Audit Module A

To perform an attestation engagement on prospective information or pro forma information, accountants must do all of the following except

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

If a nonissuer wants an accountant to perform an examination of its internal controls, the accountant should follow:

AICPA AT 501, "An Examination of an Entity's Internal Control over Financial Reporting That Is Integrated with an Audit of Its Financial Statements."

An accountant may allow general distribution of reports based on

An examination of forecasted financial information.

The phrase "Trust services" refers to:

WebTrust and SysTrust Services.

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that:

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

An accountant's report includes the phrase "We are not aware". This phrase indicates:

the auditor is providing negative assurance.

When providing limited assurance that the reviewed financial statements of a nonpublic entity require no material modifications to be in accordance with generally accepted accounting principles, the accountant should:

understand the accounting principles of the industry in which the entity operates.

Which of the following best describes an engagement to report on an entity's internal control over financial reporting for a nonpublic company?

An attestation engagement to examine and report on management's written assertions about the effectiveness of its internal control structure.

When accountants are not independent, which of the following reports can they nevertheless issue?

Compilation report.

The performance of an attestation engagement on prospective financial information does not require which of the following?

Management must disclose the probability of obtaining the results included in the prospective financial information.

Which of the following procedures would not be performed in a review of financial statements of a nonpublic company?

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

Shelly's Bank has loaned money to Pete's Auto Supply. The loan is collateralized by inventory. The loan also requires a CPA to observe the count of the inventory and trace sampled items to the vendor invoices in order to determine the value of inventory is not misstated. This service would be:

an attestation engagement.

The accountant's standard report for a compilation service would not include a statement that:

compilation service consists primarily of inquiries of company personnel and analytical procedures applied to financial data.

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:

confirm expected sales with customers.

Extensible Business Reporting Language (XBRL) provides a computer readable identifying tag for each individual item of data. The advantages of XBRL include all of the following except:

increases the speed of handling of financial data. reduces the chance of error. ***improves the full disclosure of financial information.*** permits automatic checking of information.

A report on sustainability, as defined by the AICPA, might include all of the following except

internal control over financial reporting.

When an accountant is engaged to compile a nonpublic entity's financial statements that omit substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements:

might influence users' conclusions about the business, if the disclosures were included.

When a company uses a service organization to prepare its payroll, the company's auditors:

need to understand the internal controls over the transaction regardless of the location of the control.

In an agreed-upon procedures engagement, an accountant:

restricts the report to specified users.

Auditors can gain sufficient understanding of the internal controls at a service organization by:

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