Module A: Other Public Accounting Services

Public companies are required to have annual audits and interim reviews of their first three quarters. Nonpublic companies that have their annual financial statements audited also may choose to have interim reviews. Nonpublic companies not required to have an audit may instead choose to have a review of their financial statements. CONCEPT REVIEW: Interim reviews under standards of the PCAOB and the Auditing Standards Board are both very similar to reviews performed under the SSARS. Nonpublic companies that are audited may also want interim reviews. Auditors must then follow the _______. A. ASB standards B. FASB standards C. other rules D. parent company E. PCAOB standards

A. ASB standards

If the auditor expresses an adverse or disclaimer of opinion on the complete set of financial statements, she or he is not permitted to: A. Express an unmodified opinion on a single financial statement. B. Express an unmodified opinion on an element of the financial statements. C. Express a similar opinion on a single financial statement. D. Perform any of the choices.

A. Express an unmodified opinion on a single financial statement.

The official Statements on Standards for Accounting and Review Services are applicable to practice with A. Unaudited financial statements of nonissuers. B. Audited financial statements of public companies. C. Audited financial statements of nonissuers. D. Unaudited financial statements of public companies.

A. Unaudited financial statements of nonissuers.

Public companies are required to have annual audits and interim reviews of their first three quarters. Nonpublic companies that have their annual financial statements audited also may choose to have interim reviews. Nonpublic companies not required to have an audit may instead choose to have a review of their financial statements. CONCEPT REVIEW: Interim reviews under standards of the PCAOB and the Auditing Standards Board are both very similar to reviews performed under the SSARS. Public companies are required to have _____audits and interim reviews. A. annual B. bi-annual C. interim D. occasional E. quarterly

A. annual

Public companies are required to have annual audits and interim reviews of their first three quarters. Nonpublic companies that have their annual financial statements audited also may choose to have interim reviews. Nonpublic companies not required to have an audit may instead choose to have a review of their financial statements. CONCEPT REVIEW: Interim reviews under standards of the PCAOB and the Auditing Standards Board are both very similar to reviews performed under the SSARS. SSARS reviews are performed on clients that ______an annual audit. A. do not need B. fail C. need D. require E. want

A. do not need

In order to perform a review of interim financial information, the auditor must: A. have audited or be in the process of auditing the entity's latest financial statements. B. tested the entity's internal controls to determine that financial information is reliable. C. sent confirmation to third-parties concerning significant related-party transactions. D. established sufficient criteria to form an opinion on the fair presentation of the financial information.

A. have audited or be in the process of auditing the entity's latest financial statements.

Attestation engagements include: A. only examinations. B. examinations and assurance services. C. examinations, reviews, and agreed-upon procedures. D. examinations, reviews, compilations, agreed-upon procedures, and assurance services.

C. examinations, reviews, and agreed-upon procedures.

Public companies are required to have annual audits and interim reviews of their first three quarters. Nonpublic companies that have their annual financial statements audited also may choose to have interim reviews. Nonpublic companies not required to have an audit may instead choose to have a review of their financial statements. CONCEPT REVIEW: Interim reviews under standards of the PCAOB and the Auditing Standards Board are both very similar to reviews performed under the SSARS. Nonpublic companies _____choose to have interim reviews. A. always B. cannot C. may D. must E. never

C. may

A review engagement involves performing limited procedures--like analytical procedures and inquiries. The goal is to gather enough evidence to drive attestation risk to a moderate level. CONCEPT REVIEW: When an accountant is performing a review and notices an uncorrected material departure from the criteria, the traditional review report must be modified. Limited assurance is also called ______ assurance. A. audit B. material C. negative D. positive E. unlimited

C. negative

An accountant's report includes the phrase "We are not aware". This phrase indicates: A. an attestation was not performed. B. management had not established sufficient criteria for an opinion to be issued. C. the auditor is providing negative assurance. D. a disclaimer of opinion is presented.

C. the auditor is providing negative assurance.

Many individuals are apprehensive about using the Internet to purchase items. This apprehension mainly arises from users' concerns about: A. the reliability of computer technology. B. the time delays in Internet purchases. C. a lack of security for information transmitted over the Internet. D. the lack of CPA involvement in Internet company financial information.

C. a lack of security for information transmitted over the Internet.

Service organizations need to have their controls reviewed by auditors. For example, service organizations that provide data processing services to various clients need to have their controls reviewed by auditors so that the client's auditors can satisfy themselves that control is being adequately maintained relative to the processing of client data by an external source. CONCEPT REVIEW: Often service organizations have their auditors, called service auditors, study their systems of internal control and issue a service auditor's report. Type 1 Report A. A report that documents a service organization's controls and documents their suitability B. Auditors selected by a service organization to assess systems C. Perform data processing/computer/IT services, like payroll processing, for various clients D. A report that documents a service organization's controls and documents their suitability and effectiveness

A. A report that documents a service organization's controls and documents their suitability

Service organizations need to have their controls reviewed by auditors. For example, service organizations that provide data processing services to various clients need to have their controls reviewed by auditors so that the client's auditors can satisfy themselves that control is being adequately maintained relative to the processing of client data by an external source. CONCEPT REVIEW: Often service organizations have their auditors, called service auditors, study their systems of internal control and issue a service auditor's report. Service Auditors A. A report that documents a service organization's controls and documents their suitability B. Auditors selected by a service organization to assess systems C. Perform data processing/computer/IT services, like payroll processing, for various clients D. A report that documents a service organization's controls and documents their suitability and effectiveness

B. Auditors selected by a service organization to assess systems

A review service engagement involving unaudited financial statements involves A. More work than a compilation and an audit. B. Less work than an audit but more work than a compilation. C. More work than an audit but less work than a compilation. D. Less work than a compilation but more work than an audit.

B. Less work than an audit but more work than a compilation.

For a compliance engagement, three conditions must be met. Which of the following is not one of the three conditions? A. Sufficient evidence is available to support management's evaluation. B. Management provides a report attesting to satisfactory compliance. C. Management accepts responsibility for compliance. D. Management's evaluation of compliance is capable of evaluation and is measured against reasonable criteria.

B. Management provides a report attesting to satisfactory compliance.

A review engagement involves performing limited procedures--like analytical procedures and inquiries. The goal is to gather enough evidence to drive attestation risk to a moderate level. CONCEPT REVIEW: When an accountant is performing a review and notices an uncorrected material departure from the criteria, the traditional review report must be modified. Examples of limited procedures in a review are ______ procedures and inquiries. A. agreed-upon B. analytical C. audit D. compilation E. material

B. analytical

A review engagement involves performing limited procedures--like analytical procedures and inquiries. The goal is to gather enough evidence to drive attestation risk to a moderate level. CONCEPT REVIEW: When an accountant is performing a review and notices an uncorrected material departure from the criteria, the traditional review report must be modified. If a material departure is not ______, the report needs to be modified. A. audited B. corrected C. discovered D. noted E. reviewed

B. corrected

Assurance services are defined as independent professional services that: A. establish criteria for effective measurement of business activity. B. improve the quality of information, or its context, for decision makers. C. attest to the adequacy of controls over business operations. D. develop efficient and effective accounting systems to ensure compliance with accounting standards and policy.

B. improve the quality of information, or its context, for decision makers.

A review engagement involves performing limited procedures--like analytical procedures and inquiries. The goal is to gather enough evidence to drive attestation risk to a moderate level. CONCEPT REVIEW: When an accountant is performing a review and notices an uncorrected material departure from the criteria, the traditional review report must be modified. The review report provides ______ assurance that the information is fairly presented. A. audit B. limited C. material D. no E. unlimited

B. limited

In a compilation engagement: A. all appropriate disclosures must be presented. B. managers or owners may choose to omit all the footnote disclosures. C. financial statements must be presented in prescribed forms. D. an auditor provides only negative assurance.

B. managers or owners may choose to omit all the footnote disclosures.

In an agreed-upon procedures engagement, an accountant: A. follows all of the fundamental principles of GAAS. B. restricts the report to specified users. C. includes negative assurance in the report. D. gives a qualified audit report.

B. restricts the report to specified users.

Accountants are permitted to express "negative assurance" in which of the following reports? A. Adverse opinion report on financial statements. B. Standard unmodified audit report on financial statements. C. Compilation report on unaudited financial statements. D. Review report on unaudited financial statements.

D. Review report on unaudited financial statements.

When accountants are not independent, which of the following reports can they nevertheless issue? A. Examination of internal control over financial reporting. B. Examination report on a forecast. C. Compilation report. D. Standard unmodified audit report.

C. Compilation report.

Which of the following procedures would not be performed in a review of financial statements of a nonpublic company? A. Inquire about the accounting system and bookkeeping procedures. B. Perform analytical procedures to identify relationships and individual items that appear to be unusual. C. Obtain an attorney's letter regarding litigation and unasserted claims. D. Study the financial statements for indications that they conform to generally accepted accounting principles.

C. Obtain an attorney's letter regarding litigation and unasserted claims.

Service organizations need to have their controls reviewed by auditors. For example, service organizations that provide data processing services to various clients need to have their controls reviewed by auditors so that the client's auditors can satisfy themselves that control is being adequately maintained relative to the processing of client data by an external source. CONCEPT REVIEW: Often service organizations have their auditors, called service auditors, study their systems of internal control and issue a service auditor's report. Service Organization A. A report that documents a service organization's controls and documents their suitability B. Auditors selected by a service organization to assess systems C. Perform data processing/computer/IT services, like payroll processing, for various clients D. A report that documents a service organization's controls and documents their suitability and effectiveness

C. Perform data processing/computer/IT services, like payroll processing, for various clients

To perform an attestation engagement on prospective information or pro forma information, accountants must do all of the following except A. Obtain knowledge about the entity's business and accounting principles. B. Evaluate the assumptions used to prepare the information. C. Understand the internal controls used in the processes that generated the information. D. Obtain an understanding of the process through which the information was developed.

C. Understand the internal controls used in the processes that generated the information.

The procedures used in a review engagement are: A. physical examination, reperformance, and obtaining a management representation letter. B. analytical procedures, reperformance, and obtaining a management representation letter. C. analytical procedures, inquiry, and obtaining a management representation letter. D. physical examination, inquiry, and obtaining a management representation letter.

C. analytical procedures, inquiry, and obtaining a management representation letter.

Hamell Corporation is making a presentation to a prospective investor. The presentation includes a projection showing that the company's sales will be between $25,000,000 and $27,000,000 within the next three years. Hamell believes the information will be better received if its CPA provides an attestation report on the projection. In order to provide such a report the CPA must do all of the following EXCEPT: A. obtain knowledge about the client's business. B. evaluate the assumptions used in preparing the projection. C. confirm expected sales with customers. D. identify key factors affecting the information.

C. confirm expected sales with customers.

A report on an entity's internal control over financial reporting: A. is required for all companies whether they report to the SEC or not. B. is optional for all companies whether they report to the SEC or not. C. is required by the PCAOB for large public companies and may be performed by a CPA for nonpublic companies. D. is limited to inquiry and analytical procedures for reports for non-SEC companies.

C. is required by the PCAOB for large public companies and may be performed by a CPA for nonpublic companies.

Auditors can gain sufficient understanding of the internal controls at a service organization by: A. reviewing the contract with the service organization. B. inquiry with management of the service organization. C. reviewing a report on internal controls provided by the service organization's auditors. D. sending a confirmation concerning internal controls to the service organization's auditors.

C. reviewing a report on internal controls provided by the service organization's auditors.

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that: A. the scope of the accountant's procedures has not been restricted in testing the financial information that is the representation of management. B. the accountant assessed the accounting principles used and significant estimates made by management. C. the accountant does not express an opinion or any other form of assurance on the financial statements. D. a compilation consists primarily of inquiries of entity personnel and analytical procedures applied to financial data.

C. the accountant does not express an opinion or any other form of assurance on the financial statements.

Service organizations need to have their controls reviewed by auditors. For example, service organizations that provide data processing services to various clients need to have their controls reviewed by auditors so that the client's auditors can satisfy themselves that control is being adequately maintained relative to the processing of client data by an external source. CONCEPT REVIEW: Often service organizations have their auditors, called service auditors, study their systems of internal control and issue a service auditor's report. Type 2 Report A. A report that documents a service organization's controls and documents their suitability B. Auditors selected by a service organization to assess systems C. Perform data processing/computer/IT services, like payroll processing, for various clients D. A report that documents a service organization's controls and documents their suitability and effectiveness

D. A report that documents a service organization's controls and documents their suitability and effectiveness

According to auditing standards, financial statements presented on a special-purpose framework should not A. Be accompanied by an audit report that gives an unmodified opinion with reference to the special-purpose framework. B. Contain a note describing the special-purpose framework. C. Describe in general how the special-purpose framework differs from generally accepted accounting principles. D. Contain a note with a quantified dollar reconciliation of the assets based on the special-purpose framework with the assets based on generally accepted accounting principles.

D. Contain a note with a quantified dollar reconciliation of the assets based on the special-purpose framework with the assets based on generally accepted accounting principles.

An assurance service is defined as a service that A. Reduces the risk in management decision making. B. Reviews unaudited financial information. C. Provides auditing services to nonfinancial information. D. Improves the quality of information for decision makers.

D. Improves the quality of information for decision makers.

A review service engagement involving unaudited financial statements involves A. More work than an audit but less work than a compilation. B. Less work than a compilation but more work than an audit. C. More work than a compilation and an audit. D. Less work than an audit but more work than a compilation.

D. Less work than an audit but more work than a compilation.

Public companies are required to have annual audits and interim reviews of their first three quarters. Nonpublic companies that have their annual financial statements audited also may choose to have interim reviews. Nonpublic companies not required to have an audit may instead choose to have a review of their financial statements. CONCEPT REVIEW: Interim reviews under standards of the PCAOB and the Auditing Standards Board are both very similar to reviews performed under the SSARS. Public company guidance comes from the ________. A. ASB B. FASB C. GASB D. PCAOB E. SSARS

D. PCAOB

The accountant's standard report for a review service would not include a statement that A. all information included is the representation of the management of the business. B. the accountant is not aware of any material modifications that should be made to make this financial statement conform to generally accepted accounting principles. C. a review consists primarily of making inquiries and performing analytical procedures. D. a review service was performed in accordance with AICPA generally accepted auditing standards.

D. a review service was performed in accordance with AICPA generally accepted auditing standards.

An accountant's review on unaudited financial statements would not include A. performing analytical procedures. B. reading the financial statements for indications that they conform with the applicable financial reporting framework (e.g., GAAP, IFRS). C. inquiring about the accounting system and bookkeeping procedures. D. confirmation of accounts receivable.

D. confirmation of accounts receivable.

In a compilation engagement, the accountant: A. provides reasonable assurance that no material misstatements exist. B. provides assurance that no material misstatement came to the auditors attention. C. provides a list of procedures performed and results found. D. does not express an opinion.

D. does not express an opinion.

A review engagement involves performing limited procedures--like analytical procedures and inquiries. The goal is to gather enough evidence to drive attestation risk to a moderate level. CONCEPT REVIEW: When an accountant is performing a review and notices an uncorrected material departure from the criteria, the traditional review report must be modified. In a review, practitioners gather sufficient evidence to drive risk to a(n) _______ level. A. audit B. high C. low D. moderate E. reviewed

D. moderate