Question 1

Federal and provincial governments and their agencies and local governments use the
CICA Public Sector Standards to guide their audits.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following departures from GAAP financial statements would receive an unqualified audit report?

Accepted Answer

A)  Accounting for a material capital lease as an operating lease.
B)  Use of an appropriate disclosed basis of accounting in accordance with legislation.
C)  Failing to consolidate a controlled subsidiary.
D)  Inventory written up to most recent quoted prices. B

Question 3

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

Accepted Answer

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. B

Question 4

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.?

Accepted Answer

The answer of George Wilson CA is on the board...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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 7

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.

Accepted Answer

The answer of Donna Prima, PA, was engaged to review...

Question 8

Statements prepared on a basis other than Canadian generally accepted accounting principles can be compiled or reviewed, but not audited.

Accepted Answer

A) True 
 B)False

Question 9

Since the Management Discussion and Analysis report is not part of the financial statements, the auditor bears no responsibility for it.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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
C)  The results of Snow's tests will form the basis for Snow's opinion on the fairness of
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 12

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

Accepted Answer

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 13

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

Accepted Answer

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.

Question 14

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?

Accepted Answer

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 15

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

Accepted Answer

A)  Review agreements with financial institutions for restrictions on cash balances.
B)  Study and understand the client's business.
C)  Inquire of key personnel concerning related parties and subsequent events.
D)  Perform ratio analyses of the financial data of comparable prior periods.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

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 18

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.

Accepted Answer

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 19

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

Accepted Answer

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 20

Auditors of governmental units would be presumed to be lacking in independence if they were

Accepted Answer

A)  Free from sources of external impairment.
B)  Organizationally independent.
C)  Members of a political party which campaigned against the program under audit.
D)  Auditing in a level of government other than the one to which they are normally assigned.

Exam 16: Other Public Accounting Services and Reports

Federal and provincial governments and their agencies and local governments use the CICA Public Sector Standards to guide their audits.

Which of the following departures from GAAP financial statements would receive an unqualified audit report?

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

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

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

Statements prepared on a basis other than Canadian generally accepted accounting principles can be compiled or reviewed, but not audited.

Since the Management Discussion and Analysis report is not part of the financial statements, the auditor bears no responsibility for it.

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

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

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

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

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?

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

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

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

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.

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

Auditors of governmental units would be presumed to be lacking in independence if they were