cpa audit review ch 19 review 3

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Joens1313
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cpa audit review ch 19 review 3
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2014-11-10 01:52:13
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cpa audit review ch 19 review 3
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  1. Compiled financial statements should be accompanied by an accountant’s report stating that

    The accountant is not aware of any material modifications that should be made to the financial statements to conform with U.S. GAAP.  

    A compilation is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion.  

    A compilation includes assessing the accounting principles used and significant management estimates, as well as evaluating the overall financial statement presentation.

    The accountant compiled the financial statements in accordance with Statements on Standards for Accounting and Review Services.
    The accountant compiled the financial statements in accordance with Statements on Standards for Accounting and Review Services.  

    The standard compilation report is a disclaimer stating that the accountant has compiled the financial statements in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA.
  2. Accepting an engagement to compile an entity’s financial projection most likely would be inappropriate if the projection is to be included in a(n)  

    Mortgage application for the purpose of expanding the entity’s facilities.  

    Report to the audit committee that is not sent to the stockholders.  

    Offering statement of the entity’s initial public offering of common stock.

    Comprehensive document to be used in negotiating a new labor contract.
    Offering statement of the entity’s initial public offering of common stock.   

    • Compiling a financial projection is appropriate only for limited use because the presentation of a projection is based on one or more hypothetical assumptions. Limited use means use by the responsible party and those with whom that party is negotiating directly.
    • An offering statement of the entity’s initial public offering is not considered negotiating directly.
  3. The standard report issued by an accountant after reviewing the financial statements of a nonissuer should state that  

    The accountant did not obtain an understanding of the entity’s internal control or assess risks.  

    A review consists of inquiries of company personnel and analytical procedures applied to financial data.  

    The accountant does not express an opinion or any other form of assurance on the financial statements.

    A review is limited to presenting in the form of financial statements information that is the representation of management.
    A review consists of inquiries of company personnel and analytical procedures applied to financial data.  This answer is correct.

    review states, “A review includes primarily applying analytical procedures to management’s (owners’) financial data and making inquiries of company management (owners). A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I (we) do not express such an opinion.”
  4. Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?

    Reviewing interim financial information required to be filed by public companies with the SEC.  

    Assisting in adjusting the books of account for a partnership.  

    Processing financial data for clients of other accounting firms.

    Compiling an individual’s personal financial statement to be used to obtain a mortgage.
    Compiling an individual’s personal financial statement to be used to obtain a mortgage.  

    .AR 80 describes the accountant’s procedures and reporting responsibilities for compilations. An accountant may submit a written personal financial plan containing unaudited personal financial statements to a client without complying with the requirements of AR 80 if the accountant (1) has a documented understanding with the client about its use, (2) has no reason to believe that the financial statements will be used to obtain credit or for any purpose other than the financial plan, and (3) issues a report describing the engagement (AR 600).
  5. A CPA is engaged to audit the financial statements of a nonissuer. After the audit begins, the client’s management questions the extent of procedures and objects to the confirmation of certain contracts. The client asks the accountant to change the scope of the engagement from an audit to a review. Under these circumstances, the accountant should do each of the following, except

    Consider the reason given for the client’s request and assess whether the request is reasonable.  

    Issue an accountant’s review report with a separate paragraph discussing the change in engagement scope.  

    Evaluate the possibility that financial statement information affected by the limitation on work to be performed may be incorrect or incomplete.

    Consider the additional audit effort and cost required to complete the audit.
    Issue an accountant’s review report with a separate paragraph discussing the change in engagement scope.  

    .If the client’s request is reasonable and the accountant issues a review report, it should not refer to (1) the original engagement, (2) any audit procedures performed, or (3) scope limitations that resulted in the change.
  6. In a compliance attestation engagement,  

    The practitioner should accept responsibility for the entity’s compliance with the specified requirements.  

    The practitioner may accept an engagement to examine the effectiveness of internal control over compliance only if an assertion about internal control is provided to the practitioner by the client.  

    The field work and reporting but not the general attestation standards apply.

    The result is a legal determination of an entity’s compliance with specified requirements.
    The practitioner may accept an engagement to examine the effectiveness of internal control over compliance only if an assertion about internal control is provided to the practitioner by the client.  

    The written assertion may be provided to the practitioner in a representation letter or may be presented in a separate report that will accompany the practitioner’s report.

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