Question 1

Pro forma financial information is often used to illustrate the effects of various types of transactions. Pro forma financial information would be least likely to be used with which of the following transactions?

Accepted Answer

A)  Setting up a bond sinking fund. 
B)  Disposing of a significant segment of a business. 
C)  Proposing the sale of securities and applying the proceeds to a project. 
D)  Business combinations.

Question 2

Which of the following guidelines is not a presentation that pro forma financial information should adhere to?

Accepted Answer

A)  It should describe the transaction or event that is reflected in the pro forma financial information. 
B)  It should describe significant assumptions used to develop the pro format adjustments. 
C)  It should make clear that the pro forma financial information is indicative of results that would have been achieved had the transaction or event actually taken place at an earlier time. 
D)  It should describe any significant uncertainties about those assumptions.

Question 3

The International Auditing and Assurance Standards Board's term assurance engagement means the same as The American Institute of Certified Public Accountants' term attestation engagement.

Accepted Answer

A) True 
 B)False

Question 4

A state insurance commission requires an insurance company to prepare its financial statements in accordance with Statutory Accounting Principles. This situation may prevent an auditor from issuing a special report on the financial statements as the Statutory Accounting Principles are not a recognized alternative comprehensive basis.

Accepted Answer

A) True 
 B)False

Question 5

One procedure that is common to an audit engagement, as well as to both the compilation and review engagement, is obtaining an engagement letter.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following items is not contained in the standard report on a review of separately issued interim financial statements of public companies?

Accepted Answer

A)  A description of the information reviewed. 
B)  A statement indicating that the standards of the PCAOB were followed in performing the review. 
C)  A description of the nature of the review. 
D)  Positive assurance that the auditor is not aware of any material departures from GAAP.

Question 7

Which of the following statements is false regarding responsibilities associated with agreed-upon procedures engagements?

Accepted Answer

A)  The responsibility of the practitioner is to conduct the procedures and report the findings in accordance with applicable professional standards. 
B)  The practitioner must have adequate knowledge of the subject matter. 
C)  The practitioner is required to determine if there exists a difference between the agreed-upon procedures requested by the specified parties and the procedures that the practitioner would have decided to conduct if the practitioner would have been engaged to perform another form of engagement. 
D)  The practitioner should not agree to perform agreed-upon procedures that are overly subjective.

Question 8

Which of the following activity is not part of the compilation of prospective financial statements?

Accepted Answer

A)  Assembling prospective financial statements based on the responsible party's assumptions. 
B)  Performing compilation procedures, including reading the prospective financial statements, along with their assumptions and accounting policies, and considering whether they appear to be presented in conformity with AICPA presentation guidelines and that they are not obviously inappropriate. 
C)  Issuing a compilation report. 
D)  Providing assurance on the prospective financial statements.

Question 9

Which of the following situations is least likely to initiate a forensic accounting engagement?

Accepted Answer

A)  Where management suspects a fraud is occurring within the organization. 
B)  Where strong internal controls exist. 
C)  Where an auditor recommends a separate forensic engagement due to hints of fraud uncovered during an audit. 
D)  Where auditors deem there are situations of heightened fraud risk.

Question 10

Which of the following services provides limited assurance?

Accepted Answer

A)  Review. 
B)  Audit. 
C)  Examination. 
D)  Compilation.

Question 11

The SEC requires publicly owned corporations to have their quarterly financial information reviewed by their independent auditors before it is issued, but does not require that the auditor's review report be included with the quarterly information, although many companies do include the auditor's report.

Accepted Answer

A) True 
 B)False

Question 12

It is common for an auditor to issue a compilation report on financial statements that omit all of the disclosures required by GAAP.

Accepted Answer

A) True 
 B)False

Question 13

Pro Forma Financial Information.
What is the difference between historical financial information and pro forma financial information? Discuss the guidelines that should be adhered to when presenting pro forma financial information.

Accepted Answer

The answer of Pro Forma Financial Information.
What is the difference...

Question 14

Which of the following procedures is not a review procedure for interim financial information?

Accepted Answer

A)  Making inquiries. 
B)  Performing analytical procedures. 
C)  Reading the minutes of the board of directors' meetings 
D)  Obtaining oral assurance from management that there are no subsequent events.

Question 15

Review reports issued by auditors give positive assurance as to the fair presentation of financial statements.

Accepted Answer

A) True 
 B)False

Question 16

What does the review service provided by the CPA firm require?

Accepted Answer

A)  It requires the CPA to make inquiries concerning matters affecting the financial statements. 
B)  It requires the CPA to confirm accounts receivable. 
C)  It requires the CPA to test internal controls. 
D)  It requires the CPA to provide reasonable assurance.

Question 17

The subject matter of an attestation engagement has to be as of a point in time.

Accepted Answer

A) True 
 B)False

Question 18

A compilation report provides the user with which one of the following types of assurance?

Accepted Answer

A)  No assurance. 
B)  Absolute assurance. 
C)  Limited assurance. 
D)  Negative assurance.

Question 19

The subject matter of a non-audit attestation engagement can be quite varied.

Accepted Answer

A) True 
 B)False

Question 20

When a public accounting firm issues a report on financial statements that are issued on an other comprehensive basis of accounting, this special report includes an opinion paragraph identical to an adverse opinion.

Accepted Answer

A) True 
 B)False

Exam 17: Other Services Provided by Audit Firms

Pro forma financial information is often used to illustrate the effects of various types of transactions. Pro forma financial information would be least likely to be used with which of the following transactions?

Which of the following guidelines is not a presentation that pro forma financial information should adhere to?

The International Auditing and Assurance Standards Board's term assurance engagement means the same as The American Institute of Certified Public Accountants' term attestation engagement.

One procedure that is common to an audit engagement, as well as to both the compilation and review engagement, is obtaining an engagement letter.

Which of the following items is not contained in the standard report on a review of separately issued interim financial statements of public companies?

Which of the following statements is false regarding responsibilities associated with agreed-upon procedures engagements?

Which of the following activity is not part of the compilation of prospective financial statements?

Which of the following situations is least likely to initiate a forensic accounting engagement?

Which of the following services provides limited assurance?

It is common for an auditor to issue a compilation report on financial statements that omit all of the disclosures required by GAAP.

Pro Forma Financial Information. What is the difference between historical financial information and pro forma financial information? Discuss the guidelines that should be adhered to when presenting pro forma financial information.

Which of the following procedures is not a review procedure for interim financial information?

Review reports issued by auditors give positive assurance as to the fair presentation of financial statements.

What does the review service provided by the CPA firm require?

The subject matter of an attestation engagement has to be as of a point in time.

A compilation report provides the user with which one of the following types of assurance?

The subject matter of a non-audit attestation engagement can be quite varied.

When a public accounting firm issues a report on financial statements that are issued on an other comprehensive basis of accounting, this special report includes an opinion paragraph identical to an adverse opinion.