cpa audit review ch 19 review 2

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Joens1313
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cpa audit review ch 19 review 2
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2014-11-08 12:38:01
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cpa audit review ch 19 review 2
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  1. A report on compiled financial statements should state that  

    The accountant has compiled the financial statements in accordance with standards established by the Auditing Standards Board.  

    The objective of a compilation is to assist management in presenting financial information in the form of financial statements.

    The accountant does not express an opinion but expresses only limited assurance on the compiled financial statements.

    A compilation is substantially less in scope than a review or an audit in accordance with generally accepted auditing standards.
    The objective of a compilation is to assist management in presenting financial information in the form of financial statements.  

    According to AR 80, the report on a compilation should state, “The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.”
  2. Which of the following procedures most likely would not be included in a review engagement of a nonissuer?

    Inquiring about subsequent events.  

    Obtaining an engagement letter.  

    Obtaining a management representation letter.

    Assessing the risks of material misstatement.
    Assessing the risks of material misstatement.  

    .A review does not require (1) obtaining an understanding of the entity’s internal control; (2) assessing fraud risk; (3) testing accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, and confirmation; (4) examining source documents (for example, canceled checks or bank images); or (5) performing other procedures ordinarily performed in an audit. For example, an auditor (but not an accountant performing a review) should perform risk assessment procedures to identify and assess the risks of material misstatement.
  3. The client has requested the accountant to change engagements from an audit to a review or to a compilation because the client will not allow the accountant to communicate with client’s legal counsel as required by GAAS. Under these circumstances, the accountant

    Should issue the standard review report with no mention of a scope limitation.  

    Would ordinarily refuse to issue either a review or a compilation report.  

    Should ordinarily mention the scope limitation in the review report.

    Should refuse to issue a review report but would not ordinarily refuse to issue a compilation report.
    Would ordinarily refuse to issue either a review or a compilation report.  

    The accountant should consider that the information affected by the restriction may be incorrect, incomplete, or otherwise unsatisfactory. An accountant who has been engaged to audit the financial statements ordinarily should refuse to issue either a review or a compilation report when not allowed to consult with the client’s legal counsel (AR 80 and AR 90).
  4. When compiling a nonissuer’s financial statements, an accountant is least likely to  

    Issue a compilation report on one or more, but not all, of the basic financial statements.  

    Omit substantially all of the disclosures required by generally accepted accounting principles.

    Read the compiled financial statements and consider whether they appear to include adequate disclosure.

    Perform analytical procedures designed to identify relationships that appear to be unusual.
    Perform analytical procedures designed to identify relationships that appear to be unusual.  

    In a compilation engagement, the accountant is not required to make inquiries or perform analytical or other procedures to verify, corroborate, or review information supplied by the entity. However, analytical procedures are necessary in review and audit engagements.
  5. When an accountant compiles a nonissuer’s financial statements that omit substantially all disclosures required by U.S. GAAP, the accountant should indicate in the compilation report that the financial statements are  

    Compiled in conformity with a comprehensive basis of accounting other than U.S. GAAP.  

    Not designed for those who are uninformed about such matters.

    Restricted for internal use only by the entity’s management.

    Not to be given to financial institutions for the purpose of obtaining credit.
    Not designed for those who are uninformed about such matters.  

    The accountant may not accept the engagement unless (1) (s)he modifies the standard compilation report to indicate that substantially all disclosures required by the applicable reporting framework have been omitted and (2) the omission is not, to the accountant’s knowledge, made to mislead users of the statements. The language given is from an example compilation report when substantially all disclosures are omitted.
  6. A practitioner’s standard report on a compilation of a projection should not include a  

    Statement that the practitioner expresses only limited assurance that the results may be achieved.  

    Statement that a compilation of a projection is limited in scope.  

    Disclaimer of responsibility to update the report for events occurring after the report’s date.

    Separate paragraph that describes the limitations on the presentation’s usefulness.
    Statement that the practitioner expresses only limited assurance that the results may be achieved.  

    A standard report states that the compilation is limited in scope and does not enable the practitioner to express an opinion or any other form of assurance on the prospective statements. Limited assurance (e.g., based on a review) should not be provided by the practitioner based on any prospective financial statement service.

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