Engagement Responsibilities

Question 1

Accepting & Continuing client Relationship and Engagements.

Answer 1

A firm must determine that there is no issue with integrity to accept or continue the relationship.

Question 2

What agency set standards for financial statements of nonissuer?

Answer 2

Accounting and Review Committee

Question 3

What are three elements in a CPA Firm’s Elements of quality Control Policies and Procedures for auditing practice?

Answer 3

In an Engagement the elements are:
performance,
supervision
review.

Question 4

Who makes assertion in an Examination attestation engagement?

Answer 4

The auditor known as the practitioner does not make any assertions about the subject matter.
Management makes the assertion.

Question 5

Assertions about accounts reported in the balance sheet at period end include?

Answer 5

1. Rights and obligations
2. Existence
3. Completeness
4. Accuracy, Valuation and Allocation
5. Classification
6. Presentation

Question 6

Statement on Standards for Accounting and Review Services (SSARSs) sets rules for?

Answer 6

Engagement to prepare, Compile and Review historical financial information of nonissuers.
This also applies to Pro forma or other historical information.

Question 7

In a CPA Firm Quality Control standards apply to?

Answer 7

The firm’s practice as a whole

Question 8

What should an auditor do when inquiring about the reason why a predecessor (past) auditor no longer works with the client?

Answer 8

The current or perspective auditor should obtain permission from the client to discuss the reason.

Question 9

What is the difference between Assurance and Advisory services and consulting services?

Answer 9

Assurance services improves information.
Assurance and Advisory services is one party monitoring the other.
consulting services provides advice and is a two party arrangement.

Question 10

Sarbanes-Oxley Act of 2002 requirements include

Answer 10

1.Lead auditor rotation every 5 years
2. Second partner review and approval of audit reports.
3. Clients CEO and CFO must certify appropriateness of Financial Statements.

Question 11

SSARS requires the practioner to issue a report for?

Answer 11

Compilation ( requires independence)
Review ( requires indendepence)
not for Preparation

Question 12

In Attestation Engagement which follows the rules based on the
Statements on Standards for Attestation Engagements (SSAEs), the practitioner is engaged to?

Answer 12

practicioner is engaged to issue
1. examination
2. review
3. Agreed upon procedures report on subject matter
4. assertion about subject matter.

Question 13

What are the 6 Elements of System of Quality control?

Answer 13

There are 6
1. Leadership responsibilities-Tone at the top
2. Relevant and ethical requirements
3. Acceptance and continuance of client and specific engagement.
4. Human Resources
5. Engagement performance
6. Monitoring

Question 14

Which is the organization in charge of setting standards for nonissuer is?

Answer 14

Statements on Standards for Accounting and Review Services.

Question 15

Preparing financial statements is a nonattest
service, accountant does not need to be independent.

Answer 15

A compilation is a way to collect financial information to present financial statements, during a compilation the accountant needs to show either independence or lack of it and provide disclaimer that no assurance is provided.

Question 16

The objective of a review is to provide limited assurance informing whether the accountant knows about material modifications that might be needed for the statement to be in agreeement with the reporting frame work such as GAAP.

Answer 16

Accountant must be independent in a review.
Another name for limited assurance is negative assurance. Possitive assurance is provided by an audit.

Question 17

In these engaments the auditor must have working papers/ documentation.

Answer 17

Examination, review and agreed-upon procedures engagements.

Question 18

A Characteristic that will put an auditor in alert regarding fraudulent financial reporting is?

Answer 18

When the entity is experiencing a customer decline in the industry.

Question 19

Elements that affect the overall audit strategy is ?

Answer 19

Materiality and Audit risk affects or underlies the overall audit strategy because the auditor uses these two elements to determine the nature, timing and extent of audit procedures.

Question 20

In terms of Balance sheet and Income statement which one is more predictable for analysis and substantive procedure purpose?

Answer 20

The income statement because it represents transactions over a period of time. Balance sheet represents amounts only at a moment in time.

Question 21

When the demand of a product is inelastic?

Answer 21

A price decrease will not increase the demand of the product.

Question 22

Audit risk consists of?

Answer 22

Inherent risk, Control Risk and Detection Risk

Question 23

Nonfinancial information considered for analytical purposes during the planning phase of an audit?

Answer 23

Relevant non financial information is considered such as number of employees, square footage of selling space, volume of goods produced and similar information.

Question 24

Registered with the PCAOB firms received annual inspections after performing what number of audits?

Answer 24

100 audits.

Question 25

Member of the AICPA can provide services under contingent fee ( arrangement to receive payment based on ) based on a percentage of a client investment portfolio.

Answer 25

The value of the portfolio is determined at the beginning of each quarter or longer period if agreed. the agreement can not be renewed more than quarterly.

Question 26

Statement on Standards for Accounting and Review Services (SSARS)

Answer 26

These standards applies in engagements to:
prepare, compile, and review historical financial statements, for nonissuers.
also applies to some prospective, pro forma and other historical financial information.

Question 27

Statement on Standards for Attestation Engagements (SSAEs)

Answer 27

These standards apply to nonissuers.
They refer to Review, Examination, and Agree-upon procedures.
This can be Prospective financial information such as forecast and projections, pro forma financial information, compliance and controls at a service organization.

Question 28

Statement on Auditing Standards (SASs)

Answer 28

Apply to audit of financial statements of nonissuers.

Question 29

General Accepted Auditing Standards (GAAS)

Question 30

The Statements on Standards for Attestation Engagements (SSAEs) degree of responsibility imposed on practitioners?

Answer 30

1. Must- unconditional responsibility
2. Should- Presumptively mandatory
   responsibility.
3. Should Consider- Presumptively required responsibility to consider.

Question 31

The difference between a preparation service and a compilation service?

Answer 31

A preparation service is only to prepare information requested such as preparing financial statements, pro forma or other information, no independence nor disclosure of independence is required.
On a compilation the accountant is applying accounting and financial reporting expertise to help present financial statements, in this case the accountant must determine if he/she is independent and disclose any lack of independence.

Question 32

Accountant Independence is required for?

Answer 32

When providing any level of assurance, example, in a review and Audit.

Question 33

Reports issued.?

Answer 33

No report needed for a preparation
Report needed for a compilation and review.
Compilation provides no assurance, but determination of independence needs to be determined and lack of it needs to be refer to in the report.
Review requires independence.

Question 34

Independence is impaired if the accountant
in reference to an issuer, recommends a software for any department and also

Answer 34

Receives commission from the software vendor.

Question 35

To provide timely guidance on the application of pronouncement, Auditing interpretations are issued by the Audit Task Force of the Auditing standards Board.

Auditing interpretations are NOT auditing standards.

Answer 35

Interpretations are recommendations/guidance for applying GAAS in specific situations.
They are reviewed by the ASB.

Question 36

Other Interpretive publications include?

Answer 36

1. AICPA Audit and Accounting Guides
2. AICPA Auditing Statement of Position.