Deck 17: Other Public Accounting Services and Reportsreviews and Compilations

Question 1

When unaudited financial statements are presented in comparative form with audited financial statements,such statements should be ________.

A)
B)
C)
D)

Answer 1

A

Question 2

An accountant's review engagement report would NOT include a statement that ________.

A)the engagement was performed in accordance with generally accepted auditing standards (GAAS)
B)an accountant reviews information supplied by the company
C)a review does not constitute an audit and an audit opinion is not expressed on the financial statements
D)the accountant is not aware of any material departure from generally accepted accounting standards (GAAP)

Answer 2

A

Question 3

XYZ Ltd.has prepared financial statements that are not in accordance with GAAP.The review report should ________.

A)ensure that the nature of the departure is described in the notes
B)contain a reservation describing the nature of the departure from GAAP
C)be a standard review report,since a review is not an audit
D)indicate the dollar effect of restatement for each account affected

Answer 3

B

Question 4

CA is a minority shareholder in ABC Co. ,and has just completed a compilation engagement for the company.The Notice to Reader should ________.

A)disclaim an opinion
B)provide negative assurance
C)include a statement that CA is not objective
D)not be issued,since CA is not objective

Question 5

An accountant's communication on the financial statements in a compilation engagement would NOT include a statement that ________.

A)the statements may not be appropriate for the purposes of users
B)the financial statement information has been compiled
C)a compilation engagement consists primarily of inquiries of company personnel and analytical procedures applied to financial data
D)financial statements have not been audited or reviewed and the accountant did not attempt to verify accuracy or completeness.

Question 6

With a compilation service,the procedures performed by a professional accountant can be described as ________.

A)extensive
B)few,if any
C)comparable to a review service
D)comparable to an audit

Question 7

Which of the following statements about a compilation engagement is NOT true?

A)The accountant must have adequate technical training and proficiency in accounting.
B)The accountant does not have to have an objective state of mind.
C)The statements must comply with generally accepted accounting principles.
D)The accountant should adequately plan and properly execute the work.

Question 8

Which of the following procedures should an accountant perform during an engagement to review the financial statements of a private company?

A)Communicate internal control system weaknesses that were discovered during the assessment of control risk.
B)Obtain a letter of representation signed by top-level management.
C)Send bank confirmations to the company's financial institutions.
D)Examine cash disbursements in the subsequent period for evidence of unrecorded liabilities.

Question 9

If an accountant is engaged to compile the financial statements of a private entity and the statements omit substantially all disclosures required by GAAP,which of the following alternatives is correct?

A)If the accountant concludes that the omissions result in misleading financial statements and the matter cannot be resolved,the accountant should withdraw from the engagement.
B)The report should be amended to state that the financial statements have been prepared in accordance with a comprehensive basis of accounting other than GAAP.
C)The report should be amended to state that the financial statements have not been compiled in accordance with standards for compilation and review engagements.
D)The report should indicate that the statements are special-purpose financial statements that are not comparable to those of prior periods.

Question 10

In providing guidance to accountants,which ranks highest?

A)Research study.
B)Criteria of Control guidance.
C)Handbook Recommendation.
D)Handbook Guideline.

Question 11

Ordinarily,which of the following procedures should be applied when an independent accountant conducts a review of interim financial information of a publicly held company?

A)Verify changes in key account balances.
B)Read the minutes of the board of directors' meetings.
C)Inspect the open purchase order file.
D)Perform cutoff tests for cash receipts and disbursements.

Question 12

The auditor learned the following in the course of an audit engagement.Which of the items,discovered by the auditor,need NOT be communicated to the audit committee?

A)The theft of several items of inventory by warehouse employees.
B)Management's significant accounting policies.
C)Significant audit adjustments recommended by the auditors.
D)All of these items should be communicated to the audit committee.

Question 13

With compilation engagements,the minimum standard is that financial statements ________.

A)not be false or misleading
B)be accurate
C)be fairly presented
D)be prepared in accordance with GAAP

Question 14

An auditor has been engaged to report on management's report on internal control.Management's report points to a material weakness in its system of internal controls over inventory.The auditor's report should be a(n)________.

A)adverse opinion
B)qualified opinion for a GAAP departure
C)clean opinion
D)clean opinion with an emphasis of matter paragraph

Question 15

The level of assurance provided by a review engagement can best be described as ________.

A)comparable to that of an audit
B)moderate
C)high
D)nonexistent

Question 16

Which of the following best describes a CA's engagement to report on an entity's internal controls over financial reporting?

A)An assurance engagement to examine and report on management's written assertions about the effectiveness of its internal control system.
B)An audit engagement to render an opinion on the entity's internal control system.
C)A prospective engagement to project,for a period of time not to exceed one year,and report on the expected benefits of the entity's internal control structure.
D)A consulting engagement to provide constructive advice to the entity on its internal control system.

Question 17

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

A)Enquire about the accounting system and bookkeeping procedures.
B)Perform analytical procedures to identify relationships and individual items that appear to be unusual.
C)Obtain a lawyer's letter about claims and possible claims.
D)Study the financial statements for indications that they conform to generally accepted accounting principles.

Question 18

The primary purpose for the development of standards by the Criteria of Control Committee was to ________.

A)provide guidance for companies developing best practice control systems
B)provide a basis similar to GAAP for reporting on controls
C)provide detailed tests of controls for audits of financial statements
D)provide clarity on who is responsible for controls

Question 19

Snow,CA,was engaged by Master Limited to examine and report on management's written assertion about the effectiveness of Master's internal control system over financial reporting.Snow's report should state that ________.

A)because of the inherent limitations in any system of internal control,errors or irregularities may occur and not be detected.
B)management's assertion is based on criteria established by the Canadian Institute of Chartered 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 20

When compiling the financial statements of a private company,an accountant should ________.

A)review agreements with financial institutions for restrictions on cash balances
B)study and understand the client's business
C)enquire of key personnel concerning related parties and subsequent events
D)perform ratio analyses of the financial data of comparable prior periods

Question 21

Financial statements must be presented fairly as a result of a compilation engagement.

Question 22

An auditor is most concerned that interim financial statements are not misleading relative to ________.

A)the prior year's interim financial statements
B)the annual report
C)pro forma financial statements
D)the prior year's annual financial statements

Question 23

According to the Guidance on Criteria of Control (COCO),control is effected by ________.

A)senior management
B)the board of directors
C)people throughout the organization
D)the audit committee

Question 24

Review engagements provide a moderate level of assurance.

Question 25

An accountant who is not independent can compile financial statements for a private company as long as the fact of lack of independence is disclosed in the body of the report.

Question 26

Under CICA rules,the auditor verifies the accuracy of management's internal controls statement just as he or she verifies the accuracy of financial statements.

Question 27

Review engagements involve both substantive and compliance testing.

Question 28

Reviews of interim financial information consist primarily of ________.

A)substantive procedures
B)recalculation
C)external confirmations
D)enquiry and analytical procedures

Question 29

Few,if any,procedures are performed during a compilation engagement.

Question 30

Accounting principles require that interim financial statements be prepared.

Question 31

Review engagement standards require that the accountant performing the engagement have an objective state of mind.

Question 32

Auditing standards apply to work on all audited financial statements but not to work on other assurance engagements.

Question 33

When providing assurance on internal control,the auditor provides a negative assurance report.

Question 34

The scope of a review engagement is ________.

A)similar to that of an audit
B)less than that of a compilation
C)less than that of an audit
D)more than that of an audit

Question 35

According to auditing standards,reportable matters ________.

A)must be searched for by auditors
B)must be reported by auditors if they come to their attention
C)may only be reported to management
D)may be reported on verbally or in writing

Question 36

The scope of a review engagement is similar to that of an audit.

Question 37

A review engagement consists primarily of enquiry,analytical procedures,and discussion.

Question 38

The review of interim financial information should ideally take place ________.

A)at or near year-end
B)just after the cutoff date
C)at or near the date of the interim information
D)six months into the fiscal year

Question 39

Substantive and compliance testing are applicable to ________.

A)audits only
B)reviews and audits
C)compilations and audits
D)reviews and compilations

Question 40

In a compilation engagement,the accountant performs no audit procedures.

Question 41

Personal financial planning has become a big source of business for professional accounting firms.

Question 42

What is meant by "audit of internal control over financial reporting?"

Question 43

List three matters which the auditor is responsible for reporting on to the audit committee of a public company.

Question 44

Donna Prima,PA,was engaged to review the financial statements of Rooster Restaurants,Inc. ,a private company.During her review,Donna found that Rooster had not capitalized leases as required under GAAP.The result was so material,that Donna modified the standard review report to state that "the financial statements are not in accordance with GAAP."
Required:
Is Prima's report in accordance with professional standards? If not,what should she have done under the circumstances? Explain.

Question 45

Interim financial information is a basic and necessary element of financial statements that conform to GAAP.

Question 46

In a compilation engagement,the financial statements must at least comply with GAAP.

Question 47

Auditors are obligated to search for "reportable matters."

Question 48

What does the extent of review procedures of interim financial information depend on?

Question 49

George Wilson CA is on the board of directors of a small manufacturing company,Smith Plastics,Inc.The president of the company,John Smith,has asked George to prepare financial statements for the company to be submitted to Vancouver Dominion Bank as part of a loan request.Mr.Smith tells George that the bank would like a review or an audit,but would settle for a compilation from a CA.He would like George to do the compilation.
Required:
Under what conditions,if any,would George Wilson be allowed to compile the financial statements of Smith Plastics,Inc.?

Question 50

When should reviews of interim financial information be performed?