AUD 6.2 - Preparation Engagements

Question 1

What is the lowest level of service an auditor can be associated with?

Answer 1

Preparation of financial statements

Question 2

The objective of an accountant in a preparation engagement is:

Answer 2

To prepare financial statements in accordance with a specified financial reporting framework

Question 3

Preparation standards do not apply when an accountant prepares financial statements AND:

Answer 3

Is engaged to perform an audit, review, or compilation of those financials
Solely for submission to tax authorities
For inclusion in written personal financial plans
In conjunction with litigation services
In conjunction with business valuation services

Question 4

The engagement letter for a preparation engagement should include:

Answer 4

An agreement of management that each page of the financial statements will include a statement indicating hat no assurance is provided

Question 5

The accountant should ensure that a statement is included on each page of the financial statements indicating:

Answer 5

No assurance is provided on the financials

Question 6

If the accountant is unable to include a statement on each page of the financial statements noting no assurance is provided, the accountant should:

Answer 6

Issue a disclaimer
Or
Perform a compilation engagement

Question 7

If the accountant prepares financial statements that contain a known departure from the applicable financial reporting framework, the accountant should:

Answer 7

Disclose the material misstatements in the financial statements

Question 8

If the accountant concludes that limited disclosures are acceptable (omit substantially all disclosures required by the applicable financial framework), the notes in the financials may be labeled as:

Answer 8

Selected information - substantially all disclosures required by [the applicable financial reporting framework] are not included

Question 9

Documentation in a preparation engagement SHOULD include:

Answer 9

Engagement letter
Copy of the financial statements prepared by the accountant
Any significant findings or issues

Question 10

Additional documentation that MAY be included in a preparation engagement include:

Answer 10

Oral or written communications with management regarding fraud or noncompliance
The justification for the departure from any requirements and how the alternative procedures performed were sufficient