(a) The requirement is to identify the circumstance in which a compilation report is not required. Answer (a) is correct because when financial statements are only for management, no compilation report is required. Answers (b) and (c) are incorrect because when third parties are expected to use compiled financial statements, a compilation report is required. Answer (d) is incorrect because a compilation report is not always required.
(b) The requirement is to determine the effect of an immaterial direct financial interest on accountant independence. Answer (b) is correct because even immaterial direct financial interests impair the independence that is required for the performance of reviews. Answer (a) is incorrect because a CPA who lacks independence may compile those financial statements when this lack of independence is disclosed in the compilation report. Answer (c) is incorrect because a review report may not be issued. Answer (d) is incorrect because the CPA is not independent.
(b) The requirement is to identify the circumstance in which a CPA may issue a review report on a single financial statement. Answer (b) is correct because an accountant may issue a review report on a financial statement, such as a balance sheet, and not report on the other related financial statements if the scope of his or her inquiry and analytical procedures has not been restricted. Answer (a) is incorrect because the balance sheet need not be presented in prescribed form. Answer (c) is incorrect because the balance sheet may be used to obtain credit or to distribute to creditors. Answer (d) is incorrect because specialized accounting principles and practices in an industry may or may not need to be disclosed depending upon the circumstances.
(c) The requirement is to identify a CPA’s responsibility when he or she believes that modification of the standard review report is not adequate to indicate deficiencies in financial statements affected by illegal acts. Answer (c) is correct because whenever a CPA believes that modification of the standard report is not adequate to indicate the deficiencies in the financial statements, he or she should withdraw from the review engagement and provide no further services with respect to those financial statements.
(b) The requirement is to identify the procedure not followed by an accountant in obtaining a reasonable basis for the expression of limited assurance for a review of financial statements. Answer (b) is correct because reviews ordinarily do not include an assessment of the risk of fraud. Answer (a) is incorrect because reviews include analytical procedures. Answer (c) is incorrect because a review includes inquiries of management. Answer (d) is incorrect because auditors obtain written representation from management when performing a review.
(a) The requirement is to identify the procedure least likely to be performed in a review of the financial statements of a nonissuer. Answer (a) is correct because a review of a nonissuer financial statements does not specifically address observing the safeguards over access to and use of assets and records. Answers (b), (c), and (d) are all incorrect because they are included in the procedures suggested for a review by SSARS.
(b) The requirement is to identify the procedures that an accountant would perform during an engagement to review the financial statements of a nonissuer. Answer (b) is correct because AR 100 requires that the CPA obtain a representation letter. Answers (a), (c), and (d) are incorrect because they are not included in SSARS which present a list of procedures performed during a review.
(b) The requirement is to determine the type of inquiry or analytical procedures ordinarily performed in an engagement to review a nonissuer’s financial statements. Answer (b) is correct because an accountant will make inquiries concerning the entity’s procedures for recording, classifying, and summarizing transactions, and accumulating information for disclosure in the financial statements. Answer (a) is incorrect because the analytical procedures and other procedures involved in a review do not in general obtain corroborating audit evidence as do the procedures of an audit. Answer (c) is incorrect because the procedures for reviews are not specially designed to test management’s assertion regarding continued existence. Answer (d) is incorrect because inquiries of the entity’s attorney are not normally required when a review is being performed.
(b) The requirement is to determine the most likely procedures to be included in a review engagement of a nonissuer. Answer (b) is correct because a review consists primarily of inquiries and analytical procedures. Answer (a) is incorrect because a bank transfer schedule is generally not prepared for a review engagement. Answer (c) is incorrect because a review does not include assessing the control structure. Answer (d) is incorrect because cutoff tests on sales and purchases are not normally performed on a review. Note that the procedures included in answers (a), (c), and (d) are typically performed in an audit.
(b) The requirement is to identify the most likely procedure to be included in a review of a nonissuer’s financial statements. Answer (b) is correct because SSARS state that reviews ordinarily include inquiries concerning actions taken at board of directors’ meetings. Answer (a) is incorrect because reviews consist primarily of inquiry and analytical procedures and do not generally include confirmation of accounts receivable. Answer (c) is incorrect because a review of a nonpublic entity does not normally include obtaining an understanding of internal control or assessing control risk. Answer (d) is incorrect because distribution of a review report need not be limited. See SSARS for specific procedures included in reviews.
Total Questions: | |
Correct Answers: | |
Wrong Answers: | |
Percentage: |
|