AUD HW CH.2

Created by benjiben520 

Upgrade to
remove ads

23 terms

1. An auditor may express an opinion on an entity's accounts receivable balance even if the auditor has disclaimed an opinion on the financial statements taken as a whole provided the:
a. Auditor also reports on the current asset portion of the entity's balance sheet
b. Report on accounts receivable is presented separately from the disclaimer of opinion on the financial statements.

b

2. Delta Life Insurance Co. prepares its financial statements on an accounting basis insurance companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Delta's auditor, discovers that the statements are not suitably titled, Wall should:
a. Disclose any reservations in an explanatory paragraph and qualify the opinion
b. Explain in the notes to the financial statements the terminology used..

a

3. Which of the following would be an appropriate title for a statement of revenue and expenses prepared using an OCBOA?
a. Statement of income-regulatory basis
b. Statement of activities
i. b is for not-for-profit org.

a

4. when unaudited financial statements of a nonissuer are presented in comparative form with audited financial statements in the subsequent year, the unaudited financial statements should be clearly marked to indicate their status and:
a. the report on the unaudited financial statements should be reissued
b. the report on the audited financial statements should include a separate paragraph describing the responsibility assumed for the unaudited financial statements
c. both
d. either

d

5. when unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be:
a. marked as "unaudited"
b. withheld until audited
c. referred to in the auditor's reports

a

6. before reissuing a compilation report on the financial statements of a nonissuer for the prior year, the predecessor accountant is required to:
a. review the successor accountant's working papers for prior yr
b. compare the prior year's FS with those of the current year.

b not sure

7. In which case would the accountant be least likely to perform a review of interim financial information under PCAOB standards?
a. Selected quarterly financial data is included in an annual report
b. The accountant is performing an initial audit of financial statements that include selected quarterly data
c. Quarterly financial data is included in the financial statements of a nonissuer

.C because nonissuer is regulated under SASs

8. The objective of a review of interim financial information of a public entity is to provide an accountant with a basis for reporting whether
a. Material modifications should be made to conform with GAAP
b. The financial statements are presented fairly in accordance with GAAP

b (not sure)

9. An accountant compiles unaudited financial statements that are not expected to be used by a third party. The accountant may decline to issue a compilation report provided..
a. Each page of the financial statements is clearly marked to restrict its use
b. A written engagement letter is used to document the understanding with the client
c. A written representation letter is obtained from the client's management

. A and B only

10. Does SSARs require that the compilation report be printed on the accountant's letterhead and that the report be manually signed by the accountant?
a. Printed on the accountant's letterhead
b. Manually signed by the accountant

i. Neither

11. An accountant is required to comply with SSAR when
a. Reproducing client-prepared financial statements without modification, as an accommodation to a client.
i

. False, because it is not accountant-prepared (SSAR)

12. Kell engaged March, CPA, to submit to Kell a written personal financial plan containing unaudited personal FS. March anticipates omitting certain disclosure required by GAAP because the engagement's sole purpose is to assist Kell in developing a personal financial plan. For March to be exempt from complying with the requirements of SSARS 1, Compilation and Review of FS, Kell is required to agree that the:
a. FS will not be disclosed to a non-CPA financial planner
b. FS will not be used to obtain credit.

...

13. When performing an engagement to review a nonissuer's FS, an accountant most likely would:
a. Ask about actions taken at board of directors' meetings
b. Restrict the use of the accountant's report

...

14. When compiling a nonissuer's FS, an accountant would be least likely to
a. Perform analytical procedures designed to identify relationships that appear to be unusal
b. Omit substantially all of the disclosures required by GAAP

a

15. An accountant performing a compilation or review of the FS of a nonissuer should:
a. Be able to justify departures from SSARs
b. Exercise professional judgement in applying SSARs, since they are considered recommendations as opposed to standards

a (B is not true because SSArs are NOT a recommendation as opposed to standards)

16. Which of the following statement is true regarding analytical procedures in a review engagement?
a. Analytical procedures are not required to be used as a substantive test
b. Analytical procedures involve the use of both financial and nonfinancial data

b

17. Which of the following procedures is ordinarily performed by an accountant during an engagement to compile the financial statements of a nonissuer?
a. Make inquiries of the employees and senior management regarding transactions with related parties
b. Scan the entity's records for the period just after the balance sheet date to identify subsequent events requiring disclosure
c. Consider whether the financial statements are free from obvious material

c

18. A CPA in public practice is required to comply with the provisions of the SSAE when
a. Testifying as an expert witness in accounting and auditing matters given stipulated facts
b. Compiling a client's financial projection that presents a hypothetic course of action

b

19. Which of the following is a conceptual similarity btw GAAS and SSAE?
a. Both sets of standards require the CPA to report on the adequacy of disclosure in the FS
b. The requirement that the CPA be independent in mental attitude is included in both sets of standards

i. B ( not a bc it could be no reference to FS)

20. Which of the following statements concerning prospective financial statements Is correct?
a. Only a financial forecast would normally be appropriate for limited use
b. Only a financial projection would normally be appropriate for general use
c. Any type of prospective financial statements would normally be appropriate for limited use

i. C (Financial Forecast good for both and projection only for limited use)

21. Which of the following prospective financial statements is(are) appropriate for general use?
a. Financial forecast
b. Financial projection

i. A (Financial Forecast good for both and projection only for limited use)

22. Which of the following procedures should an accountant perform during an engagement to compile prospective financial statement?
a. Make inquiries prior to the date of the report about possible future transactions that may impact the forecast once the report is issued
b. Make inquiries about the accounting principles used in the preparation of the prospective financial statements

i. B

23. Which of the following components is appropriate in a practitioner's report on the results of applying agreed upon procedures?
a. A list of procedures performed, as agreed to by the specified parties
b. A title that includes the phrase "independent audit"

i. A (b is not for the results)

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

NEW! Voice Recording

Click the mic to start.

Create Set