Chapter 19 MCQ

Question 1

An engagement for applying specified auditing procedures to financial information other than financial statements provides no assurance. This results in​ _______.

Answer 1

Distribution of the report normally being restricted

Question 2

Thermos Inc. is having its financial statements audited by Pilott​ & Levy, a PA firm. Leon Levy is the auditor in charge of the audit. The accountable party in this assurance engagement is​ _______.

Answer 2

management of Thermos Inc

Question 3

A public accountant interviewing a prospective client is informed by the client that it requires a report that provides no assurance. What engagement would be appropriate for this prospective​ client?

Answer 3

compilation

Question 4

A review engagement includes​ _______.

Answer 4

​inquiry, analytical​ procedures, and discussion

Question 5

Which of the following engagements would most likely be a compilation​ engagement?

Answer 5

An engagement with respect to financial statements attached to a personal tax return.

Question 6

When assessing the plausibility of the financial statements for a review​ engagement, the auditor will use which of the following criteria for auditing a​ small, privately held​ company?

Answer 6

an acceptable reporting framework such as ASPE

Question 7

Which of the following matters would be addressed in a report on the results of applying​ agreed-upon procedures to financial information other than financial​ statements?

Answer 7

the factual results of the procedures

Question 8

As part of the conduct of a review​ engagement, which of the following would be a typical procedure used for the assessment of the ending accounts receivable​ balance?

Answer 8

comparison of the age of the accounts receivable to the prior year

Question 9

What is an​ auditor’s responsibility for supplementary information that is outside the basic financial statements but required by accounting​ guidelines?

Answer 9

The auditor should apply certain limited procedures to the required supplementary information and add an explanatory paragraph to the financial statement audit report.

Question 10

Performing​ inquiry, analytical​ procedures, and discussion with the limited objective of assessing whether the information being reported on is plausible within the framework of appropriate criteria is the definition of​ a(n) _______.

Answer 10

review

Question 11

For the conduct of an assurance​ engagement, the practitioner is required to identify or develop criteria to evaluate the subject matter. Identify some characteristics of suitable criteria.

Answer 11

​relevance, reliability,​ neutrality, understandability, completeness

Question 12

The interim financial statements are usually​ _______.

Answer 12

not audited by the auditors

Question 13

Which of the following is a professional standard that must be followed by an accountant when conducting a compilation​ engagement?

Answer 13

work being adequately planned and properly executed

Question 14

​Agreed-upon procedures performed in accordance with CSRS 4400 provide what level of​ assurance?

Answer 14

no assurance

Question 15

With respect to working on an engagement to examine a financial forecast or projection included in a prospectus or other public offering​ document, the public accountant and the client should agree upon​ _______.

Answer 15

the period of time to be covered

Question 16

Richard is performing a compilation engagement. Richard is concerned that the information is​ _______.

Answer 16

arithmetically correct

Question 17

As part of the conduct of a review​ engagement, which of the following procedures would be appropriate for assessing the ending value of​ inventory?

Answer 17

discussion with management with respect to the costing method used

Question 18

When would the public accountant conduct audit procedures during a review​ engagement?

Answer 18

When required to assess plausibility.

Question 19

As part of the conduct of a review​ engagement, which of the following procedures would be appropriate for assessing the ending value of accounts​ payable?

Answer 19

comparison of the accounts payable balances by supplier to the prior year

Question 20

You are a public accountant retained by the manager of a cooperative retirement village to do​ “write-up work.” You are expected to prepare unaudited financial statements with each page marked​ “unaudited” and accompanied by a disclaimer of opinion stating no audit was made. In performing the​ work, you discover that there are no invoices to support ​$25,000 of the​ manager’s claimed disbursements. The manager informs you that all the disbursements are proper. What should you​ do?

Answer 20

Obtain further information about the ​$25,000 of unsupported items and withdraw if the situation is not satisfactorily resolved.

Question 21

Which of the following components of an engagement letter would apply to both a review engagement and a compilation​ engagement?

Answer 21

A statement that each page of the statements should be clearly marked​ “unaudited.”

Question 22

A notice to reader is included in what type of​ engagement?

Answer 22

compilations

Question 23

Which of the following is true about the audit of nonfinancial​ information?

Answer 23

Public accountants are not the only assurance provider of nonfinancial​ information, but they are often the preferred assurance providers.

Question 24

Revan​ LLP, Public​ Accountants, were contacted by Giovanni Media​ Inc., who was seeking an auditor.​ Giovanni’s CFO added that what the company requires is an audit of an accounts receivable schedule prepared in accordance with financial reporting provisions established by a​ regulator, the Canadian Radio and Television Commission. What standard would be appropriate for this​ engagement?

Answer 24

CAS 805 for historical financial information other than financial statements

Question 25

Blue Sky Inc. is seeking a public accountant to perform either a compilation or a review engagement. What standard will the public accountant apply to the Blue Sky​ engagement?

Answer 25

Other Canadian Standards​ (OCSs)

Question 26

The Federal Auditor General provides the results of operational audits to Parliament in Auditor General reports. What type of engagements are​ these?

Answer 26

direct reporting

Question 27

Which of the following items includes criteria for accepting a compilation​ engagement?

Answer 27

no reason to believe that the financial statements are false or misleading

Question 28

A review engagement requires what amount of evidence to be​ accumulated?

Answer 28

moderate

Question 29

You have just signed off the audit report on the financial statements of your client. What type of engagement did you​ complete?

Answer 29

Attest & assurance

Question 30

The fact that a client has a material accounting departure for failure to follow ASPE would require the accountant to disclose that fact in a separate paragraph giving rise to the modification when the accountant is performing​ _______.

Answer 30

a review and an audit

Question 31

What is meant by​ “level of​ assurance”?

Answer 31

Levels of assurance represent the degree of certainty the practitioner has​ attained, and wishes to​ convey, that the conclusions stated in his or her report are correct.

Question 32

A CPA is performing review services for a​ small, closely held manufacturing company. As a part of the​ follow-up of a significant decrease in the gross margin for the current​ year, the CPA discovers that there are no supporting documents for​ $40 000 of disbursements. The chief financial officer assures her that the disbursements are proper. What should the CPA​ do?

Answer 32

Modify the review opinion or withdraw from the engagement unless the unsupported disbursements are satisfactorily explained.

Question 33

Which of the following best describes the responsibility of the CPA in performing compilation services for a​ company?

Answer 33

The CPA must understand the​ client’s business and accounting methods and read the financial statements for reasonableness.

Question 34

Ward is performing an attestation engagement regarding an​ entity’s compliance with the requirements of a major assistance program offered by the provincial government. Ward detected noncompliance with the regulations governing the​ program, which he concluded were material.​ Ward’s report on compliance should express the following.

Answer 34

A qualified or adverse opinion