ACC 409 Ch. 17
Contractual basis
A basis of accounting that the entity uses to comply with an agreement between the entity and one or more third parties other than the auditor.
Regulatory basis
A basis of accounting that the entity uses to comply with the requirements of financial reporting provisions of a regulatory agency to whose jurisdiction the entity is subject (for example, a basis of accounting that insurance companies use pursuant to the accounting practices prescribed or permitted by a state insurance commission).
Tax basis
A basis of accounting that the entity uses to file its income tax return for the period covered by the financial statements.
Special-purpose framework
A financial reporting framework other than GAAP that is one of the following bases of accounting: cash basis, tax basis, regulatory basis, or contractual basis.
Financial forecast
A forecast that includes prospective financial statements that present, to the best of the responsible party's knowledge and belief, an entity's expected financial position, results of operations, and cash flows.
Financial projection
A projection that includes prospective financial statements that present, to the best of the responsible party's knowledge and belief, given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and cash flows.
Forensic accounting
A service that audit firms provide that involves detailed investigation of situations where fraud has already been identified or where fraud is highly suspected.
Other comprehensive bases of accounting
Bases of accounting that include cash basis, tax basis, regulatory basis, or contractual basis.
Corporate social responsibility reporting
The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families, the local community, and society at large.
Nonfinancial reporting
The practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance toward the goal of sustainable development.
Assurance engagement risk
The risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated.
Cash basis
A basis of accounting that an organization uses to record cash receipts and disbursements and modifications of the cash basis having substantial support (for example, recording depreciation on fixed assets).
Sustainability
Actions taken at the corporate level to ensure economic, environmental, and social responsibility.
Assembling
An activity that involves the manual or computer processing of mathematical or clerical functions to achieve the presentation of prospective financial statements.
Agreed-upon procedures engagement
An agreement in which a practitioner is engaged by a client to issue a report of findings based on specific procedures performed on subject matter.
Assurance engagement
An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of the subject matter against criteria. See attestation engagement.
Attestation engagement
An engagement in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter, that is, the responsibility of another party. See assurance engagement.
Compilation engagement
An engagement in which the accountant uses accounting expertise, as opposed to auditing expertise, to collect, classify, and summarize financial information; also defined as a service, the objective of which is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order to be in conformity with the applicable financial reporting framework.
Review engagement
An engagement that enables a practitioner to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the practitioner's attention that causes the practitioner to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial reporting framework.
Limited assurance engagement
An engagement whose objective is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than that for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner's conclusion.
Reasonable assurance engagement
An engagement whose objective is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner's conclusion.
For which of the following special purpose financial statements is an other-matter paragraph restricting the use of the auditor's report required? a. Cash basis. b. Tax basis. c. Regulatory basis for general use. d. Contractual basis.
a. Cash basis.
Specified parties
Individuals who will receive the practitioner's agreed-upon procedures report.
Pro forma financial information
Information that shows what the significant effects on historical financial information might have been had a consummated or proposed transaction (or event) occurred at an earlier date.
Bookkeeping services
See compilation
True or False. A review engagement is a service, the objective of which is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework.
False.
True or False. An appropriate description of findings in an agreed-upon procedures engagement would state "Nothing came to my attention as a result of applying that procedure."
False.
True or False. Examples of procedures that would be conducted in a forensic engagement include sampling and analytical review, based on materiality.
False.
True or False. Special-purpose financial statements are those prepared in a compilation engagement.
False.
True or False. The SEC requires publicly owned companies to file quarterly financial information with the SEC on Form 10-Q within 60-75 days (depending on company size) after the end of each of the first three quarters of the fiscal year.
False.
True or False. The terms attestation engagement and assurance engagement refer to the same concept; the difference in terminology occurs because the first term is used by the IAASB and the second term is used by the AICPA.
False.
True or False. When planning and performing an engagement of the audit of special-purpose financial statements, the auditor is not required to obtain an understanding of the entity's selection and application of accounting policies.
False.
Prospective financial statements
Financial forecasts or financial projections including the summaries of significant assumptions and accounting policies.
Special-purpose financial statements
Financial statements that are prepared in accordance with a special-purpose framework.
Attestation standards
Professional standards that provide guidance about gathering evidence regarding specific assertions and communicating an opinion on the fairness of the presentation to a third party.
Triple bottom-line reporting
Reporting on financial, environmental, and social performance.
True or False. Assurance engagement risk is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated.
True.
True or False. In a review, a practitioner does not obtain assurance that he or she will become aware of all significant matters that would be investigated in an audit.
True.
True or False. Prospective financial statements are either financial forecasts or financial projections.
True.
True or False. Substainability reporting includes voluntary corporate disclosures about sustainability initiatives, plans, and associated outcomes.
True.
True or False. The audit of financial statements include serious consideration of the possibility of fraud; the primary purpose of a forensic engagement is to detect, investigate, and document a situation in which fraud almost certainly exists.
True.
True or False. The auditor should perform review procedures (a) on the quarterly information contained in the annual report to shareholders and (b) on the quarterly information issued at the end of each of the first three quarters of the fiscal year when engaged to do so.
True.
True or False. The terms non-financial reporting, corporate social responsibility reporting, and triple bottom-line reporting and each sustainability-related terms.
True.
Sustainability reporting
Voluntary corporate disclosures about sustainability initiatives, plans, and associated outcomes.
Which of the following procedures is an inappropriate agreed-upon procedure? a. Comparison of documents, schedules, or analyses. b. Performance of mathematical computations. c. Confirmation of specific information with third parties. d. Evaluation of the competency or objectivity of another party.
a. Comparison of documents, schedules, or analyses.
Which of the following statements regarding compilations is false? a. A compilation engagement enables the practitioner to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the practitioner's attention that causes the practitioner to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial framework. b. The objective of a compilation engagement is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework. c. In a compilation, the practitioner is not required to make inquires or perform procedures to verify, corroborate, or review information provided by the client. d. In a compilation, the practitioner should read the financial statements, including footnotes, to make sure that they are appropriate in form and free from obvious material misstatement.
a. A compilation engagement enables the practitioner to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the practitioner's attention that causes the practitioner to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial framework.
Which of the following engagements requires less evidence than a review of financial statements? a. A compilation. b. An audit. c. An examination. d. Attestation.
a. A compilation.
Which one of the following statements is false regarding a review? a. A review involves assessing fraud risk. b. A review does not involve obtaining an understanding of the entity's internal control. c. A review does not involve testing accounting records by obtaining sufficient appropriate evidence through inspection, observation, confirmation, or examining source documents. d. A review does not involve a practitioner obtaining assurance that he or she will become aware of all significant matters that would be investigated in an audit.
a. A review involves assessing fraud risk.
Which one of the following procedures is not a standard procedure when performing a review? a. Assess the internal control over financial reporting. b. Read the financial statements to determine whether they appear to conform to GAAP. c. Obtain or prepare a trial balance of the general ledger and foot and reconcile it to the general ledger. d. Trace the financial statement amounts to the trial balance.
a. Assess the internal control over financial reporting.
Which of the following procedures is an appropriate agreed-upon procedure? a. Evaluating the competency or objectivity of another party. b. Performing of mathematical computations. c. Obtaining an understanding about a particular subject. d. Reading the work performed by others solely to describe their findings.
a. Evaluating the competency or objectivity of another party.
Which of the following statements about forensic accounting is false? a. Forensic accountants will examine, only on a sample basis, material transactions believed to relate to the fraud. b. Forensic accounting builds support for legal action against the person committing the fraud by identifying the fraud, calculating the damages caused by the fraud, and building both factual and testimonial evidence of the fraud. c. The primary purpose of forensic engagements is to detect, investigate, and document a situation in which fraud almost certainly exists. d. Forensic accountants are often asked to provide litigation support, in which they are called on to give expert testimony about financial data and accounting activities.
a. Forensic accountants will examine, only on a sample basis, material transactions believed to relate to the fraud.
Which of the following statements is false regarding forensic accounting? a. Forensic accounting builds support for legal action against the person committing the fraud by identifying the fraud, calculating the damages caused by the fraud, and building both factual and testimonial evidence of the fraud. b. Forensic accountants rely on sampling of fraud-related documents to accurately measure the cost of the fraud. c. One aspect of forensic accounting focuses on identifying the person who has perpetrated the fraud and having that person confess to the fraud. d. Interviewing is one of the most important forensic accounting skills.
a. Forensic accounting builds support for legal action against the person committing the fraud by identifying the fraud, calculating the damages caused by the fraud, and building both factual and testimonial evidence of the fraud.
What does the review service provided by the CPA firm require? a. It requires the CPA to make inquiries concerning matters affecting the financial statements. b. It requires the CPA to confirm accounts receivable. c. It requires the CPA to test internal controls. d. It requires the CPA to provide reasonable assurance.
a. It requires the CPA to make inquiries concerning matters affecting the financial statements.
A compilation report provides the user with which one of the following types of assurance? a. No assurance. b. Absolute assurance. c. Limited assurance. d. Negative assurance.
a. No assurance.
Which of the following services provides limited assurance? a. Review. b. Audit. c. Examination. d. Compilation.
a. Review.
Which of the following engagements is sometimes referred to as bookkeeping services? a. Reviews. b. Special reports. c. Compilations. d. Audits.
a. Reviews.
Which of the following standards represents the standards followed by CPAs providing a review of a client's financial statements? a. Statements on Standards for Accounting and Review Services. b. Statements on Auditing Standards. c. Statements on Standards for Consulting and Review Services. d. Statements on Accounting Principles.
a. Statements on Standards for Accounting and Review Services.
Which of the following statements relating to sustainability reporting is false? a. Sustainability reports are very similar and contain virtually identical information across entities because of the high level of regulation governing such disclosures. b. Sustainability reporting involves voluntary corporate disclosures about sustainability initiatives, plans, and associated outcomes. c. Investor interest, socially responsible investment funds, and the Dow Jones Sustainability Index have each created demand for sustainability reporting. d. The terms nonfinancial reporting, corporate social responsibility reporting, triple bottom-line reporting, and sustainability reporting are often used to describe essentially the same activities.
a. Sustainability reports are very similar and contain virtually identical information across entities because of the high level of regulation governing such disclosures.
Which of the following items is not contained in the standard report on a review of separately issued interim financial statements of public companies? a. A description of the information reviewed. b. A statement indicating that the standards of the PCAOB were followed in performing the review. c. A description of the nature of the review. d. Positive assurance that the auditor is not aware of any material departures from GAAP.
b. A statement indicating that the standards of the PCAOB were followed in performing the review.
What are the two topics that attestation standards provide guidance on? a. They provide a plan for the engagement and criteria about who can participate in the engagement. b. They provide guidance about gathering evidence regarding specific assertions and communicate an opinion on the fairness of the presentation to a third party. c. They provide sufficient assurance on subject matter and appropriate assurance about reporting. d. They provide guidance on reviewing evidence and compiling evidence.
b. They provide guidance about gathering evidence regarding specific assertions and communicate an opinion on the fairness of the presentation to a third party.
or which of the following services must a CPA be independent? a. Audits: Yes; Reviews: Yes; Compilations: Yes b. Audits: Yes; Reviews: Yes; Compilations: No c. Audits: Yes; Reviews: No; Compilations: No d. Audits: Yes; Reviews: No; Compilations: Yes
b. Audits: Yes; Reviews: Yes; Compilations: No
Which of the following is not considered a part of external assurance over sustainability reporting, as stated by the Global Reporting Initiative (GRI) Reporting Framework? a. External assurance engagements should be conducted by those with competence in the subject matter and assurance practices b. External assurance engagements should assess whether the sustainability report is reasonable, balanced, and appropriately inclusive. c. External assurance engagements should assess the extent to which the report preparer has applied the GRI Reporting Framework in reaching its conclusions. d. External assurance engagements can be issued by the CFO of the company issuing the sustainability report.
b. External assurance engagements should assess the extent to which the report preparer has applied the GRI Reporting Framework in reaching its conclusions.
Which of the following is not a way that the disclosure and reporting requirements for interim financial statements differ from those for annual financial statements? a. Accruals for estimates of bad debt are not usually as precise on interim dates as they are at year end. b. Information disclosed in the latest annual statements does not have to be repeated in the interim statements except for continuing contingencies and other uncertainties. c. Accruals for estimates of income tax expenses are not usually as precise on interim dates as they are at year end. d. The interim information does not have to be filed with the SEC for public companies.
b. Information disclosed in the latest annual statements does not have to be repeated in the interim statements except for continuing contingencies and other uncertainties.
Which of the following statements about reporting on interim financial statements is false? a. The disclosure and reporting requirements for interim financial statements differ from those for annual financial statements. b. Information disclosed in the latest financial statements must be repeated in the interim financial statements, except for continuing contingencies and other uncertainties. c. The negative assurance provided for interim financial statements should be modified when there is a material departure from GAAP or inadequate disclosure. d. Interim financial statements should include disclosures about events that occurred since the latest year end, such as changes in accounting principles or estimates and significant changes in financial position.
b. Information disclosed in the latest financial statements must be repeated in the interim financial statements, except for
Which of the following descriptions best explains triple bottom line reporting? a. It is reporting on assets, liabilities, and stockholders' equity. b. It is reporting on financial, environmental and social performance. c. It is reporting on auditing, accounting, and ethics. d. It is reporting with respect to laws, norms, and performance standards.
b. It is reporting on financial, environmental and social performance.
Which of the following procedures is not a review procedure for interim financial information? a. Making inquiries. b. Performing analytical procedures. c. Reading the minutes of the board of directors' meetings. d. Obtaining oral assurance from management that there are no subsequent events.
b. Performing analytical procedures.
Which of the following activity is not part of the compilation of prospective financial statements? a. Assembling prospective financial statements based on the responsible party's assumptions. b. Performing compilation procedures, including reading the prospective financial statements, along with their assumptions and accounting policies, and considering whether they appear to be presented in conformity with AICPA presentation guidelines and that they are not obviously inappropriate. c. Issuing a compilation report. d. Providing assurance on the prospective financial statements.
b. Performing compilation procedures, including reading the prospective financial statements, along with their assumptions and accounting policies, and considering whether they appear to be presented in conformity with AICPA presentation guidelines and that they are not obviously inappropriate.
For which of the following special purpose financial statements is a description of purpose for which special purpose financial statements are prepared not required? a. Cash basis. b. Regulatory basis for use by management and the regulator only. c. Regulatory basis for general use. d. Contractual basis.
b. Regulatory basis for use by management and the regulator only.
For which of the following special purpose financial statements is a dual opinion on a special purpose framework and GAAP required? a. Cash basis. b. Tax basis. c. Regulatory basis for general use. d. Contractual basis.
b. Tax basis.
When the CPA is not independent with respect to a compilation client, what should the CPA do? a. The CPA must not accept the engagement. b. The CPA must include a separate paragraph in the report stating the lack of independence. c. The CPA must change the engagement to a review engagement. d. The CPA must issue a disclaimer.
b. The CPA must include a separate paragraph in the report stating the lack of independence.
Which of the following statements is false regarding compilation procedures? a. The practitioner should have a general knowledge of the organization's industry, the nature of its accounting records, the accounting basis to be used (GAAP or a special purpose framework other than GAAP), and the form and content of the financial statements. b. The practitioner is required to make inquiries or perform procedures to verify, corroborate, or review information provided by the client. c. The practitioner is not required to obtain an understanding of internal control over financial reporting. d. The practitioner should read the financial statements, including footnotes, to make sure that they are appropriate in form and free from obvious material misstatement.
b. The practitioner is required to make inquiries or perform procedures to verify, corroborate, or review information provided by the client.
Which of the following is not an AICPA general standard for attestation engagements? a. The practitioner must have adequate technical training and proficiency to perform the attestation engagement. b. The practitioner must have reason to believe that the subject matter is capable of evaluation against criteria that are suitable and available to users. c. The practitioner must adequately plan the work and must properly supervise any assistants. d. The practitioner must exercise due professional care in the planning and performance of the engagement and the preparation of the report.
b. The practitioner must have reason to believe that the subject matter is capable of evaluation against criteria that are suitable and available to users.
Craig Marks, CPA performs an audit of Treasure, Inc., which keeps its financial statements on the tax basis of accounting. Craig is aware of this fact and audits the financial statements on the criteria of the tax basis. What type of engagement is this? a. This engagement is not permitted by the AICPA. b. This engagement is an audit that will result in the issuance of a special report. c. This engagement is a compilation. d. This engagement is only performed by tax accountants who do not provide attest services.
b. This engagement is an audit that will result in the issuance of a special report.
In which of the following cases should the auditor's report on compliance not include a statement that nothing came to the auditor's attention that caused the auditor to believe that the entity failed to comply with specified aspects of the contractual agreements or regulatory requirements? a. When the auditor has not identified any instances of noncompliance. b. When the auditor has expressed an unmodified or qualified opinion on the financial statements to which the applicable covenants of such contractual agreements or regulatory requirements relate. c. When the applicable covenants or regulatory requirements relate to accounting matters that have been subjected to the audit procedures applied in the audit of financial statements. d. When the auditor needs to obtain further evidence to corroborate audit evidence acquired from management and the accounting records.
b. When the auditor has expressed an unmodified or qualified opinion on the financial statements to which the applicable covenants of such contractual agreements or regulatory requirements relate.
Which of the following is an accounting service that involves performing inquiry and analytical procedures as a reasonable basis for expressing limited assurance that no material modifications need to be made to the financial statements in order for the financial statements to conform to GAAP? a. A compilation. b. An audit. c. A review. d. An agreed upon procedure.
c. A review.
Which one of the following reports is not a special report issued as a result of an examination? a. Report on a specified financial statement element. b. Report on compliance with contractual agreements. c. Agreed upon procedures. d. Report on information presented in prescribed forms.
c. Agreed upon procedures.
Which of the following procedures is not appropriate for examining or reviewing pro forma financial information? a. Obtaining less evidence in an examination engagement than in a review engagement. b. Obtaining an understanding of the underlying transaction or event. c. Discussing management's assumptions regarding the effects of the transaction or event. d. Evaluating whether pro forma adjustments are completely recorded.
c. Discussing management's assumptions regarding the effects of the transaction or event.
Which of the following activities is not part of the examination of prospective financial statements? a. Evaluating the support underlying the assumptions. b. Evaluating the preparation of the prospective financial statements. c. Evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines. d. Assembling the prospective financial statements.
c. Evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines.
Which of the following is not a critical component of an attestation engagement? a. Information or a process (the subject matter) on which the assurance service is provided. b. Criteria for evaluation, such as compliance with regulations. c. Federal regulatory guidelines. d. A written attestation report. e. Sufficient appropriate evidence.
c. Federal regulatory guidelines.
Which of the following statements is false regarding agreed-upon procedures engagements? a. In this type of engagement, the independent practitioner is engaged to assist in evaluating subject matter or an assertion. b. In this type of engagement, the nature, timing, and extent of agreed-upon procedures is the same for all engagements. c. In this type of engagement, the practitioner does not perform a review, and does not provide an opinion or negative assurance. d. In this type of engagement, the report should indicate that it is restricted in its use to specified parties.
c. In this type of engagement, the practitioner does not perform a review, and does not provide an opinion or negative assurance.
Which of the following guidelines is not a presentation that pro forma financial information should adhere to? a. It should describe the transaction or event that is reflected in the pro forma financial information. b. It should describe significant assumptions used to develop the pro format adjustments. c. It should make clear that the pro forma financial information is indicative of results that would have been achieved had the transaction or event actually taken place at an earlier time. d. It should describe any significant uncertainties about those assumptions.
c. It should make clear that the pro forma financial information is indicative of results that would have been achieved had the transaction or event actually taken place at an earlier time.
Which of the following is not subject matter that would be attested to in a non-audit attestation engagement? a. Historical events such as the price of a market basket of goods on a certain date. b. Corporate governance, compliance with law and regulations, or human resource practices. c. Management's assertions about historical financial information and associated disclosures. d. Prospective financial information, performance measurements, or backlog data.
c. Management's assertions about historical financial information and associated disclosures.
Pro forma financial information is often used to illustrate the effects of various types of transactions. Pro forma financial information would be least likely to be used with which of the following transactions? a. Setting up a bond sinking fund. b. Disposing of a significant segment of a business. c. Proposing the sale of securities and applying the proceeds to a project. d. Business combinations.
c. Proposing the sale of securities and applying the proceeds to a project.
What types of companies can have a compilation performed in accordance with the AICPA standards? a. Public Companies: Yes; Nonpublic Companies: Yes b. Public Companies: No; Nonpublic Companies: No c. Public Companies: No; Nonpublic Companies: Yes d. Public Companies: Yes; Nonpublic Companies: No
c. Public Companies: No; Nonpublic Companies: Yes
For which of the following special purpose financial statements is an emphasis-of-matter paragraph alerting readers about the preparation in accordance with the special purpose framework not required? a. Cash basis. b. Tax basis. c. Regulatory basis for general use. d. Contractual basis.
c. Regulatory basis for general use.
When an accountant is asked to compile financial statements that omit substantially all of the required disclosures, which of the following actions is appropriate? a. The CPA cannot accept the engagement. b. The CPA may accept the engagement. c. The CPA may accept the engagement if the CPA believes the omission is not undertaken to mislead users. d. The CPA must express an adverse opinion.
c. The CPA may accept the engagement if the CPA believes the omission is not undertaken to mislead users.
Refer to Exhibit 17.12, which provides examples of appropriate and inappropriate descriptions of findings of agreed-upon procedures. Assume that the practitioner is engaged to perform an agreed-upon procedures engagement. The procedure agreed upon was for the practitioner to calculate the number of blocks or streets paved during the year ended September 30, 20XX, shown on contractors' certificates of project completion; compare the resultant number to the number in an identified chart of performance statistics. Which of the following would be an appropriate way to describe the results of agreed-upon procedures? a. Nothing came to my attention that would indicate that the number is inconsistent with the chart of performance statistics. b. Then number of blocks of streets paved approximated the number of blocks included in the chart of performance statistics. c. The number of blocks of streets paved in the chart of performance statistics was Y blocks more than the number calculated from the contractors' certificates of project completion. d. All of the above.
c. The number of blocks of streets paved in the chart of performance statistics was Y blocks more than the number calculated from the contractors' certificates of project completion.
Which of the following statements is false regarding responsibilities associated with agreed-upon procedures engagements? a. The responsibility of the practitioner is to conduct the procedures and report the findings in accordance with applicable professional standards. b. The practitioner must have adequate knowledge of the subject matter. c. The practitioner is required to determine if there exists a difference between the agreed-upon procedures requested by the specified parties and the procedures that the practitioner would have decided to conduct if the practitioner would have been engaged to perform another form of engagement. d. The practitioner should not agree to perform agreed-upon procedures that are overly subjective.
c. The practitioner is required to determine if there exists a difference between the agreed-upon procedures requested by the specified parties and the procedures that the practitioner would have decided to conduct if the practitioner would have been engaged to perform another form of engagement.
How many paragraphs does the standard review report for U.S. nonpublic companies or development stage companies have? a. One. b. Two. c. Three. d. Four.
c. Three.
Which of the following situations is least likely to initiate a forensic accounting engagement? a. Where management suspects a fraud is occurring within the organization. b. Where strong internal controls exist. c. Where an auditor recommends a separate forensic engagement due to hints of fraud uncovered during an audit. d. Where auditors deem there are situations of heightened fraud risk.
c. Where an auditor recommends a separate forensic engagement due to hints of fraud uncovered during an audit.
When forming an opinion on special purpose financial statements, which of the following items does the auditor not need to evaluate? a. Whether the financial statements adequately describe the applicable financial reporting framework. b. Whether the financial statements have the appropriate title. c. Whether the financial statements include a summary of significant accounting policies. d. Whether the financial statements differ in GAAS presentation.
c. Whether the financial statements include a summary of significant accounting policies.
When are publicly owned companies required to file a Form 10Q with the SEC? a. Within 10 to 15 days (depending on the company size) after the end of each of the first three quarters of the fiscal year. b. Within 30 to 45 days (depending on the company size) after the end of each of the first three quarters of the fiscal year. c. Within 40 to 45 days (depending on the company size) after the end of each of the first three quarters of the fiscal year. d. Within 45 to 60 days (depending on the company size) after the end of each of the first three quarters of the fiscal year
c. Within 40 to 45 days (depending on the company size) after the end of each of the first three quarters of the fiscal year
A compilation of prospective financial statements includes which of the following steps? a. Assembling prospective financial statements based on the responsible party's assumptions. b. Performing compilation procedures, including reading the prospective financial statements, along with their assumptions and accounting policies, and considering whether they appear to be presented in conformity with AICPA presentation guidelines and that they are not obviously inappropriate. c. Issuing a compilation report. d. All of the above.
d. All of the above.
The G3 Framework Principles emphasize which of the following? a. Sustainability report content, including materiality, stakeholder inclusiveness, sustainability context, and completeness. b. Sustainability report quality, including balance, comparability, accuracy, timeliness, reliability, and clarity. c. Sustainability report boundaries, including careful consideration of the range of entities that should be included in the report. d. All of the above.
d. All of the above.
Which of the following are special consideration for reporting? a. Audits of financial statements prepared in accordance with special-purpose frameworks. b. Auditing of single financial statements and specific elements, accounts, or items of a financial statement. c. Reporting on compliance with aspects of contractual agreements or regulatory requirements. d. All of the above.
d. All of the above.
Which of the following statements best describes the primary difference between an audit and forensic accounting? a. An audit has the focused responsibility to detect fraud in the client organization, while forensic accounting sets out to prevent fraud. b. An audit has no responsibility for detecting fraud, while forensic accounting provides an audit specific to material fraud discovery. c. An audit must follow Generally Accepted Auditing Standards, while the forensic accountant is bound to Generally Accepted Fraud Standards. d. An audit utilizes sampling techniques to detect material misstatements, while forensic accounting examines the entire population of fraudulent transactions.
d. An audit utilizes sampling techniques to detect material misstatements, while forensic accounting examines the entire population of fraudulent transactions.
Which of the following situations is not one where the practitioner will modify the standard compilation report? a. There is an omission of disclosures for the compilation. b. A compilation report is not required c. The practitioner lacks independence. d. An understanding of internal controls cannot be obtained.
d. An understanding of internal controls cannot be obtained.
Which of the following descriptions is not a key priority to support the work of professional accountants in embedding sustainable practices? a. Raising awareness and facilitating sharing and collaboration across the global accountancy community. b. Incorporating accounting for sustainability within professional training and education. c. Using traditional ways of thinking about organizational performance. d. Establishing an international integrated reporting committee to develop a new reporting model that will better reflect the interconnected impact of financial, environmental, social, and governance factors on the long-term performance and condition of an organization.
d. Establishing an international integrated reporting committee to develop a new reporting model that will better reflect the interconnected impact of financial, environmental, social, and governance factors on the long-term performance and condition of an organization.
ther comprehensive bases of accounting do not include which of the following? a. Cash basis. b. Tax basis. c. Regulatory basis. d. Intended basis.
d. Intended basis.
A review report provides the user with which one of the following types of assurance? a. Reasonable assurance. b. Basic assurance. c. Absolute assurance. d. Limited assurance.
d. Limited assurance.
What are the two levels of assurance that can be provided in an attestation engagement? a. Risk assurance and reduction assurance. b. Professional assurance and compliance assurance. c. Sufficient assurance and appropriate assurance. d. Reasonable assurance and limited assurance.
d. Reasonable assurance and limited assurance.
Which of the following statements is false regarding reporting on sustainability activities and outcomes? a. Investor interest, socially responsible investment funds, and the Dow Jones Sustainability Index have increased demand for these sustainability disclosures. b. Specific sustainability disclosures that companies make vary little from company to company. c. Many corporate websites now include sustainability reports, and the placement on those websites is usually quite prominent. d. Regarding sustainability, companies determine what to report and how to report it by using various available guidelines, the most prominent of which is the Global Reporting Initiative (GRI) G3 Reporting Framework.
d. Regarding sustainability, companies determine what to report and how to report it by using various available guidelines, the most prominent of which is the Global Reporting Initiative (GRI) G3 Reporting Framework.
What are the performance standards required for interim review engagements on the quarterly financial information of public companies? a. Statements on Standards for Accounting and Review Services. b. Standards of the Public Company Accounting Oversight Board. c. Statements on Reviews for Public Registrants and Securities Acts. d. Standards set by the Public Oversight Board of the Enforcement Division of the SEC.
d. Standards set by the Public Oversight Board of the Enforcement Division of the SEC.
Which of the following is not an AICPA standard of reporting for attestation engagements? a. The practitioner must identify the subject matter or the assertion being reported on and state the character of the engagement in the report. b. The practitioner must state the practitioner's conclusion about the subject matter or the assertion in relation to the criteria against which the subject matter was evaluated in the report. c. The practitioner must obtain sufficient evidence to provide a reasonable basis for the conclusions that is expressed in the report. d. The practitioner must state all of the practitioner's significant reservations about the engagement, the subject matter, and if applicable, the assertion related thereto in the report.
d. The practitioner must state all of the practitioner's significant reservations about the engagement, the subject matter, and if applicable, the assertion related thereto in the report.
Which of the following is not a critical component of attestation services? a. Information or process (the subject matter) on which the assurance service is provided. b. Criteria for evaluation, such as compliance with regulations. c. Sufficient appropriate evidence. d. Two parties involved, the practitioner (or the CPA) and the intended users of the report.
d. Two parties involved, the practitioner (or the CPA) and the intended users of the report.
Forensic accounting differs from auditing on which of the following dimensions? a. Focus. b. Approach. c. Scope. d. End product. e. All of the above.
e. All of the above.
In which of the following ways does a review differ from a financial statement audit? a. A review does not involve obtaining an understanding of the organization's ICFR. b. A review does not involve assessing fraud risk. c. A review does not involve testing accounting records by obtaining sufficient appropriate evidence through inspection, observation, confirmation, or examining source documents. d. A review does not involve a practitioner obtaining assurance that he or she will become aware of all significant matters that would be investigated in an audit. e. All of the above.
e. All of the above.
Refer to Exhibit 17.8, which provides an overview of reporting requirements for special-purpose financial statements. In which of the following situation would the practitioner include an emphasis-of-matter paragraph alerting readers about the preparation in accordance with a special-purpose framework? a. When a cash basis is used. b. When a tax basis is used. c. When a regulatory basis (for use by management and the regulator only) is used. d. When a contractual basis is used. e. All of the above.
e. All of the above.
Which of the following are examples of the subject matter of an attestation engagement? a. Prospective financial information. b. Physical characteristics, such as the square footage of facilities, or processes within facilities. c. Historical events, such as the price of a market basket of goods on a certain date. d. The accuracy of compliance assertions about grants, contracts, and regulations. e. All of the above.
e. All of the above.
Which of the following is an appropriate review procedure for interim financial information? a. Making inquiries. b. Performing analytical procedures. c. Reading the minutes of board of directors' meetings. d. Reading the interim information to consider whether it appears to conform to GAAP. e. All of the above.
e. All of the above.
