Question 1

An assertion that is particularly difficult to audit with respect to personal financial statements is:

Accepted Answer

A)  Existence. 
B)  Rights. 
C)  Completeness. 
D)  Legality.

Question 2

Which of the following statements is correct with respect to an audit report issued for financial statements to be used primarily outside of the United States?

Accepted Answer

A)  The report should follow the U.S. format, modified as appropriate. 
B)  The report should follow the format of the other country. 
C)  The report may follow either the U.S. format, modified as appropriate, or may follow the format of the other country. 
D)  The report should follow the attestation examination report format.

Question 3

The financial statements of nonpublic companies may be prepared, compiled, or reviewed by the CPAs.
a. Describe preparation of financial statements.
b. Describe a compilation of financial statements.
c. Describe a review of financial statements.
d. Describe three procedures that are performed in the review of a nonpublic company's financial statements.

Accepted Answer

The answer of The financial statements of nonpublic companies may...

Question 4

Inquiry and analytical procedures ordinarily performed during a review of a nonpublic entity's financial statements include:

Accepted Answer

A)  Analytical procedures designed to identify reportable conditions related to internal control. 
B)  Inquiries concerning actions taken at meetings of the stockholders and the board of directors. 
C)  Analytical procedures designed to test the accounting records by obtaining corroborating evidential matter. 
D)  Inquiries of knowledgeable outside parties such as the client's attorneys and bankers.

Question 5

Which of the following is correct concerning a CPA firm's preparation of financial statements engagement?

Accepted Answer

A)  The statements must only be used by management and not third parties. 
B)  A written engagement letter or oral agreement is required. 
C)  No accountant's report ordinarily accompanies the financial statements. 
D)  At a minimum, the accountant preparing the financial statements must comply with the compilation standards.

Question 6

When performing a review of a nonpublic company, the auditors must obtain in a representation letter acknowledgement of management for its responsibility for each of the following except:

Accepted Answer

A)  Responsibility for identifying illegal acts committed by employees. 
B)  Responsibility for the financial statements conforming with generally accepted accounting principles. 
C)  Responsibility to prevent and detect fraud. 
D)  Knowledge of any actual or suspected fraud that is material.

Question 7

For a CPA, a client imposed scope limitation during a review of financial statements is most likely to result in:

Accepted Answer

A)  Resignation from the engagement. 
B)  Issuance of a disclaimer of opinion. 
C)  Issuance of an adverse opinion. 
D)  Only an explanatory paragraph added to report, with no change in the assurance provided.

Question 8

Which of the following types of association with financial statements is least likely to result in a report by the CPAs?

Accepted Answer

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

Question 9

Which of the following types of association requires that accountants provide a report with no explicit assurance?

Accepted Answer

A)  Compilations. 
B)  Reviews. 
C)  Financial statement preparation. 
D)  Audits.

Question 10

A compilation of financial statement provides limited assurance regarding the financial statements.

Accepted Answer

A) True 
 B)False

Question 11

An auditor's report would be designated as a report on financial statements following a special purpose financial reporting framework for financial statements when they are:

Accepted Answer

A)  For an interim period and are subjected to a review. 
B)  Unaudited and are prepared from a client's accounting records. 
C)  Prepared in accordance with a regulatory basis of accounting other than generally accepted accounting principles. 
D)  Purported to be in accordance with generally accepted accounting principles but do not include a presentation of the statement of cash flows.

Question 12

Which of the following requires modification of a review report?

Accepted Answer

A)  A change in accounting principles. 
B)  A substantial doubt about a company's ability to continue as a going concern. 
C)  A departure from generally accepted accounting principles. 
D)  A change in an accounting estimate.

Question 13

An accountant has been engaged to prepare a nonpublic client's financial statements. While preparing the financial statements, the accountant finds a number of material misstatements related to journal entries. The client refuses to correct the misstatements. Which of the following is correct?

Accepted Answer

A)  A report with an adverse opinion should be issued. 
B)  All regulatory agencies should immediately be notified. 
C)  The accountant should prepare the financial statements and present them using the misstated journal entries. 
D)  The accountant should withdraw from the engagement.

Question 14

Which of the following does not result in a modification of a compilation report?

Accepted Answer

A)  A lack of independence on the part of the auditors. 
B)  A departure from generally accepted accounting principles. 
C)  A lack of adequate disclosure in the financial statements. 
D)  A lack of consistent application of generally accepted accounting principles.

Question 15

Which of the following is accurate relating to audit reports on tax basis financial statements?

Accepted Answer

A)  No emphasis-of-matter paragraph is included in the audit report. 
B)  Use of the report need not be restricted. 
C)  The purpose of the financial statements should be described in the audit report. 
D)  Only reports with modified opinions are appropriate.

Question 16

The underwriter of a securities offering may request that an auditor perform specified procedures and supply certain assurances concerning unaudited information contained in a registration statement. The auditor's response to such a request is commonly called a:

Accepted Answer

A)  Report under federal security statutes. 
B)  Comfort letter. 
C)  Review of interim financial information. 
D)  Compilation report for underwriters.

Question 17

Is independence required when an accountant is engaged to either prepare or compile a client's financial statements? $$\begin{array} { | l | c | c | } 
\hline & \text { Prepare } & \text { Compile } \
\hline \text { A. } & \text { Yes } & \text { Yes } \
\hline \text { B. } & \text { Yes } & \text { No } \
\hline \text { C. } & \text { No } & \text { Yes } \
\hline \text { D. } & \text { No } & \text { No } \
\hline
\end{array}$$

Accepted Answer

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

Question 18

When the auditors have performed an audit and are asked to report on the client's compliance with aspects of contractual agreements, which of the following is correct?

Accepted Answer

A)  They may do so and provide reasonable assurance as to compliance. 
B)  They may do so and provide negative assurance as to compliance. 
C)  They only may do so when details of the contracts have been audited. 
D)  They may not do so.

Question 19

Letters to underwriters should not contain negative assurances.

Accepted Answer