(c) The requirement is to identify the information that is least likely to be included in an agreed-upon procedures attestation report. Answer (c) is correct because an agreed-upon procedures report provides a summary of procedures performed and findings, not limited assurance. Answer (a) is incorrect because the specified party does not take responsibility for the sufficiency of procedures. Answer (b) is incorrect because the report’s use is restricted. Answer (d) is incorrect because a summary of procedures performed is included.
(a) The requirement is to identify the type of report that is most likely to include a summary of findings rather than assurance. Answer (a) is correct because agreed-upon procedures reports include a summary of findings. Answer (b) is incorrect because a compilation report does not provide a summary of findings. Answer (c) is incorrect because an examination report includes positive assurance and not a summary of findings. Answer (d) is incorrect because a review report includes limited (negative) assurance, not a summary of findings.
(c) The requirement is to identify the statement that is not correct concerning “specified parties†of an agreed-upon procedures report under either the auditing or attestation standards. Answer (c) is correct because while a practitioner should establish a clear understanding regarding the terms of the engagement, preferably in an engagement letter, no such engagement letter is required. Answers (a) and (b) are incorrect because the specified parties must agree on the procedures to be performed and take responsibility for their adequacy. Answer (d) is incorrect because an additional party may be added as a specified party after completion of the engagement.
(a) The requirement is to determine the information to be included in a separate paragraph included in an accountant’s report on the examination of projected financial statements. Answer (a) is correct because AT 301 requires that such a report include a separate paragraph that describes the limitations on the usefulness of the presentation. See AT 301 for information that should be included in an examination report of prospective financial statements. Answer (b) is incorrect because the report includes no such statement attempting to distinguish between an examination and an audit. Answer (c) is incorrect because the report includes no such disclosure and because the accountant is not responsible for events and circumstances up to one year after the report’s date. Answer (d) is incorrect because the report suggests that the assumptions do provide a reasonable basis.
(a) The requirement is to identify the circumstance in which an accountant may accept an engagement to apply agreedupon procedures to prospective financial statements. Answer (a) is correct because AT 301 states that an accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that (1) the specified parties involved have participated in establishing the nature and scope of the engagement and take responsibility for the adequacy of the procedures to be performed, (2) use of the report is to be restricted to specified parties involved, and (3) the prospective financial statements include a summary of significant assumptions. Answer (b) is incorrect because the prospective financial statements need not be examined. Answer (c) is incorrect because responsibility for the adequacy of the procedures is taken by the specified parties. Answer (d) is incorrect because a summary of findings may be provided based on the agreed-upon procedures.
(c) The requirement is to identify the statement which should be included in an accountant’s compilation report on financial forecasts. Answer (c) is correct because when the accountant is preparing a standard compilation report on prospective financial statements, AT 301 requires that the accountant include a statement indicating that the prospective results may not be achieved.
(c) The requirement is to identify the appropriate distribution of an entity’s financial projection. A financial projection is sometimes prepared to present one or more hypothetical courses of action for evaluation in response to a question such as “What would happen if...?†It is based on a responsible party’s assumptions reflecting conditions it expects would exist and the course of action it expects would be taken, given one or more hypothetical assumptions. Projections are “limited use†financial statements meant for the responsible party (generally management) and third parties with whom the responsible party is negotiating directly. Answer (c) is correct because a bank might be expected to receive such a projection. Answers (a), (b), and (d) are all incorrect because projections are meant for “limited use†and not to be broadly distributed to groups such as all employees or potential or current stockholders. AT 301 provides overall guidance on the area of financial forecasts and projections.
(a) The requirement is to identify the statement that should be included in a compilation report on a financial forecast. Answer (a) is correct because the report should state that the compilation does not include evaluation of the support of the assumptions underlying the forecast. Answer (b) is incorrect because no such statement is included in a compilation report, and because hypothetical assumptions pertain to financial projections, not financial forecasts. Answer (c) is incorrect because the report makes no statement concerning the range of assumptions. Answer (d) is incorrect because the statement is not included in the report, and because the prospective statements are managements, not the accountant’s, representation.
(d) The requirement is to identify the type of general use prospective financial statement on which the accountant may appropriately report. Answer (d) is correct because financial forecasts are considered prospective financial statements, and they are appropriate for general use. Answer (a) is incorrect because financial projections are only appropriate for the party responsible for preparing them or for third parties with whom the responsible party is negotiating directly. Answers (b) and (c) are incorrect because partial presentations and pro forma financial statements are not considered prospective financial statements.
(d) The requirement is to identify the statement that is not included in a compilation report on prospective financial statements. Answer (d) is correct because distribution of such a report is not necessarily restricted to specified parties. Answers (a), (b), and (c) are all incorrect because such statements are included in a compilation report.
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