Question 1

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

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.

Question 2

When an accountant compiles a nonpublic entity's financial statements that omit substantially all disclosures required by generally accepted accounting principles, the accountant should indicate in the compilation report that the financial statements are:

Accepted Answer

A) restricted for internal use only by the entity's management. 
B) not to be given to financial institutions for the purpose of obtaining credit. 
C) compiled in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. 
D) not designed for those who are uninformed about the omitted disclosures.

Question 3

Which set of standards was created by the AICPA to cover services relating to unaudited financial statements?

Accepted Answer

A) Standards on Selective Audits and Review Services (SSARS). 
B) Statement on Auditing Standards (SAS). 
C) Statements on Compilation and Review Standards (SCRS). 
D) Statements on Standards for Accounting and Review Services (SSARS).

Question 4

According to the Statements on Standards for Accounting and Review Services, what response is appropriate when an accountant, who is not independent, performs a compilation of financial statements?

Accepted Answer

A) The accountant should state in the report that he/she is not independent. 
B) The accountant should withdraw from the engagement. 
C) The accountant should express a disclaimer opinion on the compilation. 
D) The accountant should express an adverse opinion on the compilation.

Question 5

An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:

Accepted Answer

A) distribution of the report is restricted to the specified users involved. 
B) the prospective financial statements also are examined. 
C) responsibility for the adequacy of the procedures performed is taken by the accountant. 
D) negative assurance is expressed on the prospective financial statements taken as a whole.

Question 6

This concept, while used by both internal and external auditors, is typically assessed quite differently for each.

Accepted Answer

A) Competence. 
B) Objectivity. 
C) Integrity. 
D) Materiality.

Question 7

The IIA's professional guidance is organized into an International Professional Practices Framework. This framework consists of two broad categories of guidance. List these categories of guidance and what they include.

Accepted Answer

The answer of The IIA's professional guidance is organized into...

Question 8

Which of the following procedures is more likely to be performed in a review engagement of a nonpublic entity than in a compilation engagement?

Accepted Answer

A) Gaining an understanding of the entity's business transactions. 
B) Gaining an understanding of the accounting principles and practices in the industry. 
C) Obtaining a representation letter from the chief executive officer. 
D) Assisting the entity in adjusting the accounting records.

Question 9

The report of a CPA on a review of the financial statements of a nonpublic entity should not include a statement that:

Accepted Answer

A) management is responsible for the preparation and fair presentation of the financials in accordance with GAAP. 
B) the review was performed in accordance with generally accepted auditing standards. 
C) the CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. 
D) a review consists principally of inquiries of company personnel and analytical procedures applied to financial data.

Question 10

In your own words, describe how the Institute of Internal Auditors (IIA)defines internal auditing.

Accepted Answer

The answer of In your own words, describe how the...

Question 11

When an accountant is not independent of an entity and is requested to perform a compilation of the entity's financial statements, the accountant:

Accepted Answer

A) is precluded from accepting the engagement. 
B) may accept the engagement and need not disclose the lack of independence. 
C) may accept the engagement, should disclose the lack of independence, and may indicate the reason for the lack of independence. 
D) may accept the engagement and must disclose both the lack of independence and the reason for the lack of independence.

Question 12

During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:

Accepted Answer

A) express negative assurance on the accounting principles that do not conform with GAAP. 
B) disclose the departure from GAAP in a separate paragraph of the report. 
C) issue an adverse or an "except for" qualified opinion, depending on materiality. 
D) express positive assurance on the accounting principles that conform with GAAP.

Question 13

Which of the following are prospective financial statements upon which an accountant may appropriately report for general use?

Accepted Answer

A) Pro forma financial statements. 
B) Financial projections. 
C) Partial presentations. 
D) Financial forecasts.

Question 14

Which of the following statements is true regarding the performance of an assurance service on information systems reliability by a CPA?

Accepted Answer

A) The CPA is not permitted to provide any other services for the entity if he or she is to perform the service. 
B) The service will require the CPA to apply all of the attestation and auditing standards. 
C) The service provides information regarding whether the information system provides reliable information for internal operating decisions. 
D) Performing the service will not require the collection of evidence.

Question 15

During a review of the financial statements of a nonpublic entity, an accountant becomes aware of inadequate disclosure that is material to the financial statements. If management refuses to correct the financial statement presentations, the accountant should:

Accepted Answer

A) issue an adverse opinion. 
B) issue an "except for" qualified opinion. 
C) disclose this departure from generally accepted accounting principles in a separate paragraph of the report. 
D) express only limited assurance on the financial statement presentations.

Question 16

Internal auditors fall into two primary categories-assurance services and consulting services. Briefly explain these two categories in relation to internal auditors.

Accepted Answer

The answer of Internal auditors fall into two primary categories-assurance...

Question 17

As with most professionals, internal auditors must follow guidelines promoting ethical conduct. The IIA Code of Ethics is important for internal auditors because the reliability of their work depends on a reputation for a high level of personal integrity. The Code of Ethics consists of four main principles of ethical conduct and some associated rules that underpin the expected conduct of IIA members. List the four main principles of the Code of Ethics and explain each.

Accepted Answer

The answer of As with most professionals, internal auditors must...

Question 18

In a review engagement, the accountant must make all of the following inquiries except those to:

Accepted Answer

A) Identify subsequent events having a material effect on the statements. 
B) Understand internal controls. 
C) Identify actions taken at stockholders' meetings. 
D) Ascertain whether statements are in accordance with GAAP.

Question 19

Which of the following would be considered a part of a consulting services (non-assurance)engagement? I. Expressing a conclusion about the reliability of an entity's financial statements.
II) Reviewing and commenting on a client-prepared business plan.

Accepted Answer

A) I only. 
B) II only. 
C) Both I and II. 
D) Neither I nor II.

Question 20

Match the Trust Services Principle with its proper definition.
-Processing integrity

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.

Exam 21: Assurance, Attestation, and Internal Auditing Services

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