Question 1

When a U.S.-based organization prepares financial statements which are for use in another country, a U.S. report, modified to reflect the accounting principles of the other country, may be issued.

Accepted Answer

A) True 
 B)False

Question 2

Whenever a report filed on a printed form designed by authorities, call upon the independent auditors to make an assertion that the auditors believe is not justified, the auditors should:

Accepted Answer

A)  Submit a short-form report with explanations. 
B)  Reword the form or attach a separate report. 
C)  Submit the form with questionable items clearly omitted. 
D)  Withdraw from the engagement.

Question 3

Which of the following types of services is most likely to result in a report that is restricted to specified parties?

Accepted Answer

A)  Compilations. 
B)  Reviews. 
C)  Agreed-upon procedures. 
D)  Audits.

Question 4

In which of the following types of reports do the auditors express negative assurance?

Accepted Answer

A)  Letters for underwriters. 
B)  Reports on audits of financial statements on a basis other than generally accepted accounting principles. 
C)  Reports on audits of specified accounts. 
D)  Reports on summary financial statements.

Question 5

Which of the following would not be included in a CPA's report based upon a review of the financial statements of a nonpublic entity?

Accepted Answer

A)  A statement that the review was in accordance with generally accepted auditing standards. 
B)  A statement that all information included in the financial statements are the representations of management. 
C)  A statement describing the nature of the procedures performed. 
D)  A statement describing the auditor's conclusions based upon the results of the review.

Question 6

If compiled financial statements presented in conformity with the cash receipts and disbursements basis of accounting do not disclose the basis of accounting used, the accountant should:

Accepted Answer

A)  Disclose the basis in the notes to the financial statements. 
B)  Clearly label each page "Unaudited." 
C)  Disclose the basis of accounting in the accountant's report. 
D)  Recompile the financial statements using generally accepted accounting principles.

Question 7

Which of the following is not an example of financial statements that use a special purpose financial reporting framework?

Accepted Answer

A)  Of a partnership which follows accounting practices used to file its tax return. 
B)  Prepared for limited purposes such as relating to contract a company has entered into. 
C)  Of an organization that has limited the scope of the auditor's examination. 
D)  Of an organization that follows procedures of a regulatory agency that oversees the company and its operations.

Question 8

Which of the following procedures is usually the first step in reviewing the financial statements of a nonpublic entity?

Accepted Answer

A)  Make preliminary judgments about risk and materiality to determine the scope and nature of the procedures to be performed. 
B)  Obtain a general understanding of the entity's organization, its operating characteristics, and its products or services. 
C)  Assess the risk of material misstatement arising from fraudulent financial reporting and the misappropriation of assets. 
D)  Perform a preliminary assessment of the operating efficiency of the entity's internal control activities.

Question 9

During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the financial statement presentations, the CPA should:

Accepted Answer

A)  Disclose the departure in a separate paragraph of the report. 
B)  Issue an adverse opinion. 
C)  Attach a note explaining the effects of the departure. 
D)  Issue a compilation report.

Question 10

When an auditor reports on financial statements prepared on an entity's income tax basis, the auditor's report should:

Accepted Answer

A)  Disclose that the income tax basis is a basis of accounting other than generally accepted accounting principles. 
B)  Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards. 
C)  Not express an opinion on whether the statements are presented in conformity with the basis of accounting used. 
D)  Include an explanation of how the results of operations differ from the cash receipts and disbursements basis of accounting.

Question 11

A practitioner's report on agreed-upon procedures that is in the form of procedures and findings should contain:

Accepted Answer

A)  Negative assurance that the procedures did not necessarily disclose all reportable conditions. 
B)  An acknowledgment of the practitioner's responsibility for the sufficiency of the procedures. 
C)  A statement of restrictions on the use of the report. 
D)  A disclaimer of opinion on the entity's financial statements.

Question 12

The auditors should take exception to assets presented at their estimated current values in personal financial statements.

Accepted Answer

A) True 
 B)False

Question 13

An auditor's report on financial statements prepared in accordance with a special purpose financial reporting framework of accounting other than generally accepted accounting principles should include all of the following except:

Accepted Answer

A)  Reference to the note to the financial statements that describes the basis of preparation of the financial statements. 
B)  Disclosure that the audit was performed in accordance with generally accepted auditing standards. 
C)  An opinion as to whether the basis of accounting used is appropriate under the circumstances. 
D)  An opinion as to whether the financial statements are presented fairly in conformity with the basis of accounting described.

Question 14

Which of the following is correct when a company is issuing summary financial statements developed from audited financial statements?

Accepted Answer

A)  Such summary statements should always have a CPA's report associated with them when audited financial statements exist. 
B)  The CPA may issue a report on whether the summary information is fairly stated in all material respects in relation to the basic financial statements. 
C)  The CPA should perform a compilation and review of the summary financial statements. 
D)  The CPA who has audited the financial statements who is asked to report on the summary statements should decline the engagement because the summary statements do not include all disclosures necessary under generally accepted accounting principles.

Question 15

A "comfort letter" to an investment banking firm will normally not:

Accepted Answer

A)  Express negative assurance. 
B)  Be included with the registration statement for the securities. 
C)  Include the CPA's opinion as to whether the audited financial statements comply in all material respects with applicable requirements of the related securities acts. 
D)  Include a statement as to the auditors' independence.

Question 16

Which of the following circumstances requires modification of the accountant's report on a review of interim financial information of publicly held entity? $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Inconsistent } \
\text { Accounting } \
\text { Principle } \
\text { Application }
\end{array} & \begin{array} { c } 
\text { Inadequate } \
\text { Disclosure }
\end{array} \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 17

During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the financial statement presentations, the CPA should:

Accepted Answer

A)  Disclose the departure in a separate paragraph of the report. 
B)  Issue an adverse opinion. 
C)  Attach a note explaining the effects of the departure. 
D)  Issue a compilation report.

Question 18

The balance sheet for an individual may be titled a Statement of Financial Condition.

Accepted Answer

A) True 
 B)False

Question 19

Comfort letters are ordinarily signed by the:

Accepted Answer

A)  Client. 
B)  Client's lawyer. 
C)  Independent auditor. 
D)  Internal auditor.

Question 20

An auditor is reporting on cash basis financial statements. These statements are best referred to in his opinion by which of the following descriptions?

Accepted Answer

A)  Financial position and results of operation arising from cash transactions. 
B)  Assets and liabilities arising from cash transactions, and revenue collected and expenses paid. 
C)  Balance sheet and income statement resulting from cash transactions. 
D)  Cash balance sheet and the source and application of funds.

Exam 19: Additional Assurance Services: Historical Financial Information

When a U.S.-based organization prepares financial statements which are for use in another country, a U.S. report, modified to reflect the accounting principles of the other country, may be issued.

Whenever a report filed on a printed form designed by authorities, call upon the independent auditors to make an assertion that the auditors believe is not justified, the auditors should:

Which of the following types of services is most likely to result in a report that is restricted to specified parties?

In which of the following types of reports do the auditors express negative assurance?

Which of the following would not be included in a CPA's report based upon a review of the financial statements of a nonpublic entity?

If compiled financial statements presented in conformity with the cash receipts and disbursements basis of accounting do not disclose the basis of accounting used, the accountant should:

Which of the following is not an example of financial statements that use a special purpose financial reporting framework?

Which of the following procedures is usually the first step in reviewing the financial statements of a nonpublic entity?

During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the financial statement presentations, the CPA should:

When an auditor reports on financial statements prepared on an entity's income tax basis, the auditor's report should:

A practitioner's report on agreed-upon procedures that is in the form of procedures and findings should contain:

The auditors should take exception to assets presented at their estimated current values in personal financial statements.

An auditor's report on financial statements prepared in accordance with a special purpose financial reporting framework of accounting other than generally accepted accounting principles should include all of the following except:

Which of the following is correct when a company is issuing summary financial statements developed from audited financial statements?

A "comfort letter" to an investment banking firm will normally not:

During a review of the financial statements of a nonpublic entity, the CPA finds that the financial statements contain a material departure from generally accepted accounting principles. If management refuses to correct the financial statement presentations, the CPA should:

The balance sheet for an individual may be titled a Statement of Financial Condition.

Comfort letters are ordinarily signed by the:

An auditor is reporting on cash basis financial statements. These statements are best referred to in his opinion by which of the following descriptions?