AUD CH 19

For an audit of financial statements prepared using another country's financial reporting framework, auditors may follow:

-auditing standards of the other country -international auditing standards -auditing standards of the United States,

Auditors are allowed to report on summary financial statements unless they issue a ___ opinion.

-disclaimer of -adverse

The statements of standards for Accounting and review services provides guidance for:

-financial statement preparation -reviews -compilations

CPAs can compile financial statements that omit substantially all disclosures required by GAAP if the:

-financial statements are not misleading -CPA adds a paragraph to the compilation's report to indicate the omission.

When accepting an engagement in which a special purpose financial reporting framework is used, auditors must obtain an understanding of:

-how management determined the framework is acceptable -the intended users -the purpose of the statements

Accountants that perform a review of the current year financial statements but performed a compilation in the prior-period can:

-include a reference to the prior year's report in the current year's report -reissue the prior year's report and present it with the current year's report.

Review reports must be altered in situations involving:

-lack of appropriate disclosure in financial statements -a departure from generally accepted accounting principles.

In order to provide negative assurance with respect to a client's compliance with indenture provisions, auditors must have:

-performed audit procedures on the application restrictions -conducted an audit of the related financial statements.

Review reports are not required to be altered in situations involving:

-the existence of most major uncertainties -inconsistent application of generally accepted accounting principles.

Each page of the financial statements that are created from preparation service should include a statement that:

-the statements have not been audited or reviewed -no CPA provides any assurance on them

IN which of the following reports should a CPA not express negative (limited) assurance?

A standard compilation report on financial statements of a nonpublic entity.

The proper report by an auditor relating to summarized financial statements includes:

An opinion on whether the summarized information is fairly stated in all material respects in relation to the basic financial statements.

A CPA who is NOT independent may perform which of the following services for a nonpublic company?

Compilation-YES Review -NO

Which assertion is generally most difficult to attest to with respect to personal financial statements?

Completeness

which of the following is not typically performed when the auditors are performing a review of client financial statements?

Confirmation of accounts receivable.

Which of the following must be obtained in a review of a nonpublic company?

Engagement Letter-Yes Representation Letter-Yes

Which of the following statements is correct regarding contacting a predecessor accountant before accepting a review engagement?

If inquiries are made with the client's consent the predecessor accountants are generally required to respond.

Comfort letters to underwriters are normally signed by the:

Independent auditor.

A proper compilation report on financial statements that omit note disclosures:

Indicates that management has omitted such information.

Concerning interim quarterly financial statements, management of public companies:

Must engage CPAs to review the statements.

Which of the following forms of accountant association is least likely to result in issuance of an accountant's report on financial statements or financial information?

Preparation

T/F: when auditing a single financial statements, auditors may have to perform procedures on items not reported on that statement.

TRUe

Financial statements prepared following are most likely to be considered a special-purpose financial reporting framework?

The cash basis of accounting

Accountants that have reviewed prior-period financial statements and the current year should issue:

a review report covering both years.

When performing compilation services, accountants do not provide ____ on the financial statements so they do not need to be independent.

assurance

Accountants should report information about significant adjustments found during the review and disagreements with management over accounting principles or review procedures to the:

audit committee

In comfort letters, auditors provide positive assurance on matters in the registration statement regarding:

auditor independent

The income statement for an individual is called the statement of:

changes in net worth

When performing a review of a nonpublic company, which is least likely to be included in auditor inquiries of management members with responsibility for financial and accounting matters?

communications with related parties.

CPAs who are looking to acquire information about a prospective client before accepting a review engagement should:

contact the client's predecessor CPA

Audit reports for agreed-upon procedures should include a _____ opinion.

disclaimer of

Auditors of personal financial statements may needed to use the work of an appraiser to assess ___ of personal assets.

estimated current values

Nonpublic companies that have SSARS reviews on their financial information:

have not had an annual audit performed.

Auditors who are engaged to audit a particular account need to modify the standard audit report to:

indicate the information audited

When an accountant engaged to perform a review becomes aware of a material departure from GAAP, the report:

is required to be modified.

Auditors must obtain a representation letter from the client for all review engagements in which:

management acknowledges their responsibility for the financial statements.

auditors that audit a complete set of financial statements and the balance sheet will use different ____ measures to assess misstatements on each engagement.

materiality

CPAs ___ perform compilations when they are not independent of the client.

may

When financial statements are intended for use only outside the United States, the auditors:

may use either the U.S. form of report or report of the other county's audit report.

Auditors provide ___ assurance on compliance on compliance reports prepared for contractual agreements or regulatory requirements.

negative

The statement of financial condition for an individual shows the individual's ____ ____ in lieu of "owners' equity".

net worth

Accountants provide ___ assurance in a compilation report.

no

The accountants' review report expresses ___ opinion on the fairness of the financial statements.

no

The preparation of financial statements is ___ service and does not ordinarily result in the issuance of an accountant's report.

nonattest

During a review engagement, accountants will do all of the following except:

perform test of controls and substantive tests.

In an agreed-upon procedures engagement, the CPA requests the responsible party to provide a written assertion that the subject matter is in accordance with the criteria it is said to follow. If this request is refused, the:

refusal is indicated in the report

The auditors report should include an additional other-matter paragraph including an alert about restricting the use of the auditors' report for special-purpose statements prepared in accordance with the ___ basis of accounting.

regulatory or contractual

According to professional standards, engagement letters or other suitable form of written communication are ___ for review engagements.

required

Auditors that are involved with financial information prepared on a regulatory basis that requests a specific layout for the auditors' report that is not acceptable can:

reword the form or attach an appropriately worded separate report

Cash, tax, and regulatory basis are all examples of ___-___ financial reporting frameworks.

special-purpose

Public companies are required to have annual audits and also interim reviews of _____ quarters of the year information.

the first three

Auditors provide comfort letters to ___ to help fulfill their obligation to perform a reasonable investigation of the securities registration statement.

underwriters

If the auditors cannot develop confidence that audit procedures have located all concealed asserts when auditing personal financial statements, auditors should:

withdraw from the engagement

in performing a compilation, if the accountant believes modification to the standard report is not adequate to indicate the deficiencies in the financial statements, the accountant should:

withdraw from the engagement