AUD 5: Prepare Communication
Which of the following is a false statement regarding communications between predecessor and successor accountants?
A successor accountant is required to communicate with a predecessor accountant in connection with acceptance of a compilation or review engagement.
What is meant by "restricted use"?
Applies to accountant's reports intended only for one or more specific third parties
If the client refuses to disclose the newly discovered facts and their impact on the financial statements to persons known to be currently using or likely to use the financial statements prompting the accountant to notify third party users, which of the following guidelines should be used for such disclosure? The disclosure should include a description of the nature of the subsequently acquired information and its effect on the financial statements. The information disclosed should be as precise and factual as possible.
Both I and II
When the basic financial statements are accompanied by information presented for supplementary analysis purposes in a compilation or review engagement, the accountant should do which of the following?
Clearly indicate the degree of responsibility, if any, he or she is taking with respect to the supplemental information
An accountant's report that is restricted as to use should contain a separate paragraph at the end of the report that includes which of the following reporting elements? A. A statement indicating that the report is intended solely for the information and use of the specified parties B. An identification of the specified parties to whom use is restricted C. A statement that the report is not intended to be and should not be used by anyone other than the specified parties D. All of the answer choices are correct.
D
When a client undertakes to disclose newly discovered facts and their impact on the financial statements to persons known to be currently using or likely to use the financial statements, which of the following methods should be used? A. If the effect on the accountant's report or the financial statements can be readily determined, disclosure should consist of issuing revised financial statements and, where applicable, the accountant's report. The reasons for the revision should be described in a note to the financial statements and, when applicable, be referred to in the accountant's report. B. If the effect on the accountant's report or the financial statements cannot be immediately determined, persons known to be using or likely to use the financial statements should be notified that they should not be used. If the financial statements will be revised, these persons should be notified that revised financial statements and, where applicable, the accountant's report will be issued as soon as practicable. C. When issuance of the financial statement for the subsequent period is imminent, disclosure can be made in those subsequent period statements. D. All of the answer choices could be used, given the particular circumstances.
D
When the basic financial statements are accompanied by information presented for supplementary analysis purposes in a compilation or review engagement, the accountant may do which of the following? Refer to the other data in an other-matter paragraph Issue a separate report on the other data
Either I or II
Which of the following is a false statement regarding restrictions on the use of an accountant's compilation or review report on subject matter or presentations based on measurement or disclosure criteria contained in contractual agreements or regulatory provisions?
If an accountant issues a document including both a separate restricted-use report and a general-use report, both reports should be restricted to the specified parties.
Which of the following is a false statement regarding subsequent discovery of facts existing at the date of the accountant's compilation or review report?
If the engagement was a compilation, the accountant must modify his or her report for a lack of independence.
Which of the following statements is incorrect regarding notification of third parties if the client refuses to disclose newly discovered facts and their impact on the financial statements?
The accountant's disclosure should include a brief description of the client's conduct or motive with regard to its refusal to notify third parties.
Which of the following is a false statement regarding communications to management and others that fraud or noncompliance with laws and regulations may have occurred?
The communication must be in writing.
In which of the following circumstances does an accountant not have a duty to disclose that fraud or noncompliance with laws and regulations may have occurred to parties outside of the entity?
To a predecessor accountant so that he or she might notify any users who might still be relying on his or her report
When an auditor submits a document that contains information in addition to audited financial statements to a client or to others, his responsibility:
includes reporting on all the information included in the document.
If the client refuses to disclose the newly discovered facts and their impact on the financial statements to persons known to be currently using or likely to use the financial statements, all of the following steps should be taken by the accountant except:
notification to the Better Business Bureau.
Baker, CPA, was engaged to review the financial statements of Hall Co., a nonissuer. During the engagement, Baker uncovered a complex scheme involving client noncompliance with laws and regulations and fraud that materially affect Hall's financial statements. If Baker believes that modification of the standard review report is not adequate to indicate the deficiencies in the financial statements, Baker should:
withdraw from the engagement.