Deck 25: Other Assurance Services

Question 1

Compilation reports may be of all but which of the following types?

A) compilation with limited independence
B) compilation with full disclosure
C) compilation without independence
D) compilation that omits substantially all disclosures

Answer 1

A

Question 2

Auditors frequently audit statements that were prepared on a comprehensive basis of accounting other than GAAP. When this occurs:

A) generally accepted auditing standards apply to these engagements and the reporting requirements differ.
B) generally accepted auditing standards apply to these engagements and the reporting requirements are the same as well.
C) generally accepted auditing standards do not apply to these examinations and the reporting requirements differ also.
D) generally accepted auditing standards do not apply to this engagement and the reporting requirements remain the same for the CPA.

Answer 2

A

Question 3

You are a CPA retained by the manager of a cooperative retirement village to do "write-up work." You are expected to prepare unaudited financial statements with each page marked "unaudited" and accompanied by a disclaimer of opinion stating no audit was performed. In performing the work, you discover that there are no invoices to support a claim for a $25,000 disbursement. The manager informs you that all the disbursements are proper. What should you do?

A) Submit the expected statements but omit $25,000 of unsupported disbursements.
B) Include the unsupported disbursements in the statements since you are not expected to make an audit.
C) Obtain from the manager a written statement that you informed him of the missing invoices and include his assurance that the disbursements are proper.
D) Notify the owners that some of the claimed disbursements are unsupported and withdraw if the situation is not satisfactorily resolved.

Answer 3

D

Question 4

Practitioners who perform reviews and compilations are referred to in the SSARS standards as:

A) bookkeepers.
B) accountants.
C) auditors.
D) CPAs.

Question 5

Your accounting firm has accepted a compilation engagement from a client in which your firm is not independent. In that case you:

A) may not accept the engagement.
B) may accept the engagement and disclose the lack of independence.
C) may accept the engagement and not disclose the lack of independence.
D) may accept the engagement and disclose the lack of independence and the reason for the lack of independence.

Question 6

For compilations, an accountant does which of the following?

A)
B)
C)
D)

Question 7

An accountant has accepted an engagement in which the audit procedures of inquiry and analytical procedures will be employed. These procedures will form the basis for issuance of:

A) a compilation report.
B) audit report on supplemental information issued by the client.
C) management advisory report requested by the audit committee.
D) review report on comparative financial statements for a non-public company.

Question 8

The standards which govern the CPA's association with unaudited financial statements of private companies are the:

A) AICPA's Code of Professional Conduct.
B) Statements on Auditing Standards (SASs).
C) Statements of Standards on Attestation Engagements (SSAEs).
D) Statements on Standards for Accounting and Review Services (SSARS).

Question 9

The two types of services provided in connection with the Statements on Standards for Accounting and Review Services are:

A) audit and examination services.
B) compilation and review services.
C) examination and review services.
D) management advisory services and compilations.

Question 10

Before performing a review of a nonpublic entity's financial statements, an accountant should:

A) complete a series of inquiries concerning the entity's procedures for recording, classifying, and summarizing transactions.
B) obtain a sufficient level of knowledge of the accounting principles and practices of the industry in which the entity operates.
C) inquire whether management has omitted substantially all of the disclosures required by generally accepted accounting principles.
D) apply analytical procedures to provide limited assurance that no material modifications should be made to the financial statements.

Question 11

In a review service where the client has failed to follow GAAP, the accountant is:

A) not required to determine the effect of a departure if management has not done so, but that fact must be disclosed in the report.
B) required to determine the effect of a departure if management has not done so, and that fact must be disclosed in the report.
C) not required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report.
D) required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report.

Question 12

The statement that "Nothing came to our attention which would indicate that these statements are not fairly presented" expresses which of the following?

A) disclaimer of an opinion
B) negative assurance
C) negative confirmation
D) shared opinion

Question 13

Evidence for a review engagement consists primarily of:

A)
B)
C)
D)

Question 14

Which of the following would not be included in a CPA's report based upon a review of the financial statements of a nonpublic entity?

A) A statement that the review was in accordance with generally accepted auditing standards.
B) A statement that all information included in the financial statements is the representation of management.
C) A statement describing the principal procedures performed.
D) A statement describing the auditor's conclusions based upon the results of the review.

Question 15

You are preparing to issue a report on the compilation of financial statements for a non-public company. Prior to issuing the report you should:

A) read the financial statements to determine if they are free from obvious material errors.
B) perform analytical procedures to determine if they are free from material misstatements.
C) perform tests of balances on selected accounts to determine if they are free from material misstatements.
D) perform limited control tests to determine if there are any material misstatements.

Question 16

Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services?

A) A review requires more substantive evidence than an audit.
B) An audit requires less evidence related to internal control than a review.
C) A review requires less evidence than an audit.
D) None of the above statements is true.

Question 17

A CPA firm can issue a compilation report:

A) only if the partners are independent.
B) only if all the partners and the staff in the office performing the engagement are independent.
C) if the partners have no material or direct immaterial interest in client.
D) even if it is not independent.

Question 18

An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review:

A) is substantially equivalent in scope to an audit.
B) is substantially more in scope than a compilation.
C) is substantially less in scope than an audit.
D) provides only limited assurance that the financial statements are fairly presented.

Question 19

The concept of limited assurance is provided for in which of the following engagements?

A) audit
B) review
C) compilation
D) agreed-upon procedures

Question 20

The concept of reasonable assurance is provided for in which one of the following engagements?

A) review
B) compilation
C) audit
D) none of the above

Question 21

Review reports are normally dated as of the client's balance sheet date.

Question 22

Negative assurance is not permissible in:

A) reports based upon a review engagement.
B) letters required by security underwriters for data pertinent to SEC registration statements.
C) reports based on an audit of interim financial statements of a closely held business entity.
D) reports relating to the results of agreed-upon procedures to one or more specified elements, accounts, or items of financial statement.

Question 23

Draft a report that would be appropriate when an independent accountant has performed a compilation of financial statements with disclosures in accordance with GAAP.

Question 24

A financial statement review conducted in compliance with SSARS emphasizes five activities, one of which is to "perform analytical procedures." State the other four.

Question 25

Which of the following forms of review are permissible under SSARS?

A) review without positive assurance
B) review on financial statements that omit substantially all disclosures
C) reviews without CPA independence
D) review without limited procedures

Question 26

When performing a review (SSARS review) of financial statements, the accountant is required to obtain a letter of representation from management.

Question 27

When performing compilation services, the accountant is not required to obtain an understanding of the client's internal control.

Question 28

A financial statement review conducted in compliance with SSARS includes obtaining an understanding of internal control.

Question 29

The Securities and Exchange Commission requires quarterly financial information as a part of the:

A) 10-K report.
B) 10-Q report.
C) 8-K report.
D) auditor's report.

Question 30

CPAs must be independent to issue a compilation report.

Question 31

Discuss each of the three types of compilation reports and the circumstances in which each should be used.

Question 32

A CPA firm can issue a compilation report even if it is not independent with respect to the client.

Question 33

SSARS are issued by the SEC.

Question 34

Statements on Standards for Accounting and Review Services (SSARS) govern the CPA's association with unaudited financial statements of nonpublic (private) companies, but not public companies.

Question 35

An auditor who was engaged to perform an examination of the financial statements of a nonpublic entity has been asked by the client to refrain from performing various audit procedures and change the nature of the engagement to a review of the financial statements in accordance with standards established by the AICPA. The client's request was made because the cost to complete the examination was significant. Under these circumstances, the auditor would most likely:

A) qualify the auditor's report and refer to the scope limitation.
B) view the request as an indication of a possible irregularity.
C) complete the examination that was in progress.
D) honor the client's request.

Question 36

Discuss the five SSARS requirements that must be met when an accountant is performing a compilation of financial statements.

Question 37

Draft a report that would be appropriate when an accountant has performed a compilation of financial statements with disclosures in accordance with GAAP, but the accountant is not independent with respect to the client.

Question 38

CPAs must be independent to issue a review report.

Question 39

A nonaudit engagement in which the accountant undertakes to present, in the form of financial statements, information that is the representation of management, without undertaking to express any assurance on the statements is called a review engagement.

Question 40

Draft a report that would be appropriate when an independent accountant has performed a compilation of financial statements which substantially omits all disclosures and the statement of cash flows required by GAAP.

Question 41

An agreed-upon procedures engagement is one in which:

A) the auditor and management agree that procedures will be applied to all accounts and circumstances.
B) the auditor and management agree that procedures will not be applied to all accounts and circumstances.
C) the auditor and management or a third party agree that the engagement will be limited to certain specific procedures.
D) the auditor and management or a 3rd party agree that the auditor will apply his or her judgment to determine procedures to be performed.

Question 42

As a CPA, you have been engaged to perform an attestation engagement. You would typically:

A) express a conclusion about an assertion.
B) provide management consulting services.
C) prepare financial forecasts to secure in preparation for receiving debt funding.
D) compile financial statements for the client.

Question 43

The quarterly reports submitted to the SEC by the client:

A) have to be audited and the CPA firm must be identified.
B) do not have to be audited, but the CPA firm which does the year-end audit must be identified.
C) have to be audited, but the CPA firm does not have to be identified.
D) do not have to be audited, but the CPA firm which does the year-end audit must review the quarterly statements before they are submitted to the SEC.

Question 44

When performing a review of interim information for a public company, the accountant ordinarily does not perform tests of the accounting records, independent confirmations, or physical examinations.

Question 45

The use of positive assurance is appropriate in review reports.

Question 46

Reports on agreed-upon procedures are intended to be distributed:

A) to only the involved parties, who would have the requisite knowledge about those procedures and the level of assurance resulting from them.
B) to only the involved parties, who would have the requisite knowledge about those procedures but not the level of assurance resulting from them.
C) to any party to whom the client wishes.
D) only to the stockholders of the client.

Question 47

When performing an attestation engagement a CPA is required to adhere to the Statements on Standards for Attestation Engagements. Describe below the Standards of Field Work for attestation engagements.

Question 48

In which type of report would you read the following statement: "We believe that our examination provides a reasonable basis for our opinion."?

A) review
B) audit
C) examination
D) agreed-upon procedures

Question 49

Statements on Standards for Attestation Engagements are established by the:

A) Securities and Exchange Commission.
B) Public Company Accounting Oversight Board.
C) Auditing Standards Board.
D) Accounting and Review Services Committee.

Question 50

A CPA who is not independent and is associated with financial statements should disclaim an opinion with respect to those financial statements. The disclaimer should:

A) clearly state the specific reasons for lack of independence.
B) not mention any reason for the disclaimer other than that the CPA was unable to conduct the examination in accordance with generally accepted auditing standards.
C) not describe the reason for lack of independence but should state specifically that the CPA is not independent.
D) include a middle paragraph clearly describing the CPA's association with the client and explaining why the CPA was unable to gather sufficient competent evidential matter to warrant the expression of an opinion.

Question 51

Which of the following is not one of the types of engagements and related forms of conclusions that are defined by the attestation standards?

A) reviews
B) compilations
C) examinations
D) agreed-upon procedures

Question 52

The use of negative assurance is appropriate in audit reports.

Question 53

Which of the following is not a standard contained in both the Attestation Standards and Generally Accepted Auditing Standards with regards to the standards of field work?

A) The examination is to be performed by a person having adequate technical training..
B) An independence in mental attitude is to be maintained.
C) Sufficient evidence is to be obtained.
D) The practitioner must obtain a sufficient understanding of the client's internal control.

Question 54

Which of the following types of engagement reports would provide positive assurance?

A) an examination
B) a review
C) an agreed-upon procedures engagement
D) a compilation

Question 55

SSAEs are issued by the AICPA.

Question 56

Which of the following results in a conclusion that represents positive assurance?

A) review
B) compilation
C) examination
D) agreed upon procedure engagement

Question 57

The distribution of which of the following types of reports is unrestricted?

A) examinations and reviews
B) reviews and agreed-upon procedures
C) examinations and agreed-upon procedures
D) examinations, reviews, and agreed-upon procedures

Question 58

Distribution of which of the following types of reports is limited?

A) audit
B) review
C) agreed-upon procedures
D) examination

Question 59

An examination results in a conclusion that represents ________ assurance.

A) limited assurance
B) negative
C) positive
D) unequivocal

Question 60

Specific attestation standards have been developed in all but which of the following areas?

A) pro forma financial information
B) compliance with laws and regulations
C) prospective financial statements
D) standards have been developed for all of the above

Question 61

In a WebTrust attestation engagement the client engages a CPA to provide what level of assurance that the company's Website complies with Trust Services principles?

A) absolute
B) reasonable
C) limited
D) moderate

Question 62

Which of the following services is performed under the attestation standards?

A)
B)
C)
D)

Question 63

What is the best reason that standards prohibit accepting an engagement on a projection for general use?

A) The CPA's procedures would violate SSARS.
B) Reports on projections are not well understood by the general public.
C) Underlying hypothetical assumptions are difficult to interpret without obtaining additional information.
D) The CPA is not qualified to report on the use of GAAP in the projected financial statement.

Question 64

Which of the following statements regarding prospective financial statements is most correct?

A) CPA's are not attesting to the accuracy of the prospective financial statements.
B) CPA's are attesting to the accuracy of the prospective financial statements.
C) CPA's are performing a review on the company's assumptions and hypothetical's that underlie the prospective financial statements.
D) CPA's are performing a review on the achievability of the prospective financial statements.

Question 65

There are no questions for this Learning Objective.

Question 66

General use statements are prepared for use by ________.

A) known contractual parties
B) any third party
C) regulators
D) internal auditor

Question 67

Of the three types of attestation engagements, examination engagements provide a higher level of assurance than agreed-upon procedures engagements but less than review engagements.

Question 68

Briefly describe each of the five Trust Services principles.

Question 69

Who developed the WebTrust service? Briefly explain this service.

Question 70

As a CPA you have been asked to examine an entity's financial projections. Acceptance of the engagement would be appropriate if distribution is limited to:

A) stockholders of record as of the date of the report.
B) potential investors and creditors by posting on the Company's website.
C) general public by posting on the company's website.
D) a financial institution for which the company is negotiating a loan.

Question 71

Which of the following is not one of the general types of prospective financial statements included in the attestation standards?

A)
B)
C)
D)

Question 72

Professional standards prohibit which one of the following types of engagements for prospective financial statements from being undertaken?

A) a compilation
B) a review
C) an examination
D) an agreed-upon procedures engagement

Question 73

Systrust services are performed under the direction of the SSAEs.

Question 74

Which are prospective financial statements that present an entity's expected financial position, results of operations, and cash flows, to the best of the responsible party's knowledge and belief?

A)
B)
C)
D)

Question 75

Examination attestation engagements result in a conclusion that is in a positive form, whereas review attestation engagements result in a conclusion in the form of a negative assurance.

Question 76

WebTrust services are performed under the direction of the SSARS.

Question 77

Which are prospective financial statements that present an entity's financial position, results of operations, and cash flows, to the best of the responsible party's knowledge and belief, given one or more hypothetical assumptions?

A)
B)
C)
D)

Question 78

CPAs can issue a WebTrust opinion only on all five Trust Services principles.

Question 79

Briefly describe a SysTrust engagement.

Question 80

The WebTrust service requires that a CPA update its testing of the e-commerce aspects of a entity's Web site at least every:

A) ninety days.
B) month.
C) six months.
D) twelve months.