GLEIM CH 18 part 5

In a comfort letter, the auditor should most likely avoid using which of the following terms to describe the work performed? A. Audited. B. Read. C. Made inquiries. D. Made a general review.

D. Made a general review.

A CPA should not normally refer to which one of the following subjects in a comfort letter? A. The independence of the CPA. B. Changes in financial statement items during a period subsequent to the date and period of the latest financial statements in the registration statement. C. Unaudited financial statements and schedules in the registration statement. D. Management's determination of operating segments.

D. Management's determination of operating segments.

Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securities Exchange Act of 1934. A large accelerated filer must submit Form 10-K within A. 60 days of the end of the company's fiscal year. B. 45 days of the end of each quarter. C. 2 weeks of the end of each month. D. 15 days of significant events.

A. 60 days of the end of the company's fiscal year.

A report based on a review of interim financial information (IFI) would include all of the following elements except A. A representation that the financial statements are the responsibility of the auditor. B. A description of the procedures for a review of interim financial information. C. A statement about whether the auditor is aware of any material modifications that should be made to the accompanying financial information so that it conforms with the applicable financial reporting framework. D. An identification of the interim financial information reviewed.

A. A representation that the financial statements are the responsibility of the auditor.

Whenever negative assurance is provided by a CPA, it is based upon A. An absence of nullifying evidence. B. A presence of substantiating evidence. C. An objective audit in accordance with generally accepted auditing standards. D. A judgmental determination in accordance with guidelines promulgated by the SEC.

A. An absence of nullifying evidence.

In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the requirements of an applicable financial reporting framework to a specific transaction. The accountant's report should include a statement that A. Any difference in the facts, circumstances, or assumptions presented may change the report. B. The engagement was performed in accordance with Statements on Standards for Consulting Services. C. The guidance provided is for general use. D. Nothing came to the accountant's attention that caused the accountant to believe that the application of the financial reporting framework to the facts is inappropriate.

A. Any difference in the facts, circumstances, or assumptions presented may change the report.

The other information in a document containing audited financial statements and the auditor's report on them may be relevant to an independent auditor. With respect to other information, the A. Auditor's responsibility is to read the other information to identify any material inconsistencies with the statements. B. Auditor is obligated to perform auditing procedures to corroborate other information contained in a document. C. Auditor need not be concerned with the other information. D. Auditor must include the other information in the report if it needs revision.

A. Auditor's responsibility is to read the other information to identify any material inconsistencies with the statements.

An independent auditor'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 the A. Auditor's review report is not a part of the registration statement within the meaning of the Securities Act of 1933. B. Auditor assumes no responsibility for subsequent events. C. Auditor's review was performed in accordance with rules and regulations adopted by the Securities and Exchange Commission. D. Auditor obtained corroborating evidence to determine whether material modifications are needed for such information to be in accordance with GAAP.

A. Auditor's review report is not a part of the registration statement within the meaning of the Securities Act of 1933.

Blue, CPA, has been asked to report on the application of a financial reporting framework to a specific transaction by an entity that is audited by another CPA. Blue may accept this engagement but should A. Consult with the continuing accountant to obtain information relevant to the transaction. B. Report the engagement's findings to the entity's audit committee, the continuing accountant, and management. C. Disclaim any opinion on the application of the financial reporting framework to the hypothetical transaction. D. Be independent of the client.

A. Consult with the continuing accountant to obtain information relevant to the transaction.

Supplementary information (SI) not necessary for the fair presentation of the audited financial statements is presented with those statements. How should an auditor report on this SI? A. In a separate report or other-matter paragraph. B. SI always should be presented in a separate report. C. In a separate report or other-matter paragraph before the opinion. D. Supplementary information should always be be presented in an other-matter paragraph following the opinion and emphasis-of-matter paragraph.

A. In a separate report or other-matter paragraph.

Comfort letters ordinarily are signed by the client's A. Independent auditors. B. Underwriters of securities. C. Audit committee. D. Senior management.

A. Independent auditors.

The objective of a review of interim financial information (IFI) of a nonissuer is to provide an auditor with a basis for reporting whether A. Material modifications should be made to conform with the applicable financial reporting framework. B. A reasonable basis exists for expressing an updated opinion regarding the financial statements that were previously audited. C. Condensed financial statements or pro forma financial information should be included in a registration statement. D. The financial statements are presented fairly in accordance with the applicable financial reporting framework.

A. Material modifications should be made to conform with the applicable financial reporting framework.

The information supplementary to the basic financial statements on which the auditor has been engaged to report may not include A. Modifications of the auditor's report. B. Details of items in the basic financial statements. C. Statistical data. D. Explanatory comments.

A. Modifications of the auditor's report.

Which of the following matters is included in a typical comfort letter? A. Negative assurance on whether unaudited condensed financial information complies in form with the accounting requirements of the SEC. B. An opinion on whether any fraud risk factors indicate significant incentive and opportunity relating to fraudulent financial reporting. C. Positive assurance on whether there has been any change in capital stock or long-term debt since the date of the audited financial statements. D. An opinion on whether the entity's internal control components are operating as designed in achieving their stated objectives.

A. Negative assurance on whether unaudited condensed financial information complies in form with the accounting requirements of the SEC.

An auditor has performed additional procedures for a client making a private placement of securities that is exempt from SEC filing requirements. In addition to permitting the inclusion of the audited statements in the offering document, the auditor has assisted the client in its preparation of the placement document. Before the client distributes the document, the auditor should do all the following except A. Obtain agreement from the SEC that the offering document is complete. B. Read the other information included in the offering document. C. Perform subsequent events procedures leading up to the distribution date of the document. D. Obtain an updated management representation letter.

A. Obtain agreement from the SEC that the offering document is complete.

An auditor is engaged to report on supplementary information (SI) not required for the financial statements to be fairly presented. The auditor is required to perform certain procedures based on the materiality level. Which of the following is not a procedure performed by the auditor? A. Presenting the results in an opinion paragraph. B. Inquiring about the purpose of, and criteria for, the SI. C. Understanding methods of preparation. D. Inquiring about significant assumptions.

A. Presenting the results in an opinion paragraph.

Supplementary information (SI) not necessary for the audited financial statements to be fairly presented is presented with those statements. Management is responsible for A. Providing written representations. B. Evaluating the appropriateness and completeness of the SI. C. Determining conformity of the SI with the applicable criteria for its form and content. D. Reconciling SI with the underlying records or the financial statements.

A. Providing written representations.

Prior to the report release date, an auditor reads the letter of transmittal accompanying a county's comprehensive annual financial report and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take? A. Request that the client revise the letter of transmittal. B. Include an emphasis-of-matter paragraph in the auditor's report. C. Consider withdrawing from the engagement. D. Request a client representation letter acknowledging the inconsistency.

A. Request that the client revise the letter of transmittal.

An auditor concludes prior to the release date of the report that a material inconsistency exists in the other information in an annual report to shareholders. The report contains audited financial statements. If the auditor concludes that the financial statements do not require revision, but management refuses to revise or eliminate the material inconsistency, the auditor may A. Revise the auditor's report to include a separate other-matter paragraph describing the material inconsistency. B. Express a qualified opinion after discussing the matter with the client's directors. C. Consider the matter closed because the other information is not in the audited statements. D. Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate other-matter paragraph.

A. Revise the auditor's report to include a separate other-matter paragraph describing the material inconsistency.

Whenever a report filed on a printed form designed by authorities calls upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor should A. Reword the form. B. Submit an unmodified report with explanations. C. Submit the form with questionable items clearly omitted. D. Withdraw from the engagement.

A. Reword the form.

When the auditor reports on supplementary information (SI), a separate report should be issued when the A. SI and the audited statements are presented separately. B. SI and the audited statements are presented together. C. SI is reported on in an other-matter paragraph. D. Auditor expressed an adverse opinion on the financial statements.

A. SI and the audited statements are presented separately.

Investment and property schedules are presented for purposes of additional analysis in a document outside the basic financial statements. The schedules are not required supplementary information. When the auditor is engaged to report on whether the supplementary information is fairly stated in relation to the audited financial statements as a whole, the measurement of materiality is the A. Same as that used in forming an opinion on the basic financial statements as a whole. B. Lesser of the individual schedule of investments or schedule of property by itself. C. Greater of the individual schedule of investments or schedule of property by itself. D. Combined total of both the individual schedules of investments and property as a whole.

A. Same as that used in forming an opinion on the basic financial statements as a whole.

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 the A. Successor independent auditor. B. Client's audit committee. C. Principal underwriter. D. Securities and Exchange Commission.

A. Successor independent auditor.

If management omits all required supplementary information (RSI) from the accompanying financial statements of a nonissuer, the auditor should A. Take no further action. B. Present the information. C. Add an emphasis-of-matter paragraph. D. Withdraw from the engagement.

A. Take no further action.

The auditor should not accept an engagement to report on summary statements unless A. The auditor has been engaged to audit the financial statements from which the summary statements are derived. B. The auditor issued an unmodified report on the statements from which the summary statements are derived. C. The auditor takes responsibility for the summary financial statements. D. A complete audit can be completed on the summary statements.

A. The auditor has been engaged to audit the financial statements from which the summary statements are derived.

Supplementary information (SI) not necessary for the audited financial statements to be fairly presented is presented with those statements. The auditor of the statements has what responsibility for subsequent events? A. The auditor is not responsible for considering subsequent events with respect to the SI. B. The auditor is responsible for querying management about any developments regarding contingencies. C. The auditor is responsible for reading the available minutes of meetings of owners. D. The auditor is responsible for reading the latest subsequent interim financial statements.

A. The auditor is not responsible for considering subsequent events with respect to the SI.

The client's financial reporting includes supplementary financial information outside the basic financial statements but required by the Financial Accounting Standards Board (FASB). Which of the following statements is correct regarding the auditor's responsibility for this supplementary financial information? A. The auditor should perform limited procedures. B. The auditor should apply tests of details of transactions. C. The auditor is not required to report omissions. D. The auditor should read the supplementary financial information.

A. The auditor should perform limited procedures.

Required supplementary information (RSI) must accompany the basic financial statements. Who determines whether RSI is required? A. The designated accounting standards setter. B. The practitioner. C. The responsible party. D. The board of directors.

A. The designated accounting standards setter.

An auditor is reporting on financial statements prepared in accordance with a framework generally accepted in another country. The auditor most likely has the option of using a U.S. form of report or the report form of the other country if A. The financial statements and report are intended for use only outside the U.S. B. The financial statements and report are intended for use in the U.S. and the other country. C. The financial statements and report are intended for use only in the U.S. D. The auditor expresses an opinion on whether the statements are presented fairly within the other country's framework.

A. The financial statements and report are intended for use only outside the U.S.

The procedures to express an opinion on supplementary information are based on which of the following? A. The materiality level used for the audit of the financial statements. B. The number of material misstatements found in the financial statements. C. The amount of information provided in the supplementary information sections to the financial statements. D. The subject matter of the supplementary information provided.

A. The materiality level used for the audit of the financial statements.

Management chooses to place supplementary information required by the FASB or GASB in notes to the financial statements. According to GAAS, this information may be identified as A. Unaudited. B. Supplementary information required by the FASB or GASB. C. Disclosures required by the FASB or GASB. D. Audited financial data required by generally accepted accounting principles.

A. Unaudited.

An auditor practicing in the U.S. has been engaged to report on the financial statements of a U.S. entity that have been prepared in accordance with a financial reporting framework generally accepted in another country. The auditor should A. Understand the framework. B. Be certified by the appropriate auditing or accountancy board of the other country. C. Notify management that the auditor is required to disclaim an opinion on the financial statements. D. Receive a waiver from the auditor's state board of accountancy to perform the engagement.

A. Understand the framework.

If information supplementary to the basic financial statements has been subjected to auditing procedures, the auditor may express an opinion that the accompanying information is fairly stated in A. Conformity with generally accepted accounting principles. B. All material respects in relation to the basic financial statements as a whole. C. Conformity with standards established by the AICPA. D. Accordance with generally accepted auditing standards.

B. All material respects in relation to the basic financial statements as a whole.

When an independent auditor's report based on a review of interim financial information is presented in a registration statement, a prospectus should include a statement about the auditor's involvement. This statement should clarify that the A. Auditor is not an expert within the meaning of the Securities Act of 1933. B. Auditor's review report is not a part of the registration statement within the meaning of the Securities Act of 1933. C. Auditor performed only limited auditing procedures on the interim financial statements. D. Auditor's review was performed in accordance with standards established by the SEC.

B. Auditor's review report is not a part of the registration statement within the meaning of the Securities Act of 1933.

Which of the following statements is true concerning letters for underwriters, commonly referred to as comfort letters? A. Comfort letters are required by the Securities Act of 1933 for the initial public sale of registered securities. B. Comfort letters typically give negative assurance on unaudited interim financial information. C. Comfort letters usually are included in the registration statement accompanying a prospectus. D. Comfort letters ordinarily update auditors' opinions on the prior year's financial statements.

B. Comfort letters typically give negative assurance on unaudited interim financial information.

When supplementary information (SI) is presented separately from the audited financial statements, how should the auditor's report on SI be presented? A. In an other-matter paragraph in the auditor's report on the financial statements. B. In a separate auditor's report. C. Either in an other-matter paragraph in the auditor's report on the financial statements or in a separate report. D. In the opinion paragraph of the auditor's report on the financial statements.

B. In a separate auditor's report.

Which of the following should the auditor of a nonissuer do when reporting on supplementary information that is required by a designated accounting standard setter, presented with the basic financial statements? A. Include a paragraph before the opinion paragraph that references the required supplementary information (RSI). B. Include a paragraph after the opinion paragraph that references the required supplementary information (RSI). C. Include a reference to the required supplementary information (RSI) in the opinion paragraph. D. Make no reference to the required supplementary information (RSI) in the report.

B. Include a paragraph after the opinion paragraph that references the required supplementary information (RSI).

AU-C 915, Reports on Application of Requirements of an Applicable Financial Reporting Framework, provides guidance to a reporting accountant who A. Has been engaged to report on financial statements. B. Is preparing a written report on the application of an applicable financial reporting framework to a specific transaction. C. Intends to give oral advice in the form of a position paper not related to a specific transaction. D. Is requested to provide expert testimony in litigation involving accounting matters.

B. Is preparing a written report on the application of an applicable financial reporting framework to a specific transaction.

The objective of a review of interim financial information of an issuer is to provide an auditor with a basis for reporting whether A. A reasonable basis exists for expressing an updated opinion regarding the financial statements that were previously audited. B. Material modifications should be made to conform with generally accepted accounting principles. C. The financial statements are presented fairly in accordance with standards of interim reporting. D. The financial statements are presented fairly in accordance with generally accepted accounting principles.

B. Material modifications should be made to conform with generally accepted accounting principles.

The auditor's inquiries of management regarding required supplementary information (RSI) should be directed to the judgments made concerning A. Relevance and validity. B. Measurement and presentation. C. Accuracy and objectivity. D. Rights and obligations.

B. Measurement and presentation.

When an auditor issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive A. Positive assurance on supplementary disclosures. B. Negative assurance on capsule information. C. A disclaimer on prospective financial statements. D. A limited opinion on pro forma financial statements.

B. Negative assurance on capsule information.

The report on summary financial statements should indicate that the A. Summary financial statements are prepared in conformity with a special purpose framework. B. Procedures performed included evaluating whether they are prepared in accordance with the applied criteria. C. Summary financial statements are fairly presented in all material respects. D. The auditor expresses limited assurance that the financial statements conform with GAAP.

B. Procedures performed included evaluating whether they are prepared in accordance with the applied criteria.

Which of the following procedures ordinarily should be applied when an independent auditor conducts a review of interim financial information of an issuer? A. Verify changes in key account balances. B. Read the minutes of the board of directors' meetings. C. Inspect the open purchase order file. D. Perform cutoff tests for cash receipts and disbursements.

B. Read the minutes of the board of directors' meetings.

An auditor may report on summary financial statements that are derived from audited financial statements only if the auditor A. Expresses an unmodified opinion on the audited financial statements from which the summary financial statements are derived. B. States whether the information is consistent with the audited financial statements. C. Determines that the summary financial statements include all the disclosures necessary for the audited financial statements. D. Presents the summary financial statements in comparative form with the prior year's summary financial statements.

B. States whether the information is consistent with the audited financial statements.

When performing a review of interim financial information (IFI), an auditor would typically do each of the following except A. Consider the results from the latest audit. B. Test controls related to the preparation of annual financial information. C. Perform analytical procedures. D. Make inquiries of management.

B. Test controls related to the preparation of annual financial information.

An auditor is reporting on summary financial statements for an annual period. The auditor's unmodified opinion should indicate whether the information in the summary financial statements is consistent, in all material respects, with A. Accounting principles generally accepted in the United States of America. B. The audited financial statements. C. A special purpose framework. D. Supplementary filings under federal security statutes.

B. The audited financial statements.

What is an auditor's responsibility for supplementary information, such as the disclosure of pension information, that is outside the basic financial statements but required by the GASB? A. The auditor should apply substantive tests of transactions to the supplementary information and verify its conformity with the GASB requirement. B. The auditor should apply certain limited procedures to the supplementary information and report deficiencies in, or omissions of, such information. C. The auditor's only responsibility for the supplementary information is to determine that such information has not been omitted. D. The auditor has no responsibility for such supplementary information as long as it is outside the basic financial statements.

B. The auditor should apply certain limited procedures to the supplementary information and report deficiencies in, or omissions of, such information.

Comfort letters ordinarily are addressed to A. The Securities and Exchange Commission. B. The party who negotiated the agreement with the client. C. Creditor financial institutions. D. The client's audit committee.

B. The party who negotiated the agreement with the client.

In a comfort letter, an auditor may provide negative assurance about A. The absence of any significant deficiencies in internal control. B. Whether the entity's unaudited interim financial information complies as to form with the accounting requirements of the Securities Act of 1933. C. The results of procedures performed in compiling the entity's financial forecast. D. The compliance of the entity's registration statement with the requirements of the Securities Act of 1933.

B. Whether the entity's unaudited interim financial information complies as to form with the accounting requirements of the Securities Act of 1933.

MEEN, LLP, is finalizing its audit report of financial statements intended for use only outside the U.S. The report must include A. A U.S. form of report. B. The report form and content of the other country. C. A U.S. form of the report or the report form of the other country. D. A reference to the note to the statements that describes their basis of presentation.

C. A U.S. form of the report or the report form of the other country.

The auditor has determined that the audited financial statements and supplementary information (SI) are presented together. The auditor may report on the SI in A. A paragraph preceding the opinion paragraph. B. A separate report only. C. An other-matter paragraph. D. An emphasis-of-matter paragraph.

C. An other-matter paragraph.

What is an auditor's responsibility for required supplementary information (RSI)? A. Include a disclaimer on the information only if the auditor is unable to apply limited procedures to it. B. Add an emphasis-of-matter paragraph to the auditor's report before the opinion paragraph. C. Apply limited procedures to the information and report its omission or the need for material modifications. D. Audit the RSI in accordance with applicable auditing standards.

C. Apply limited procedures to the information and report its omission or the need for material modifications.

An auditor is engaged to report on statistical data presented with audited financial statements. Under these circumstances, the report on the statistical data should A. State that the presentation is a special purpose framework. B. Restrict the use of the report to those specified users within the entity. C. Be limited to data derived from the entity's audited financial statements. D. Indicate that the data are subject to prospective results that may not be achieved.

C. Be limited to data derived from the entity's audited financial statements.

The Securities and Exchange Commission has authority to A. Prescribe specific auditing procedures to detect fraud concerning inventories and accounts receivable of companies engaged in interstate commerce. B. Deny lack of privity as a defense in third-party actions for gross negligence against the auditors of issuers. C. Determine accounting principles for the purpose of financial reporting by companies offering securities to the public. D. Require a change of auditors of governmental entities after a given period of years as a means of ensuring independence.

C. Determine accounting principles for the purpose of financial reporting by companies offering securities to the public.

While planning an engagement to issue a report on the application of the requirements of an applicable financial reporting framework to a specific transaction of a nonissuer, a reporting accountant should obtain an understanding of the A. Financial expertise of the users of the reporting accountant's report. B. Risk appetites of parties to the specific transaction. C. Form and substance of the specific transaction. D. Internal control activities related to the specific transaction.

C. Form and substance of the specific transaction.

The financial statements of KCP America, a U.S. entity, are prepared for inclusion in the consolidated financial statements of its non-U.S. parent. These financial statements are prepared in accordance with a financial reporting framework generally accepted in the parent's country and are for use only in that country. Which is an appropriate report on the financial statements for KCP America's auditor to issue? I. A U.S. form of report (unmodified) II. A U.S. form of report modified to report on the financial reporting framework of the parent's country III. The report form of the parent's country A. I only. B. II only. C. II and III only. D. I, II, and III.

C. II and III only.

Which of the following best describes other information in documents containing audited financial statements? A. Required supplementary information. B. Summary financial statements. C. Information presented in addition to the audited financial statements, such as a report by management on operations. D. Notes to the financial statements.

C. Information presented in addition to the audited financial statements, such as a report by management on operations.

SEC Form S-3 is an optional, short-form registration statement that relies on the incorporation by reference of periodic reports required by the Securities Exchange Act of 1934. Form S-3 offers substantial savings in filing costs over other forms because minimal disclosures are required in the prospectus. The SEC permits the use of Form S-3 by an issuer that A. Does not have stock held by nonaffiliates. B. Does not qualify for Form S-1. C. Is a seasoned issuer or a well-known seasoned issuer. D. Has not had to file Form 8-K during the most recent 2-year period.

C. Is a seasoned issuer or a well-known seasoned issuer.

Supplementary Information (SI) not required for the financial statements to be fairly presented A. Is reported on in an emphasis-of-matter paragraph. B. Must be reported on in a separate report. C. Is presented outside the basic statements. D. Is not reported on by the auditor.

C. Is presented outside the basic statements.

When making a review of interim financial information (IFI), the auditor's work consists primarily of A. Studying and evaluating limited amounts of documentation supporting the interim financial information. B. Scanning and reviewing client-prepared, internal financial statements. C. Making inquiries and performing analytical procedures concerning significant accounting matters. D. Confirming and verifying significant account balances at the interim date.

C. Making inquiries and performing analytical procedures concerning significant accounting matters.

A U.S. entity prepares its financial statements in accordance with a financial reporting framework generally accepted in another country. These financial statements will be included in the consolidated financial statements of its non-U.S. parent. Before reporting on the financial statements of the U.S. entity, the auditor practicing in the U.S. should A. Notify management of the U.S. entity that the auditor is required to disclaim an opinion on the financial statements. B. Receive a waiver to report on the U.S. entity from the appropriate accountancy authority in the other country. C. Obtain an understanding of the purpose of the financial statements and the intended users. D. Communicate with the auditor of the non-U.S. parent regarding the level of assurance to be provided.

C. Obtain an understanding of the purpose of the financial statements and the intended users.

When audited financial statements are presented in a document containing other information, the auditor A. Has an obligation to perform auditing procedures to corroborate the other information. B. Should express a qualified opinion if the other information is materially inconsistent with the statements. C. Should be aware of whether the other information contains a material misstatement of fact. D. Has no responsibility for the other information because it is not part of the basic financial statements.

C. Should be aware of whether the other information contains a material misstatement of fact.

Which of the following applies to an accountant conducting a review of interim financial information? A. The accountant must indicate in the report those circumstances in which generally accepted accounting principles have not been consistently observed in the current period in relation to the preceding period. B. The accountant must express an opinion on the financial statements taken as a whole. C. The accountant must maintain independence in mental attitude in all matters relating to the engagement. D. The accountant must obtain sufficient appropriate evidence by performing procedures to afford a reasonable basis for an opinion.

C. The accountant must maintain independence in mental attitude in all matters relating to the engagement.

All of the following statements about financial statements prepared in accordance with a reporting framework generally accepted in another country and intended for use in the U.S. are true except A. The auditor should report using the U.S. form of report. B. The report includes an emphasis-of-matter paragraph identifying the reporting framework used in the preparation of the financial statements. C. The auditor expresses an opinion on whether the financial statements are presented fairly within the framework of the U.S. D. The report includes an emphasis-of-matter paragraph indicating that the framework differs from accounting principles generally accepted in the U.S.

C. The auditor expresses an opinion on whether the financial statements are presented fairly within the framework of the U.S.

A registration statement filed with the Securities and Exchange Commission may contain the reports of two or more independent auditors on their audits of the financial statements for different periods. What responsibility does the auditor who has not audited the most recent financial statements have relative to events occurring after the date of his or her report that may affect the financial statements on which (s)he reported? A. The auditor has responsibility for events up to the subsequent fiscal year end. B. The auditor has responsibility for events up to the date of the subsequent audit report. C. The auditor has responsibility for events up to the effective date of the registration statement. D. The auditor has no responsibility beyond the date of the original report.

C. The auditor has responsibility for events up to the effective date of the registration statement.

An auditor who is engaged to report on whether supplementary information is fairly stated, in all material respects, in relation to the statements as a whole should determine that which of the following conditions are satisfied? A. The financial statements are free from material misstatement. B. Internal controls are in place to prevent fraud relating to the supplementary information. C. The supplementary information is derived directly from the underlying records used to prepare the statements and relates to the same period. D. The auditor had participated in a material way to prepare the supplementary information.

C. The supplementary information is derived directly from the underlying records used to prepare the statements and relates to the same period.

Which of the following circumstances requires modification of the auditor's report on a review of interim financial information (IFI)? 1. Substantial Doubt about the Entity's Ability to Continue as a Going Concern 2. Inadequate Disclosure A. 1 Yes 2 Yes B. 1 No 2 No C. 1 Yes 2 No D. 1 No 2 Yes

D. 1 No 2 Yes

Form 8-K must be filed within A. 90 days after the end of the fiscal year covered by the report. B. 45 days after the end of each of the first 3 quarters of each fiscal year. C. 90 days after the end of an employee stock purchase plan fiscal year. D. 4 business days after significant events.

D. 4 business days after significant events.

Comfort letters ordinarily are A. Addressed to the client's audit committee and signed by the client's independent auditor B. Addressed to the client's requesting party and signed by the client's senior manager C. Addressed to the client's audit committee and signed by the client's senior manager D. Addressed to the client's requesting party and signed by the client's independent auditor

D. Addressed to the client's requesting party and signed by the client's independent auditor

Which of the following matters is covered in a typical comfort letter? A. Negative assurance concerning whether the entity's internal control activities operated as designed during the period being audited. B. An opinion regarding whether the entity complied with laws and regulations under Government Auditing Standards and the Single Audit Act. C. Positive assurance concerning whether unaudited condensed financial information complied with generally accepted accounting principles. D. An opinion as to whether the audited financial statements comply in form with the accounting requirements of the SEC.

D. An opinion as to whether the audited financial statements comply in form with the accounting requirements of the SEC.

An auditor who is engaged to report on whether supplementary information (SI) is fairly stated should determine that the A. SI and the financial statements are presented separately. B. SI relates either to the prior period or the current period. C. SI consists of required supplementary information (RSI). D. Auditor's report on the financial statements did not disclaim an opinion.

D. Auditor's report on the financial statements did not disclaim an opinion.

An auditor determines that the entity is presenting certain supplementary financial disclosures of pension information that are required by the GASB. Under these circumstances, the auditor should A. Express an opinion on the required supplementary information. B. State that the audit is not being performed in accordance with generally accepted auditing standards. C. Document in the working papers that the required supplementary information is presented but should not apply any procedures to the information. D. Compare the required supplementary information for consistency with the audited financial statements.

D. Compare the required supplementary information for consistency with the audited financial statements.

When planning a review of an audit client's interim financial statements, which of the following procedures should the auditor perform to obtain an understanding of the entity and its environment, including its internal control? A. Perform substantive procedures on selected accounts. B. Make a direct inquiry of the entity's outside legal counsel about the status of any new litigation involving the entity. C. Select a sample of material revenue transactions occurring during the interim period and examine supporting documentation. D. Consider the results of audit procedures performed with respect to the current year's financial statements.

D. Consider the results of audit procedures performed with respect to the current year's financial statements.

When an auditor's report is incorporated by reference in an SEC registration statement, a prospectus that includes a statement about the auditor's involvement should refer to the auditor as A. Auditor of the prospectus. B. Management's representative before the SEC. C. Certified preparer of the report. D. Expert in auditing and accounting.

D. Expert in auditing and accounting.

A modification of the auditor's report on a review of interim financial information is necessitated by which of the following? A. A substantial doubt about the entity's ability to continue as a going concern. B. Lack of consistency. C. Use of another auditor's report. D. Inadequate disclosure.

D. Inadequate disclosure.

In an auditor's review of interim financial information (IFI), the auditor typically performs each of the following except A. Reading the available minutes of the latest stockholders' meeting. B. Applying financial ratios to the interim financial information. C. Inquiring of the accounting department's management. D. Obtaining corroborating external evidence.

D. Obtaining corroborating external evidence.

Which of the following is one of management's responsibilities surrounding supplementary information (SI)? A. Reconciling SI with underlying records or the financial statements. B. Testing the appropriateness and completeness of the SI. C. Obtaining written representations. D. Preparing SI in accordance with applicable criteria.

D. Preparing SI in accordance with applicable criteria.

An auditor should A. Never report on supplementary information. B. Report on supplementary information in any financial statement audit. C. Report on supplementary information in any integrated audit. D. Report on supplementary information if (s)he is specifically engaged to do so.

D. Report on supplementary information if (s)he is specifically engaged to do so.

The objective of a review of interim financial information (IFI) of a nonissuer is to provide the auditor with a basis for A. Determining whether the prospective financial information is based on reasonable assumptions. B. Expressing a limited opinion that the financial information is presented in conformity with the applicable financial reporting framework. C. Deciding whether to perform substantive audit procedures prior to the balance sheet date. D. Reporting whether material modifications should be made for such information to conform with the applicable financial reporting framework.

D. Reporting whether material modifications should be made for such information to conform with the applicable financial reporting framework.

An audit of the financial statements included in Form 10-Q is not required. However, an external auditor's involvement with a Form 10-Q that is being prepared for filing with the SEC most likely consists of a(n) A. Compilation report on the financial statements included in Form 10-Q. B. Comfort letter that covers stub-period financial data. C. Opinion on internal controls under which the Form 10-Q data were developed. D. Review of the interim financial statements included in Form 10-Q.

D. Review of the interim financial statements included in Form 10-Q.

When reporting on supplementary information (SI) in relation to the financial statements as a whole, an auditor A. Must report on the information because it is necessary for the statements to be fairly presented. B. Should determine that the information is derived from a source other than the underlying records used to prepare the statements. C. Should include an emphasis-of-matter paragraph in the report if the auditor disclaimed an opinion on the statements. D. Should determine the information is presented with the statements or is readily available.

D. Should determine the information is presented with the statements or is readily available.

The auditor is engaged to report on whether supplementary information is fairly stated in relation to the audited financial statements as a whole. Which of the following best describes the auditor's responsibility for this information if it is outside the basic financial statements and not deemed necessary to their fair presentation? A. The auditor has no reporting responsibility concerning information accompanying the basic financial statements. B. The auditor should report on the supplementary information only if the auditor participated in its preparation. C. The auditor must disclaim an opinion on the information if it is supplementary information required by the applicable financial reporting framework. D. The auditor should not express an opinion on the supplementary information if (s)he disclaimed an opinion on the financial statements.

D. The auditor should not express an opinion on the supplementary information if (s)he disclaimed an opinion on the financial statements.

In its annual report to shareholders, Lake Co. included an assertion about the effectiveness of its sales force. Lake's auditor is expressing an unmodified opinion on Lake's financial statements but has not been engaged to examine and report on this management assertion. What is the auditor's responsibility concerning such information? A. The auditor should add an other-matter paragraph to the report on the financial statements disclaiming an opinion on management's assertion. B. The auditor has no obligation to read the assertion or to verify the accuracy or appropriateness of its contents. C. The auditor should request that Lake place the assertion in its annual report where it will not be misinterpreted to be the auditor's assertion. D. The auditor should read the assertion and consider whether it is a material misstatement of fact.

D. The auditor should read the assertion and consider whether it is a material misstatement of fact.

Which of the following best describes the auditor's reporting responsibility when engaged to report on supplementary information in relation to the financial statements as a whole? A. The auditor has no reporting responsibility concerning supplementary information. B. The auditor should report on the supplementary information only if the auditor participated in its preparation. C. The auditor should report on the supplementary information only if the auditor did not participate in its preparation. D. The auditor should report on all the information.

D. The auditor should report on all the information.

If management declines to present required supplementary information, the auditor should express a(n) A. Adverse opinion. B. Qualified opinion with an additional paragraph. C. Unmodified opinion without an additional paragraph. D. Unmodified opinion with an other-matter paragraph.

D. Unmodified opinion with an other-matter paragraph.