Question 1

Which of the following steps is NOT required in performing a compliance attestation engagement?

Accepted Answer

A) Assess planning materiality 
B) Assess inherent risk 
C) Confirm restrictions with applicable third-parties 
D) Consider subsequent events 
A) Assess planning materiality 
B) Assess inherent risk 
C) Confirm restrictions with applicable third-parties 
D) Consider subsequent events C

Question 2

When providing limited assurance that the reviewed financial statements of a nonpublic entity require no material modifications to be in accordance with generally accepted accounting principles,the accountant should

Accepted Answer

A) assess the risk that a material misstatement could occur in a financial statement assertion. 
B) confirm with the entity's lawyer that material loss contingencies are disclosed. 
C) understand the accounting principles of the industry in which the entity operates. 
D) develop audit plans to determine whether the entity's financial statements are fairly presented. 
A) assess the risk that a material misstatement could occur in a financial statement assertion. 
B) confirm with the entity's lawyer that material loss contingencies are disclosed. 
C) understand the accounting principles of the industry in which the entity operates. 
D) develop audit plans to determine whether the entity's financial statements are fairly presented. C

Question 3

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

Accepted Answer

A) Communicate reportable conditions discovered during the assessment of control risk. 
B) Obtain a client representation letter from members of management. 
C) Send bank confirmation letters to the entity's financial institutions. 
D) Examine cash disbursements in the subsequent period for unrecorded liabilities. 
A) Communicate reportable conditions discovered during the assessment of control risk. 
B) Obtain a client representation letter from members of management. 
C) Send bank confirmation letters to the entity's financial institutions. 
D) Examine cash disbursements in the subsequent period for unrecorded liabilities. B

Question 4

When interim financial information is presented as supplementary information accompanying audited financial statements,the auditor should make reference to the information

Accepted Answer

A) in all cases. 
B) when it has not been labeled as "unaudited". 
C) when it is material to the financial statement users. 
D) when the information has been reviewed rather than audited. 
A) in all cases. 
B) when it has not been labeled as "unaudited". 
C) when it is material to the financial statement users. 
D) when the information has been reviewed rather than audited.

Question 5

AR-C 90 requires adequate documentation for a review engagement.Which items are required to be documented?

Accepted Answer

A) Analytical procedures: Yes; Management representations: No; Understanding of internal controls: No 
B) Analytical procedures: No; Management representations: Yes; Understanding of internal controls: No 
C) Analytical procedures: Yes; Management representations: Yes; Understanding of internal controls: No 
D) Analytical procedures: Yes; Management representations: Yes; Understanding of internal controls: Yes 
A) Analytical procedures: Yes; Management representations: No; Understanding of internal controls: No 
B) Analytical procedures: No; Management representations: Yes; Understanding of internal controls: No 
C) Analytical procedures: Yes; Management representations: Yes; Understanding of internal controls: No 
D) Analytical procedures: Yes; Management representations: Yes; Understanding of internal controls: Yes

Question 6

George Wilson is on the board of directors of a small manufacturing company,Smith Plastics Inc.George holds a CPA certificate and is a member of the AICPA.The president of the company,John Smith,has asked George to prepare financial statements for the company to be submitted to Sixth First 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 CPA.He would like George to do the compilation.
Required:
Under what conditions,if any,George Wilson would be allowed to prepare a compilation of the financial statements of Smith Plastics Inc.?

Accepted Answer

George Wilson is not independent of Smit

Question 7

Hamell Corporation is making a presentation to a perspective investor.The presentation includes a projection showing that the company's sales will be between $25,000,000 and $27,000,000 within the next three years.Hamell believes the information will be better received if its CPA provides an attestation report on the projection.The CPA should insure that proper disclosure is made to indicate that

Accepted Answer

A) the $27,000,000 estimate is a best case scenario. 
B) the range of the projection is appropriate given the circumstances. 
C) the range does not indicate a "best" and "worst" case scenario. 
D) projections are limited in their information content due to uncontrollable changes in the business environment. 
A) the $27,000,000 estimate is a best case scenario. 
B) the range of the projection is appropriate given the circumstances. 
C) the range does not indicate a "best" and "worst" case scenario. 
D) projections are limited in their information content due to uncontrollable changes in the business environment.

Question 8

Attestation engagements include

Accepted Answer

A) only examinations. 
B) examinations and assurance services. 
C) examinations,reviews,and agreed-upon procedures. 
D) examinations,reviews,compilations,agreed-upon procedures and assurance services. 
A) only examinations. 
B) examinations and assurance services. 
C) examinations,reviews,and agreed-upon procedures. 
D) examinations,reviews,compilations,agreed-upon procedures and assurance services.

Question 9

Review work on unaudited financial statements consists primarily of conducting inquiries,performing analytical procedures,and obtaining a management representation letter.List the typical procedures accountants would perform on a review engagement.

Accepted Answer

The typical review procedures would incl

Question 10

In a compilation engagement,

Accepted Answer

A) all appropriate disclosures must be presented. 
B) managers or owners may choose to omit all the footnote disclosures. 
C) financial statements must be presented in prescribed forms. 
D) an auditor provides only negative assurance. 
A) all appropriate disclosures must be presented. 
B) managers or owners may choose to omit all the footnote disclosures. 
C) financial statements must be presented in prescribed forms. 
D) an auditor provides only negative assurance.

Question 11

In an agreed-upon procedures engagement,an accountant must

Accepted Answer

A) follow the attestation standard related to internal control. 
B) follow the attestation standard related to evidential matter. 
C) include negative assurance explicitly in the report. 
D) all of these are true. 
A) follow the attestation standard related to internal control. 
B) follow the attestation standard related to evidential matter. 
C) include negative assurance explicitly in the report. 
D) all of these are true.

Question 12

Extensible Business Reporting Language (XBRL)provides a computer readable identifying tag for each individual item of data.The advantages of XBRL include all of the following except

Accepted Answer

A) increases the speed of handling of financial data. 
B) reduces the chance of error. 
C) improves the full disclosure of financial information. 
D) permits automatic checking of information. 
A) increases the speed of handling of financial data. 
B) reduces the chance of error. 
C) improves the full disclosure of financial information. 
D) permits automatic checking of information.

Question 13

A report on an entity's internal control over financial reporting

Accepted Answer

A) is required for all companies whether they report to the SEC or not. 
B) is optional for all companies whether they report to the SEC or not. 
C) is required by the PCAOB for large public companies and may be performed by a CPA for nonpublic companies. 
D) is limited to inquiry and analytical procedures for reports for non-SEC companies. 
A) is required for all companies whether they report to the SEC or not. 
B) is optional for all companies whether they report to the SEC or not. 
C) is required by the PCAOB for large public companies and may be performed by a CPA for nonpublic companies. 
D) is limited to inquiry and analytical procedures for reports for non-SEC companies.

Question 14

Which of the following procedures is ordinarily performed by an accountant in a compilation engagement of a nonpublic entity?

Accepted Answer

A) Reading the financial statements to consider whether they are free of obvious mistakes in the application of accounting principles 
B) Obtaining written representations from management indicating that the compiled financial statements will not be used to obtain credit 
C) Making inquiries of management concerning actions taken at meetings of the stockholders and the board of directors 
D) Applying analytical procedures designed to corroborate management's assertions that are embodied in the financial statement components 
A) Reading the financial statements to consider whether they are free of obvious mistakes in the application of accounting principles 
B) Obtaining written representations from management indicating that the compiled financial statements will not be used to obtain credit 
C) Making inquiries of management concerning actions taken at meetings of the stockholders and the board of directors 
D) Applying analytical procedures designed to corroborate management's assertions that are embodied in the financial statement components

Question 15

An auditor that is requested to provide a report on application of requirements of an appropriate financial reporting framework may not

Accepted Answer

A) issue an opinion on the accounting treatment of a hypothetical transaction. 
B) discuss the requirements with the client's current auditors. 
C) limit the report to the sole use of specified parties. 
D) state that differences in facts,circumstances or assumptions might change the conclusion. 
A) issue an opinion on the accounting treatment of a hypothetical transaction. 
B) discuss the requirements with the client's current auditors. 
C) limit the report to the sole use of specified parties. 
D) state that differences in facts,circumstances or assumptions might change the conclusion.

Question 16

Which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of a publicly held entity?

Accepted Answer

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 cut-off tests for cash receipts and disbursements. 
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 cut-off tests for cash receipts and disbursements.

Question 17

Big Ben's Toy (BBT)Company has recently outsourced its payroll operation to Mary's Payroll Service (MPS).MPS receives the changes to the payroll data base (hirings,firings,rate increases,etc.)and the number of hours worked for all hourly employees.MPS calculates the payroll and sends BBT printed payroll checks,a payroll register,and a list of payments to be made to third parties (IRS,insurance,pension plan,etc.).BBT transfers an appropriate amount into its payroll bank account and distributes the checks.Accounts payable uses the list of third-party payments to make appropriate payments.
You have been hired to perform an audit of BBT Company.During your opening meeting with BBT management you state that your audit plan includes inquiries of Mary's Payroll Service and a review of the AT 801 report on internal controls at MPS.BBT's management is confused and states that BBT should not have to pay you to review controls at another organization.
Prepare a brief explanation to BBT's management as to why it is necessary to review the controls at MPS and the importance of this review to BBT Company.

Accepted Answer

The outsourcing of significant portions

Question 18

Which of the following is NOT a principle of Trust Service engagements?

Accepted Answer

A) Security from unauthorized use 
B) Availability of the system,products,or services 
C) Proficiency in preparing transactions 
D) Confidentiality of information 
A) Security from unauthorized use 
B) Availability of the system,products,or services 
C) Proficiency in preparing transactions 
D) Confidentiality of information

Question 19

Hamell Corporation is making a presentation to a prospective investor.The presentation includes a projection showing that the company's sales will be between $25,000,000 and $27,000,000 within the next three years.Hamell believes the information will be better received if its CPA provides an attestation report on the projection.In order to provide such a report the CPA must do all of the following EXCEPT

Accepted Answer

A) obtain knowledge about the client's business. 
B) evaluate the assumptions used in preparing the projection. 
C) confirm expected sales with customers. 
D) identify key factors affecting the information. 
A) obtain knowledge about the client's business. 
B) evaluate the assumptions used in preparing the projection. 
C) confirm expected sales with customers. 
D) identify key factors affecting the information.

Question 20

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that

Accepted Answer

A) the scope of the accountant's procedures has not been restricted in testing the financial information that is the representation of management. 
B) the accountant assessed the accounting principles used and significant estimates made by management. 
C) the accountant does not express an opinion or any other form of assurance on the financial statements. 
D) a compilation consists primarily of inquiries of entity personnel and analytical procedures applied to financial data. 
A) the scope of the accountant's procedures has not been restricted in testing the financial information that is the representation of management. 
B) the accountant assessed the accounting principles used and significant estimates made by management. 
C) the accountant does not express an opinion or any other form of assurance on the financial statements. 
D) a compilation consists primarily of inquiries of entity personnel and analytical procedures applied to financial data.

Which of the following steps is NOT required in performing a compliance attestation engagement?

When providing limited assurance that the reviewed financial statements of a nonpublic entity require no material modifications to be in accordance with generally accepted accounting principles,the accountant should

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

When interim financial information is presented as supplementary information accompanying audited financial statements,the auditor should make reference to the information

AR-C 90 requires adequate documentation for a review engagement.Which items are required to be documented?

Attestation engagements include

Review work on unaudited financial statements consists primarily of conducting inquiries,performing analytical procedures,and obtaining a management representation letter.List the typical procedures accountants would perform on a review engagement.

In a compilation engagement,

In an agreed-upon procedures engagement,an accountant must

Extensible Business Reporting Language (XBRL)provides a computer readable identifying tag for each individual item of data.The advantages of XBRL include all of the following except

A report on an entity's internal control over financial reporting

Which of the following procedures is ordinarily performed by an accountant in a compilation engagement of a nonpublic entity?

An auditor that is requested to provide a report on application of requirements of an appropriate financial reporting framework may not

Which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of a publicly held entity?

Which of the following is NOT a principle of Trust Service engagements?

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 13: Other Public Accounting Services

Which of the following steps is NOT required in performing a compliance attestation engagement?

When providing limited assurance that the reviewed financial statements of a nonpublic entity require no material modifications to be in accordance with generally accepted accounting principles,the accountant should

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

When interim financial information is presented as supplementary information accompanying audited financial statements,the auditor should make reference to the information

AR-C 90 requires adequate documentation for a review engagement.Which items are required to be documented?

Attestation engagements include

Review work on unaudited financial statements consists primarily of conducting inquiries,performing analytical procedures,and obtaining a management representation letter.List the typical procedures accountants would perform on a review engagement.

In a compilation engagement,

In an agreed-upon procedures engagement,an accountant must

Extensible Business Reporting Language (XBRL)provides a computer readable identifying tag for each individual item of data.The advantages of XBRL include all of the following except

A report on an entity's internal control over financial reporting

Which of the following procedures is ordinarily performed by an accountant in a compilation engagement of a nonpublic entity?

An auditor that is requested to provide a report on application of requirements of an appropriate financial reporting framework may not

Which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of a publicly held entity?

Which of the following is NOT a principle of Trust Service engagements?

Compiled financial statements of a nonpublic entity should be accompanied by a report stating that

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters