Flashcards in AUD 3 Deck (19):
A CPA is required to comply with the provisions of the Statements on Standards for Attestation Engagements when engaged to:
provide assurance on investment performance statistics prepared by an investment company on established criteria.
Lake, CPA, is auditing the financial statements of Gill Co. Gill uses the EDP Service Center, Inc., to process its payroll transactions. EDP's financial statements are audited by Cope, CPA, who recently issued a report on management's description of EDP's system and the suitability of the design and operating effectiveness of controls. Lake is considering Cope's report on EDP's system in assessing control risk on the Gill engagement. What is Lake's responsibility concerning making reference to Cope as a basis, in part, for Lake's own opinion?
Lake may not refer to Cope under the circumstances above.
When an accountant compiles projected financial statements, the accountant's report should include a separate paragraph that:
describes the limitations on the usefulness of the projection.
Which of the following would be an appropriate title for a statement of revenue and expenses prepared using a special-purpose framework?
Statement of income—regulatory basis
If an auditor performing an integrated audit identifies one or more material weaknesses in a nonissuer's internal control, the auditor should:
express an adverse opinion on the entity's internal control.
What is an auditor's responsibility when engaged to report on supplementary information accompanying the basic financial statements
The auditor should report on the accompanying information in either (1) an other-matter paragraph following the opinion paragraph in the auditor's report on the financial statements or (2) in a separate report on the supplementary information.
When an auditor reports on financial statements prepared on an entity's income tax basis, the auditor's report should:
state that the basis of presentation is a comprehensive basis of accounting other than GAAP.
An accountant has been asked to issue a review report on the balance sheet of a nonissuer without reporting on the related statements of income, retained earnings, and cash flows. The accountant may issue the requested review report only if:
the scope of the accountant's inquiry and analytical procedures has not been restricted.
In reviewing the financial statements of a nonissuer, an accountant is required to modify the standard review report for which of the following matters?
Inability to assess the risk of material misstatement due to fraud
Discovery of significant deficiencies in the design of the entity's internal control
Neither I nor II
During an engagement to review the financial statements of a nonissuer, an accountant becomes aware of a material departure from the applicable financial reporting framework. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:
disclose the departure from the applicable financial reporting framework in a separate paragraph of the report.
Which of the following statements is correct concerning letters for underwriters, commonly referred to as comfort letters?
Letters for underwriters typically give negative assurance on unaudited interim financial information.
Investment and property schedules are presented for purposes of additional analysis in an auditor-submitted document. The schedules are not required parts of the basic financial statements but accompany the basic financial statements. When reporting on such additional information, the measurement of materiality is the:
same as that used in forming an opinion on the basic financial statements taken as a whole.
An auditor concludes, prior to the audit report release date, that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the client refuses to revise the other information to eliminate the inconsistency, the auditor should communicate the matter to those charged with governance and may:
revise the auditor’s report to include an other-matter paragraph describing the material inconsistency.
An auditor reads the letter of transmittal accompanying a county's comprehensive annual financial report and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take?
Request that the client revise the letter of transmittal
Field is an employee of Gold Enterprises. Hardy, CPA, is asked to express an opinion on Field's profit participation in Gold's net income. Hardy may accept this engagement only if:
Hardy also performs procedures on Gold's financial position and results of operations.
An auditor may report on condensed financial statements that are derived from a complete set of audited financial statements only if the auditor:
indicates whether the information is fairly stated in all material respects in relation to the complete financial statements.
Which of the following procedures ordinarily should be applied when an independent accountant conducts a review of interim financial information of a nonissuer?
Read the minutes of the board of directors’ meeting
In the standard report on condensed financial statements that is derived from an issuer's audited financial statements, a CPA should indicate that the:
CPA has audited and expressed an opinion on the complete financial statements.