entity, are prepared for inclusion in the consolidated financial statements of its non-US parent. These financial statements are prepared in conformity with the accounting principles generally accepted in the parent’s country and are for use only in
Before reporting on the financial statements of a US entity that have been prepared in conformity with another country’s accounting principles, an auditor practicing in the US shoulda. Understand the accounting principles generally accepted in the other country.b. Be certified by the appropriate
An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements. Under these circumstances, the report on the selected data shoulda. Be limited to data derived from the audited financial statements.b. Be distributed
An auditor may report on condensed financial statements that are derived from complete financial statements if thea. Condensed financial statements are distributed to stockholders along with the complete financial statements.b. Auditor described the additional procedures performed on the condensed
An accountant’s review report on interim financial information of a public entity is most likely to include aa. Statement that the interim financial information was examined in accordance with standards of the Public Company Accounting Oversight Board.b. Statement that the interim financial
Which of the following is least likely to be a procedure included in an accountant’s review of interim financial information of a public entity?a. Compare disaggregated revenue data by month to that of the previous interim period.b. Read available minutes of meetings of stockholders.c. Observe
Which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of a publicly held entity?a. Verify changes in key account balances.b. Read the minutes of the board of directors’ meetings.c. Inspect the open purchase
A modification of the CPA’s report on a review of the interim financial statements of a publicly held company would be necessitated by which of the following?a. An uncertainty.b. Lack of consistency.c. Reference to another accountant.d. Inadequate disclosure.
An independent accountant’s report is based on a review of interim financial information. If this report is presented in a registration statement, a prospectus should include a statement clarifying that thea. Accountant’s review report is not a part of the registration statement within the
The objective of a review of interim financial information of a public entity (issuer) is to provide an accountant with a basis for reporting whethera. Material modifications should be made to conform with generally accepted accounting principles.b. A reasonable basis exists for expressing an
Green, CPA, is aware that Green’s name is to be included in the interim report of National Company, a publicly held entity. National’s quarterly financial statements are contained in the interim report. Green has not audited or reviewed these interim financial statements. Green should request
When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(n)a. Regulation S-X exemption.b. Report on pro forma financial statements.c. Unaudited
When an independent CPA assists in preparing the financial statements of a publicly held entity, but has not audited or reviewed them, the CPA should issue a disclaimer of opinion. In such situations, the CPA has no responsibility to apply any procedures beyonda. Documenting that internal control
An auditor should disclose the substantive reasons for expressing an adverse opinion in an explanatory paragrapha. Preceding the scope paragraph.b. Preceding the opinion paragraph.c. Following the opinion paragraph.d. Within the notes to the financial statements.
When an auditor expresses an adverse opinion, the opinion paragraph should includea. The principal effects of the departure from generally accepted accounting principles.b. A direct reference to a separate paragraph disclosing the basis for the opinion.c. The substantive reasons for the financial
March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March’s client. Monday expects to present Wall’s audited financial statements with March’s auditor’s report to 1st Federal Bank to obtain financing in Monday’s attempt
An auditor may express an opinion on an entity’s accounts receivable balance even if the auditor has disclaimed an opinion on the financial statements taken as a whole provided thea. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial
An auditor may not issue a qualified opinion whena. An accounting principle at variance with GAAP is used.b. The auditor lacks independence with respect to the audited entity.c. A scope limitation prevents the auditor from completing an important audit procedure.d. The auditor’s report refers to
A scope limitation sufficient to preclude an unqualified opinion always will result when managementa. Prevents the auditor from reviewing the working papers of the predecessor auditor.b. Engages the auditor after the year-end physical inventory is completed.c. Requests that certain material
An auditor decides to issue a qualified opinion on an entity’s financial statements because a major inadequacy in its computerized accounting records prevents the auditor from applying necessary procedures. The opinion paragraph of the auditor’s report should state that the qualification
When disclaiming an opinion due to a client-imposed scope limitation, an auditor should indicate in a separate paragraph why the audit did not comply with generally accepted auditing standards. The auditor should also omit the Scope paragraph Opinion paragrapha. No Yesb. Yes Yesc. No Nod. Yes No
Harris, CPA, has been asked to audit and report on the balance sheet of Fox Co. but not on the statements of income, retained earnings, or cash flows. Harris will have access to all information underlying the basic financial statements. Under these circumstances, Harris maya. Not accept the
An auditor who qualifies an opinion because of an insufficiency of evidential matter should describe the limitations in an explanatory paragraph. The auditor should also refer to the limitation in the Scope paragraph Opinion paragraph Notes to the financial statementsa. Yes No Yesb. No Yes Noc. Yes
Park, CPA, was engaged to audit the financial statements of Tech Co., a new client, for the year ended December 31, 2009. Park obtained sufficient audit evidence for all of Tech’s financial statement items except Tech’s opening inventory. Due to inadequate financial records, Park could not
Due to a scope limitation, an auditor disclaimed an opinion on the financial statements taken as a whole, but the auditor’s report included a statement that the current asset portion of the entity’s balance sheet was fairly stated. The inclusion of this statement isa. Not appropriate because it
In which of the following circumstances would an auditor not express an unqualified opinion?a. There has been a material change between periods in accounting principles.b. Quarterly financial data required by the SEC has been omitted.c. The auditor wishes to emphasize an unusually important
In the first audit of a client, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and the prior year, as well as the amounts of assets or liabilities at the beginning of the current year. This was due to the
In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion?a. The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedures.b. Conditions that
In which of the following situations would an auditor ordinarily choose between expressing an “except for” qualified opinion or an adverse opinion?a. The auditor did not observe the entity’s physical inventory and is unable to become satisfied as to its balance by other auditing procedures.b.
If a publicly held company issues financial statements that purport to present its financial position and results of operations but omits the statement of cash flows, the auditor ordinarily will express a(n)a. Disclaimer of opinion.b. Qualified opinion.c. Review report.d. Unqualified opinion with a
When an auditor qualifies an opinion because of inadequate disclosure, the auditor should describe the nature of the omission in a separate explanatory paragraph and modify the Introductory paragraph Scope paragraph Opinion paragrapha. Yes No Nob. Yes Yes Noc. No Yes Yesd. No No Yes
In which of the following circumstances would an auditor be most likely to express an adverse opinion?a. The chief executive officer refuses the auditor access to minutes of board of directors’ meetings.b. Tests of controls show that the entity’s internal control is so poor that it cannot be
Which of the following phrases would an auditor most likely include in the auditor’s report when expressing a qualified opinion because of inadequate disclosure?a. Subject to the departure from US generally accepted accounting principles, as described above.b. With the foregoing explanation of
An auditor concludes that a client’s illegal act, which has a material effect on the financial statements, has not been properly accounted for or disclosed. Depending on the materiality of the effect on the financial statements, the auditor should express either a(n)a. Adverse opinion or a
An auditor includes a separate paragraph in an otherwise unmodified report to emphasize that the entity being reported on had significant transactions with related parties.The inclusion of this separate paragrapha. Is considered an “except for” qualification of the opinion.b. Violates generally
When audited financial statements are presented in a client’s document containing other information, the auditor shoulda. Perform inquiry and analytical procedures to ascertain whether the other information is reasonable.b. Add an explanatory paragraph to the auditor’s report without changing
An auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the client refuses to revise or eliminate the
If an auditor is asked to provide an opinion relating to information accompanying the financial statements in a document, the opinion will ordinarily be upon whether the information is fairly stated ina. Accordance with US generally accepted auditing standards.b. Conformity with US generally
If management declines to present supplementary information required by the Governmental Accounting Standards Board (GASB), the auditor should issue a(n)a. Adverse opinion.b. Qualified opinion with an explanatory paragraph.c. Unqualified opinion.d. Unqualified opinion with an additional explanatory
In an audit of a nonissuer company, which statement is correct concerning required supplementary information by a designated accounting standards setter?a. The auditor has no responsibility for required supplementary information as long as it is outside the basic financial statements.b. The
Unaudited financial statements for the prior year presented in comparative form with audited financial statements for the current year should be clearly marked to indicate their status and I. The report on the prior period should be reissued to accompany the current period report.II. The report on
The predecessor auditor, who is satisfied after properly communicating with the successor auditor, has reissued a report because the audit client desires comparative financial statements. The predecessor auditor’s report should makea. Reference to the report of the successor auditor only in the
A client is presenting comparative (two-year) financial statements. Which of the following is correct concerning reporting responsibilities of a continuing auditor?a. The auditor should issue one audit report that is on both presented years.b. The auditor should issue two audit reports, one on each
When single-year financial statements are presented, an auditor ordinarily would express an unqualified opinion in an unmodified report if thea. Auditor is unable to obtain audited financial statements supporting the entity’s investment in a foreign affiliate.b. Entity declines to present a
Before reissuing the prior year’s auditor’s report on the financial statements of a former client, the predecessor auditor should obtain a letter of representations from the Former client’s management Successor auditora. Yes Yesb. Yes Noc. No Yesd. No No
Jewel, CPA, audited Infinite Co.’s prior year financial statements. These statements are presented with those of the current year for comparative purposes without Jewel’s auditor’s report, which expressed a qualified opinion. In drafting the current year’s auditor’s report, Crain, CPA,
When reporting on comparative financial statements, an auditor ordinarily should change the previously issued opinion on the prior year’s financial statements if thea. Prior year’s financial statements are restated to conform with generally accepted accounting principles.b. Auditor is a
An entity changed from the straight-line method to the declining balance method of depreciation for all newly acquired assets. This change has no material effect on the current year’s financial statements, but is reasonably certain to have a substantial effect in later years. If the change is
When an entity changes its method of accounting for income taxes, which has a material effect on comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor’s report. This paragraph should identify the nature of the change anda. Explain why the change is
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