Question 1

When third party use of prospective financial statements is expected, an accountant may not accept an engagement to

Accepted Answer

A)  Perform a review. 
B)  Perform a compilation. 
C)  Perform an examination. 
D)  Apply agreed-upon procedures. 
A)  Perform a review. 
B)  Perform a compilation. 
C)  Perform an examination. 
D)  Apply agreed-upon procedures.

Question 2

The report of a CPA on a review of the financial statements of a nonpublic entity should not include a statement that

Accepted Answer

A)  All information included in the financial statements is the representation of the entity's management. 
B)  The review was performed in accordance with generally accepted auditing standards. 
C)  The CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. 
D)  A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. 
A)  All information included in the financial statements is the representation of the entity's management. 
B)  The review was performed in accordance with generally accepted auditing standards. 
C)  The CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. 
D)  A review consists principally of inquiries of company personnel and analytical procedures applied to financial data.

Question 3

Snow, CPA, was engaged by Master Co., a privately-held company, to examine and report on management's written assertion about the effectiveness of Master's internal control over financial reporting. Snow's report should state that

Accepted Answer

A)  Because of inherent limitations of any internal controls, errors or fraud may occur and not be detected. 
B)  Management's assertion is based on criteria established by the American Institute of Certified Public Accountants. 
C)  The results of Snow's tests will form the basis for Snow's opinion on the fairness of Master's financial statements in conformity with GAAP. 
D)  The purpose of the engagement is to enable Snow to plan an audit and determine the nature, timing, and extent of tests to be performed. 
A)  Because of inherent limitations of any internal controls, errors or fraud may occur and not be detected. 
B)  Management's assertion is based on criteria established by the American Institute of Certified Public Accountants. 
C)  The results of Snow's tests will form the basis for Snow's opinion on the fairness of Master's financial statements in conformity with GAAP. 
D)  The purpose of the engagement is to enable Snow to plan an audit and determine the nature, timing, and extent of tests to be performed.

Question 4

May an accountant plan and perform an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles?

Accepted Answer

A)  Only a compilation could be performed without the specialized knowledge. 
B)  Only a review could be performed without the specialized knowledge. 
C)  Both a compilation and a review could be performed without the specialized knowledge. 
D)  Neither a compilation nor a review could be performed without the specialized knowledge. 
A)  Only a compilation could be performed without the specialized knowledge. 
B)  Only a review could be performed without the specialized knowledge. 
C)  Both a compilation and a review could be performed without the specialized knowledge. 
D)  Neither a compilation nor a review could be performed without the specialized knowledge.

Question 5

Before issuing a report on the compilation of financial statements of a nonpublic entity, the accountant should

Accepted Answer

A)  Apply analytical procedures to selected financial data to discover any material misstatements. 
B)  Corroborate at least a sample of the assertions management has embodied in the financial statements. 
C)  Inquire of the entity's personnel whether the financial statements omit substantially all disclosures. 
D)  Read the financial statements to consider whether the financial statements are free from obvious material errors. 
A)  Apply analytical procedures to selected financial data to discover any material misstatements. 
B)  Corroborate at least a sample of the assertions management has embodied in the financial statements. 
C)  Inquire of the entity's personnel whether the financial statements omit substantially all disclosures. 
D)  Read the financial statements to consider whether the financial statements are free from obvious material errors.

Question 6

Which of the following represents the order from the least assurance to the most assurance provided for the types of services provided?

Accepted Answer

A)  Review, compilation, audit. 
B)  Compilation, review, audit. 
C)  Audit, review, compilation. 
D)  Audit, compilation, review. 
A)  Review, compilation, audit. 
B)  Compilation, review, audit. 
C)  Audit, review, compilation. 
D)  Audit, compilation, review.

Question 7

Blue Co., a privately-held entity, asked its tax accountant, Cook, a CPA in public practice, to reproduce Blue's internally-prepared interim financial statements on Cook's computer when Cook prepared Blue's quarterly tax return. Cook should not submit these financial statements to Blue unless, at a minimum, Cook complies with the provisions of

Accepted Answer

A)  Statements on Responsibilities in Tax Practice. 
B)  Statements on Standards for Accounting and Review Services. 
C)  Statements on Responsibilities in Unaudited Financial Services. 
D)  Statements on Standards for Attestation Engagements. 
A)  Statements on Responsibilities in Tax Practice. 
B)  Statements on Standards for Accounting and Review Services. 
C)  Statements on Responsibilities in Unaudited Financial Services. 
D)  Statements on Standards for Attestation Engagements.

Question 8

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain

Accepted Answer

A)  A statement of limitations on the use of the report. 
B)  An opinion about whether management's assertion is fairly stated. 
C)  Negative assurance that control risk has not been assessed. 
D)  An acknowledgement of responsibility for the sufficiency of the procedures. 
A)  A statement of limitations on the use of the report. 
B)  An opinion about whether management's assertion is fairly stated. 
C)  Negative assurance that control risk has not been assessed. 
D)  An acknowledgement of responsibility for the sufficiency of the procedures.

Question 9

An accountant's report expressing an opinion on an entity's internal controls should state that

Accepted Answer

A)  Only those controls on which the accountant intends to rely for purposes of the financial statement audit were reviewed, tested, and evaluated. 
B)  The establishment and maintenance of the internal controls is the responsibility of management. 
C)  The study and evaluation of the internal controls was conducted in accordance with generally accepted auditing standards. 
D)  Distribution of the report is restricted for use only by management and the board of directors. 
A)  Only those controls on which the accountant intends to rely for purposes of the financial statement audit were reviewed, tested, and evaluated. 
B)  The establishment and maintenance of the internal controls is the responsibility of management. 
C)  The study and evaluation of the internal controls was conducted in accordance with generally accepted auditing standards. 
D)  Distribution of the report is restricted for use only by management and the board of directors.

Question 10

An agreed-upon procedures engagement is significantly more limited in scope than an examination. An accountant may perform an agreed-upon procedures attestation engagement for prospective financial statements provided that attestation standards are complied with and ten criteria are met. Identify five of the ten criteria below.

Accepted Answer

Answer should include 5 of the following

Question 11

Statements on Standards for Accounting and Review Services (SSARS) require an accountant to report when the accountant has

Accepted Answer

A)  Typed client-prepared financial statements, without modification, as an accommodation to the client. 
B)  Provided an entity with a financial statement format that does not include dollar amounts, to be used by the entity in preparing financial statements. 
C)  Proposed correcting journal entries to be recorded by the client that change client-prepared financial statements. 
D)  Generated, through the use of computer software, financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP. 
A)  Typed client-prepared financial statements, without modification, as an accommodation to the client. 
B)  Provided an entity with a financial statement format that does not include dollar amounts, to be used by the entity in preparing financial statements. 
C)  Proposed correcting journal entries to be recorded by the client that change client-prepared financial statements. 
D)  Generated, through the use of computer software, financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP.

Question 12

Which of the following would be considered a part of a consulting services (non-assurance) engagement? I. Expressing a conclusion about the reliability of an entity's financial statements.
II) Reviewing and commenting on a client-prepared business plan.

Accepted Answer

A)  I only. 
B)  II only. 
C)  Both I and II. 
D)  Neither I nor II. 
A)  I only. 
B)  II only. 
C)  Both I and II. 
D)  Neither I nor II.

Question 13

Which of the following statements is true regarding the performance of an assurance service on information systems reliability by a CPA?

Accepted Answer

A)  The CPA is not permitted to provide any other services for the entity if he or she is to perform the service. 
B)  The service will require the CPA to apply all of the attestation and auditing standards. 
C)  The service provides information regarding whether the information system provides reliable information for internal operating decisions. 
D)  Performing the service will not require the collection of evidence. 
A)  The CPA is not permitted to provide any other services for the entity if he or she is to perform the service. 
B)  The service will require the CPA to apply all of the attestation and auditing standards. 
C)  The service provides information regarding whether the information system provides reliable information for internal operating decisions. 
D)  Performing the service will not require the collection of evidence.

Question 14

According to the Code of Professional Conduct, what response is appropriate when an accountant, who is not independent, performs a compilation of financial statements?

Accepted Answer

A)  The accountant should indicate in the last sentence of the report that he/she is not independent. 
B)  The accountant should withdraw from the engagement. 
C)  The accountant should express a disclaimer opinion on the compilation. 
D)  The accountant should express an adverse opinion on the compilation. 
A)  The accountant should indicate in the last sentence of the report that he/she is not independent. 
B)  The accountant should withdraw from the engagement. 
C)  The accountant should express a disclaimer opinion on the compilation. 
D)  The accountant should express an adverse opinion on the compilation.

Question 15

An accountant's standard report on a compilation of a projection should not include

Accepted Answer

A)  A statement that he or she does not express an opinion on the statements or assumptions. 
B)  A statement that a compilation of a projection is limited in scope. 
C)  A disclaimer of responsibility to update the report for events occurring after the report's date. 
D)  A statement that the accountant expresses only limited assurance that the results may be achieved. 
A)  A statement that he or she does not express an opinion on the statements or assumptions. 
B)  A statement that a compilation of a projection is limited in scope. 
C)  A disclaimer of responsibility to update the report for events occurring after the report's date. 
D)  A statement that the accountant expresses only limited assurance that the results may be achieved.

Question 16

For a practitioner to examine management's assertions about the effectiveness of internal controls, all of the following conditions are necessary except:

Accepted Answer

A)  Sufficient competent evidence can be developed to support the evaluation. 
B)  The practitioner must have already concluded that the financial statements are fairly presented in accordance with the applicable accounting framework. 
C)  The entity's management accepts responsibility for the effectiveness of its internal control. 
D)  All of the conditions listed are necessary. 
A)  Sufficient competent evidence can be developed to support the evaluation. 
B)  The practitioner must have already concluded that the financial statements are fairly presented in accordance with the applicable accounting framework. 
C)  The entity's management accepts responsibility for the effectiveness of its internal control. 
D)  All of the conditions listed are necessary.

Question 17

A practitioner is allowed to perform either of two types of attestation engagements for reporting on internal control: (1) examination or (2) review.

Accepted Answer

A) True 
 B)False

Question 18

Inquiry of the entity's personnel and analytical procedures are the primary bases for the issuance of a(n)

Accepted Answer

A)  Compilation report on financial statements for a nonpublic company in its first year of operations. 
B)  Auditor's report on financial statements supplemented with price-level information. 
C)  Review report on comparative financial statements for a nonpublic company in its second year of operations. 
D)  Management advisory report prepared at the request of the entity's audit committee. 
A)  Compilation report on financial statements for a nonpublic company in its first year of operations. 
B)  Auditor's report on financial statements supplemented with price-level information. 
C)  Review report on comparative financial statements for a nonpublic company in its second year of operations. 
D)  Management advisory report prepared at the request of the entity's audit committee.

Question 19

Which set of standards was created by the AICPA to cover services relating to unaudited financial statements?

Accepted Answer

A)  Standards on Selective Audits and Review Services (SSARS). 
B)  Statement on Auditing Standards (SAS). 
C)  Statements on Compilation and Review Standards (SCRS). 
D)  Statements on Standards for Accounting and Review Services (SSARS). 
A)  Standards on Selective Audits and Review Services (SSARS). 
B)  Statement on Auditing Standards (SAS). 
C)  Statements on Compilation and Review Standards (SCRS). 
D)  Statements on Standards for Accounting and Review Services (SSARS).

Question 20

The two standards of fieldwork for attestation engagements do not include the requirement that the CPA gain an understanding of internal control.

Accepted Answer

A) True 
 B)False

When third party use of prospective financial statements is expected, an accountant may not accept an engagement to

The report of a CPA on a review of the financial statements of a nonpublic entity should not include a statement that

Snow, CPA, was engaged by Master Co., a privately-held company, to examine and report on management's written assertion about the effectiveness of Master's internal control over financial reporting. Snow's report should state that

May an accountant plan and perform an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles?

Before issuing a report on the compilation of financial statements of a nonpublic entity, the accountant should

Which of the following represents the order from the least assurance to the most assurance provided for the types of services provided?

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain

An accountant's report expressing an opinion on an entity's internal controls should state that

Statements on Standards for Accounting and Review Services (SSARS) require an accountant to report when the accountant has

Which of the following would be considered a part of a consulting services (non-assurance) engagement? I. Expressing a conclusion about the reliability of an entity's financial statements. II) Reviewing and commenting on a client-prepared business plan.

Which of the following statements is true regarding the performance of an assurance service on information systems reliability by a CPA?

According to the Code of Professional Conduct, what response is appropriate when an accountant, who is not independent, performs a compilation of financial statements?

An accountant's standard report on a compilation of a projection should not include

For a practitioner to examine management's assertions about the effectiveness of internal controls, all of the following conditions are necessary except:

A practitioner is allowed to perform either of two types of attestation engagements for reporting on internal control: (1) examination or (2) review.

Inquiry of the entity's personnel and analytical procedures are the primary bases for the issuance of a(n)

Which set of standards was created by the AICPA to cover services relating to unaudited financial statements?

The two standards of fieldwork for attestation engagements do not include the requirement that the CPA gain an understanding of internal control.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Filters

Exam 21: Assurance, Attestation, and Internal Auditing Services

When third party use of prospective financial statements is expected, an accountant may not accept an engagement to

The report of a CPA on a review of the financial statements of a nonpublic entity should not include a statement that

Snow, CPA, was engaged by Master Co., a privately-held company, to examine and report on management's written assertion about the effectiveness of Master's internal control over financial reporting. Snow's report should state that

May an accountant plan and perform an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles?

Before issuing a report on the compilation of financial statements of a nonpublic entity, the accountant should

Which of the following represents the order from the least assurance to the most assurance provided for the types of services provided?

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain

An accountant's report expressing an opinion on an entity's internal controls should state that

Statements on Standards for Accounting and Review Services (SSARS) require an accountant to report when the accountant has

Which of the following would be considered a part of a consulting services (non-assurance) engagement? I. Expressing a conclusion about the reliability of an entity's financial statements. II) Reviewing and commenting on a client-prepared business plan.

Which of the following statements is true regarding the performance of an assurance service on information systems reliability by a CPA?

According to the Code of Professional Conduct, what response is appropriate when an accountant, who is not independent, performs a compilation of financial statements?

An accountant's standard report on a compilation of a projection should not include

For a practitioner to examine management's assertions about the effectiveness of internal controls, all of the following conditions are necessary except:

A practitioner is allowed to perform either of two types of attestation engagements for reporting on internal control: (1) examination or (2) review.

Inquiry of the entity's personnel and analytical procedures are the primary bases for the issuance of a(n)

Which set of standards was created by the AICPA to cover services relating to unaudited financial statements?

The two standards of fieldwork for attestation engagements do not include the requirement that the CPA gain an understanding of internal control.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Filters