A6 Flashcards
What is management’s responsibility in a preparation engagement?
the accuracy of significant judgments to be used in the preparation of the F/S
What is a caveat included in the compilation report?
The accountant is not required to perform any procedures to verify the accuracy or completeness of information provided by management.
T/F: The compilation report should state that the financial statements have not been audited or reviewed but does not compare the scope of a compilation to the scope of a review or an audit.
true
What should the accountant do if they believe the F/S contain material misstatements but they’re only issuing a compilation report?
obtain the additional or revised information needed to correct the F/S
T/F: An accountant cannot issue a compilation report on comparative F/S if one of the years F/S does not include the required GAAP disclosures.
true
Should an accountant modify a review report if the entity’s F/S were presented on another comprehensive basis of accounting?
yes
What would you do if you issued a compilation report in the PY and an audit report in the CY?
either reissue the compiled F/S or add a paragraph in the audit report stating the different level of responsibility needed for the compilation report
T/F: If you issued an audit report in the PY and a review report in the CY, you would need to disclose the reason for the change.
false; you would want to indicate the previous opinion issued, the reason for the modifications (if any), and that no auditing procedures were performed since the previous report date
What is the objective of a review of interim financial information?
to provide the accountant with a basis for reporting whether material modifications should be made to conform with generally accepted accounting principles
T/F: Neither interim reviews under the PCAOB or SSARS require inquiry with outside legal counsel.
true
What is the AICPA code of professional conduct?
it includes both principles, which provide an overall framework, and rules, which govern performance
governs any service that an AICPA member performs - nonissuer audits, SSARS, etc.
T/F: Independence is impaired if the CPA’s spouse, parent, child, sibling, etc. are employed by the client in a position that is audit sensitive (i.e., internal auditor, cashier, purchasing agent, accounting supervisor, etc.).
true
T/F: An advisor to a client’s board of trustees generally is not considered to impair someone’s independence.
true - b/c they aren’t making decisions for the client (just giving advice that the client can accept or reject)
What action would impair a CPA’s independence when performed for a client?
- anything related to authorizing, executing, or consummating a transaction on behalf of the client
- preparing source documents
When does the AICPA allow contingent fees?
in tax matters that are based on results of judicial proceedings or the findings of governmental agencies (IRS)
