Question 1

Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?

Accepted Answer

A) Assisting in adjusting the books of account for a partnership. 
B) Examining prospective financial statements. 
C) Processing financial data for clients of other accounting firms. 
D) Compiling an individual's personal financial statement to be used to obtain a mortgage. 
A) Assisting in adjusting the books of account for a partnership. 
B) Examining prospective financial statements. 
C) Processing financial data for clients of other accounting firms. 
D) Compiling an individual's personal financial statement to be used to obtain a mortgage.

Question 2

Jones Retailing, a nonpublic entity, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements, provided the:

Accepted Answer

A) reason for omitting the disclosures is explained in the engagement letter and acknowledged in the management representation letter. 
B) financial statements are prepared on a comprehensive basis of accounting other than generally accepted accounting principles. 
C) distribution of the financial statements is restricted to internal use only. 
D) omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report. 
A) reason for omitting the disclosures is explained in the engagement letter and acknowledged in the management representation letter. 
B) financial statements are prepared on a comprehensive basis of accounting other than generally accepted accounting principles. 
C) distribution of the financial statements is restricted to internal use only. 
D) omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report.

Question 3

Compilation reports may include:

Accepted Answer

A) compilations when the accountant is not independent. 
B) compilations with full disclosure. 
C) compilations that omits substantially all disclosures. 
D) any of the items listed. 
A) compilations when the accountant is not independent. 
B) compilations with full disclosure. 
C) compilations that omits substantially all disclosures. 
D) any of the items listed.

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

Independence is:

Accepted Answer

A) required for financial statement audits but not for assurance services. 
B) required for both financial statement audits and assurance services. 
C) required for assurance services but not financial statement audits. 
D) preferred but not required for financial statement audits and assurance services. 
A) required for financial statement audits but not for assurance services. 
B) required for both financial statement audits and assurance services. 
C) required for assurance services but not financial statement audits. 
D) preferred but not required for financial statement audits and assurance services.

Question 6

The expectation that an internal auditor does not accept gifts that may impair judgment is based on the code of ethics principle of:

Accepted Answer

A) integrity. 
B) objectivity. 
C) confidentiality. 
D) competency. 
A) integrity. 
B) objectivity. 
C) confidentiality. 
D) competency.

Question 7

Reasonable assurance is provided in:

Accepted Answer

A) an audit engagement. 
B) a compilation engagement. 
C) a review engagement. 
D) none of the items listed. 
A) an audit engagement. 
B) a compilation engagement. 
C) a review engagement. 
D) none of the items listed.

Question 8

In an examination of prospective financial statements, which of the following would not require a revision of prospective financial information?

Accepted Answer

A) Mathematical errors. 
B) Unreasonable or internally inconsistent assumptions. 
C) Inappropriate or incomplete presentation. 
D) All of the items listed may require a revision of prospective financial information. 
A) Mathematical errors. 
B) Unreasonable or internally inconsistent assumptions. 
C) Inappropriate or incomplete presentation. 
D) All of the items listed may require a revision of prospective financial information.

Question 9

The party responsible for assumptions identified in the preparation of prospective financial statements is usually:

Accepted Answer

A) a third-party lending institution. 
B) the entity's management. 
C) the reporting accountant. 
D) the entity's independent auditor. 
A) a third-party lending institution. 
B) the entity's management. 
C) the reporting accountant. 
D) the entity's independent auditor.

Question 10

Assurance services are independent professional services that improve the quality of information specifically for internal decision makers.

Accepted Answer

A) True 
 B)False

Question 11

Accepting an engagement to compile a financial projection for a public company most likely would be inappropriate if the projection were to be distributed to:

Accepted Answer

A) a bank with which the entity is negotiating for a loan. 
B) a labor union with which the entity is negotiating a contract. 
C) the principal stockholder, to the exclusion of the other stockholders. 
D) all stockholders of record as of the report date. 
A) a bank with which the entity is negotiating for a loan. 
B) a labor union with which the entity is negotiating a contract. 
C) the principal stockholder, to the exclusion of the other stockholders. 
D) all stockholders of record as of the report date.

Question 12

Inquiry and analytical procedures ordinarily performed during a review of a nonpublic entity's financial statements include:

Accepted Answer

A) analytical procedures designed to identify material weaknesses in internal control. 
B) inquiries concerning actions taken at meetings of the stockholders and the board of directors. 
C) analytical procedures designed to test the accounting records by obtaining corroborating evidential matter. 
D) inquiries of knowledgeable outside parties such as the entity's attorneys and bankers. 
A) analytical procedures designed to identify material weaknesses in internal control. 
B) inquiries concerning actions taken at meetings of the stockholders and the board of directors. 
C) analytical procedures designed to test the accounting records by obtaining corroborating evidential matter. 
D) inquiries of knowledgeable outside parties such as the entity's attorneys and bankers.

Question 13

When engaged to compile the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entity's accounting principles and practices. This requirement most likely will include obtaining a general understanding of the:

Accepted Answer

A) stated qualifications of the entity's accounting personnel. 
B) design of the entity's internal controls placed in operation. 
C) risk factors relating to misstatements arising from illegal acts. 
D) internal control awareness of the entity's senior management. 
A) stated qualifications of the entity's accounting personnel. 
B) design of the entity's internal controls placed in operation. 
C) risk factors relating to misstatements arising from illegal acts. 
D) internal control awareness of the entity's senior management.

Question 14

Match the Trust Services Principle with its proper definition.
-Privacy

Accepted Answer

A) Personal information is collected, used, retained, and disclosed and disposed to meet the entity's objectives. 
B) Information and systems are protected against unauthorized access, unauthorized disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems and affect the entity's ability to meet its objectives. 
C) System processing is complete, valid, accurate, timely, and authorized to meet the entity's objectives. 
D) Information designated as private is protected to meet the entity's objectives. 
E) Information and systems are available for operation and use to meet the entity's objectives. 
A) Personal information is collected, used, retained, and disclosed and disposed to meet the entity's objectives. 
B) Information and systems are protected against unauthorized access, unauthorized disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems and affect the entity's ability to meet its objectives. 
C) System processing is complete, valid, accurate, timely, and authorized to meet the entity's objectives. 
D) Information designated as private is protected to meet the entity's objectives. 
E) Information and systems are available for operation and use to meet the entity's objectives.

Question 15

Examples of attest engagements include examination, review, and agreed-upon procedures engagements.

Accepted Answer

A) True 
 B)False

Question 16

Prior to commencing the compilation of financial statements of a nonpublic entity, the accountant should:

Accepted Answer

A) perform analytical procedures sufficient to determine whether fluctuations among account balances appear reasonable. 
B) complete the preliminary phase of the study and evaluation of the entity's internal control. 
C) verify that the financial information supplied by the entity agrees with the books of original entry and supporting documentation. 
D) acquire a knowledge of any specialized accounting principles and practices used in the entity's industry. 
A) perform analytical procedures sufficient to determine whether fluctuations among account balances appear reasonable. 
B) complete the preliminary phase of the study and evaluation of the entity's internal control. 
C) verify that the financial information supplied by the entity agrees with the books of original entry and supporting documentation. 
D) acquire a knowledge of any specialized accounting principles and practices used in the entity's industry.

Question 17

The purpose of an attestation engagement is to provide users of information with an opinion, conclusion, or findings regarding the reliability of subject matter or an assertion about the subject matter, as measured against suitable and available criteria.

Accepted Answer

A) True 
 B)False

Question 18

Absolute assurance is provided in:

Accepted Answer

A) an audit engagement. 
B) a compilation engagement. 
C) a review engagement. 
D) none of the items listed. 
A) an audit engagement. 
B) a compilation engagement. 
C) a review engagement. 
D) none of the items listed.

Question 19

Which of the following should be included in an accountant's standard report based upon the review of a nonpublic entity's financial statements?

Accepted Answer

A) A statement that the review was performed in accordance with generally accepted audit standards. 
B) A statement that a review consists principally of inquiries and analytical procedures. 
C) A statement that the review includes a study and evaluation of the internal controls of the entity. 
D) A statement that a review is substantially greater in scope than a compilation. 
A) A statement that the review was performed in accordance with generally accepted audit standards. 
B) A statement that a review consists principally of inquiries and analytical procedures. 
C) A statement that the review includes a study and evaluation of the internal controls of the entity. 
D) A statement that a review is substantially greater in scope than a compilation.

Question 20

Under the attestation standards, a practitioner can either examine or perform agreed-upon procedures on prospective financial information.

Accepted Answer

A) True 
 B)False

Exam 21: Assurance, Attestation, and Internal Auditing Services

Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?

Jones Retailing, a nonpublic entity, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements, provided the:

Compilation reports may include:

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?

Independence is:

The expectation that an internal auditor does not accept gifts that may impair judgment is based on the code of ethics principle of:

Reasonable assurance is provided in:

In an examination of prospective financial statements, which of the following would not require a revision of prospective financial information?

The party responsible for assumptions identified in the preparation of prospective financial statements is usually:

Assurance services are independent professional services that improve the quality of information specifically for internal decision makers.

Accepting an engagement to compile a financial projection for a public company most likely would be inappropriate if the projection were to be distributed to:

Inquiry and analytical procedures ordinarily performed during a review of a nonpublic entity's financial statements include:

When engaged to compile the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entity's accounting principles and practices. This requirement most likely will include obtaining a general understanding of the:

Match the Trust Services Principle with its proper definition. -Privacy

Examples of attest engagements include examination, review, and agreed-upon procedures engagements.

Prior to commencing the compilation of financial statements of a nonpublic entity, the accountant should:

The purpose of an attestation engagement is to provide users of information with an opinion, conclusion, or findings regarding the reliability of subject matter or an assertion about the subject matter, as measured against suitable and available criteria.

Absolute assurance is provided in:

Which of the following should be included in an accountant's standard report based upon the review of a nonpublic entity's financial statements?

Under the attestation standards, a practitioner can either examine or perform agreed-upon procedures on prospective financial information.

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 Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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

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