chapter 2

Question 0

Special purpose framework audit:

Other matter paragraph – ONLY FOR CONTRACTUAL/REGULATORY

Answer 0

restrict use if the report to those within the entity, parties in contract, or regulatory agencies. Negative assurance

Question 1

Special purpose framework audit:

Auditor should-

Answer 1

Obtain know-

1) Purpose, intended users, steps taken by mgmt
2) obtain agreement by mgmt acknowledging their responsibility
3) obtain understanding of significant interpretations

Question 2

Special purpose framework audit:

Emphasis of matter paragraph

Answer 2

1) indicates that FS is = applicable special purpose framework
2) refers to the note in FS that describes framework
3) States that the special purpose framework is a basis of accounting other than GAAP

Question 3

Piecemeal opinion - on specific element, only appropriate (unmodified) if:

Answer 3

1) opinion not published with and does not accompany auditors report
2) specific element does not constitute major portion of the entity’s complete set of FS

Question 4

Special purpose FS report should include:

Answer 4

1) title
2) an addresse
3) introductory paragraph that identifies the FS audited
4) description of mgmt responsibility - FS
5) description of mgmt responsibility - determine framework
6) description of purpose for preparation of FS in framework
7) description of auditors responsibility
8) opinion paragraph on special purpose
9) emphasis of matter
10) other paragraph that restricts use

Question 6

Report on Summary FS - procedures

Answer 6

1) see that the summary FS adequately disclose their nature and identify the audited FS
2) see that the applied criteria are disclosed
3) see if summary FS can be agreed to or recalculated from the audited FS
4) see if the summary FS are prepared in accordance with the applied criteria
5) see if the summary FS contain the necessary info

Question 6

Report on selected financial data:

Answer 6

Should be limited to data derived from audited FS

Question 7

Engagement to report on summary FS - engagement acceptance

Answer 7

1) see if criteria applied by mgmt in preparation of summary FS are acceptable
2) obtain an agreement of mgmt that it acknowledges it’s responsiblities
3) obtain an agreement with mgmt in writing about the expected form and content of the report

Question 8

When auditors modified opinion on complete set of FS is relevant to specific element:

Answer 8

Express an adverse opinion on the specific element when there is a material misstatement; disclaim opinion on specific element when the modified opinion on the FS is the result of a scope limitation

Question 9

If auditing a complete set of FS and a single FS, or a specific element:

Answer 9

Issue a separate auditors report and express an opinion for each engagement. Reports can be together if differentiated and audit report of FS is unmodified

Question 10

Compilation requirements:

Answer 10

1) knowledge of industry accounting principles and practices
2) understanding of clients business
3) reading the FS

Question 11

Compilation requirements - understanding the clients business:

Answer 11

Staff qualifications 
Transaction types and frequency
Accounting basis used to prepare FS
Form of the accounting records
FS form and content

Question 12

Compilation - documentation requirement

Answer 12

1) engagement letter
2) significant findings or issues
3) oral or written communications with mgmt regarding fraud

Question 13

5 elements of compilation and review engagements

Answer 13

1) a 3 party relationship involving mgmt, an accountant, and intended users
2) an applicable financial framework
3) FS or financial info
4) sufficient appropriate evidence
* **review only
5) a written report

Question 14

Compilation - independence required?

Answer 14

No. But lack of independence must be disclosed in the last paragraph of the compilation report

Question 15

Reporting on compilation

Answer 15

CAR

MR

ARSOM

Question 16

Reporting on compilation - additional requirements

Answer 16

1) each page s/b marked ‘see accountants compilation’
2) SSARS does not require that the compilation report be printed on the accountants letterhead
3) at accountants discretion, explanatory paragraph can be made to emphasis matters

Question 17

Review requirements

Answer 17

U LIAR CPA

Question 18

SSARS require an accountant to report when:

Answer 18

An accountant ‘submits’ FS. Submission is presenting FS to a client that the accountant has prepared either manually or use of computer software

Question 19

The following audit procedures generally are not performed in a review :

Answer 19

1) tests of the accounting records
2) tests of mgmts assertions regarding continued existence
3) inquires of the entity’s attorney concerning contingent liabilities

Question 20

Compilation report not required if:

Answer 20

The compiled FS are not expected to be used by a third party

Question 21

Reporting on comparative FS -

All periods compiled or reviewed

Answer 21

Continuing accountant should update the report on the prior period and issue it as part of the current report

Question 22

Reporting on comparative FS -

Current period reviewed and prior period compiled

Answer 22

Higher level of service in current period, the report in the prior period should be updated and issued as the last paragraph of the current periods report

Question 23

Reporting on comparative FS -

Current period compiled and prior period reviewed

Answer 23

Options:

1) issue a compilation report and add a paragraph to the report on the current period statements
2) reissue the prior period review report
A) can be combined with CP compilation
OR
B) presented separately from the current period compilation

Question 24

Comparative FS - compiled FS that omit substantially all disclosures

Answer 24

Do not issue a report on comparative FS when statements for one or more but not all periods presented omit all disclosures required by GAAP

Question 25

Other accountants involved- | Predecessor accountants compilation or review report reissued unchanged

Answer 25

They should: 1) decide if their report is still appropriate 2) perform following procedures: A) read FS and current period report B) compare the prior period stmts with those issued previously and currently C) obtain letter from successor accounts stating that they are not aware of any relevant info that might have a material effect on the prior P

Question 26

Comparative FS - predecessor report not reissued: expanded report

Answer 26

Add additional paragraph mentioning the following: 1) a statement that the prior periods were compiled or reviewed by other accountants 2) the date of their report 3) a description of the standard form of disclaimer or limited assurance given in the prior report 4) a description of any modifications contained in the report

Question 27

Comparative FS - current period unaudited and prior period audited

Answer 27

Accountant should issue the current period compilation or review report and add additional paragraph stating : 1) prior period stmts were audited 2) the date of the previous reports 3) the opinions expressed and, the reasons for the modification 4) that no auditing procedures have been performed since the previous date

Question 28

Comparative FS - predecessors report not reissued

Answer 28

1) make reference to the report of the predecessor accountants in current period OR 2) perform that level of service themselves

Question 29

Comparative FS - current period audited and prior period unaudited

Answer 29

Include an other matter paragraph that states: 1) the service performed in the period prior 2) the date of the prior period report 3) a description of any material modifications described in the report 4) a stmt that the service was less in scope than an audit and did not provide the basis for an opinion

Question 30

Revision of interim FS - non-issuers

Answer 30

May do if: 1) the latest FS have been audited 2) the auditor has either been engaged to audit the entity's CY FS, or audited the entity's latest annual FS 3) the same financial reporting framework is used for the Interim FS as for annual FS 4) the interim Financial info is condensed info

Question 31

Objective of a review engagement

Answer 31

To determine whether material modifications are necessary for the information to be in conformity with the applicAble financial framework

Question 32

Review of issuers interim financial info

Answer 32

Report should include a stmt that the review was conducted in accordance with the standards of the PCAOB

Question 33

Comfort letter

Answer 33

A letter from the CPA to the named underwriter and other requesting parties just before the registration of the clients securities. Not required by or filed with SEC

Question 34

Must do when comfort letter is to be issued:

Answer 34

Perform a review of interim financial info

Question 35

To obtain a comfort letter:

Answer 35

The requesting party must provide the auditor with an attorney's opinion or rep letter

Question 36

Comfort letter - restricted use

Answer 36

A comfort letter must include a stmt that the letter is solely for the info of the addressees and to assist the underwriters in conducting and documenting their investigation of the company affairs

Question 37

When the auditor should not comment or provide assurance

Answer 37

1) market risk sensitive instruments | 2) qualitative disclosures

Question 38

Trust services

Answer 38

Assurance and advisory services used to address the risks and probs related to IT. Five essential principles: Security, availability, processing integrity, online privacy and confidentiality

Question 39

WebTrust engagements

Answer 39

Provide assurance related e-commerce.

Question 40

SysTrust engagements

Answer 40

Provide assurance with respect to the reliability of any defined electronic system

Question 41

Attestation standards differ from GAAS

Answer 41

1) no reference is made to FS 2) no reference is made to GAAP 3) attestation standards provide levels of assurance below that provided by a GAAS audit

Question 42

Attestation Standards - general

Answer 42

``` Training Independence Performance/due professional care Professional, adequate knowledge Your belief that the subject matter is capable of evaluation ```

Question 43

Attestation Standards - fieldwork

Answer 43

Planing and supervision | Appropriate, sufficient evidence

Question 44

Attestation Standards - reporting

Answer 44

Subject matter or assertion being reported on Significant reservations about the engagement Express conclusions about subject matter Restrict use of the report to specified parties

Question 45

Conditions for agreed-upon procedures

Answer 45

Independence of the practitioner Agreement of the parties Measurability and consistency Sufficiency of the procedures Use of the report is restricted Responsibility for the subject matter Engagements to perform agreed-upon procedures on prospective financials

Question 46

Attestation - restrict use of the report to specified parties when:

Answer 46

1) the criteria are appropriate for or available to only a limited number of parties 2) reporting on subject matter and written assertion has not been provided 3) reporting on an agreed-upon procedure engagement

Question 47

Financial Forecast

Answer 47

Best guess: available for general or limited use

Question 48

Agreed upon procedures- reporting requirements

Answer 48

- title, with date and signature - ID of specified parties,subject matter - stmt that subject matter is by mgmt - stmt that procedures performed are agreed upon, descripton - Stmt that the sufficiency of the procedures is by mgmt - stmt that conducted in accordance wth attestation - AICPA - list of procedures performed - stmt that CPA was not engaged to conduct an examination - stmt on restriction on report use - reservations concerning procedures

Question 49

Financial projection

Answer 49

What would happen if; limited use only

Question 50

Examination of a financial forecast is a professional service that involves:

Answer 50

1) evaluating the preparation of the prospective FS 2) evaluating the support underlying the assumptions 3) evaluating the presentation of the prospective FS in conformity with AICPA guidelines 4) issuing an examination report

Question 51

Modifications to the opinion when:

Answer 51

1) AICPA presentation guidelines are not followed - QUALIFIED OR AD 2) significant assumptions are not disclosed - AD 3) basis not reasonable - one or more sig assumptions do not provide a reasonable basis for the FS - AD 4) scope limitation - DISCLAIMER

Question 52

Examination of prospective FS - report contains:

Answer 52

1) ID of the prospective FS presented 2) ID of the responsible party and stmt saying responsible party 3) stmt that CPA responsiblity is to express an opinion on the stmts 4) stmt that the exam was done by attestation standards; AICPA 5) stmt that the practicitoner believes that the exam provides reasonable basis for opinion 6) opinion that the underlying assumptions provide a reasonable basis for the forecast 7) caveat that the results may not be achieved 8) stmt that the practitioner assumes no responsibility to update report 9) for projection - include description; restrictive use

Question 53

Engagement change from review to compilation

Answer 53

must have reasonable justification for change; no reference made regarding original engagement

Question 54

Review Report Form

Answer 54

AM I SAD MR FIRSALA

Question 55

Compilation report of financial forecast:

Answer 55

1) ID of the prospective FS the responsible party 2) a stmt that the practicitoner has compiled in accordance with attestation standards 3) stmt that a compilation is limited in scope and does not enable the practictioner to express an opinion 4) a caveat that the prospective results may not be achieved 5) stmt that the practicitoner assumes no responsibility to update report 6) stmt that the compilation does not include evaluation of the support of the assumptions underlying the forecast

Question 56

CANNOT COMPILE PROSPECTIVE FINANCIAL STMTS

Answer 56

if the entity fails to disclose a summary of the significant assumptions

Question 58

Compilation report of financial projection (limited use):

Answer 58

changed slightly to include: - a description of the purpose of the projection at the end of the first paragraph - a reference to the hypothetical assumption - paragraph restricting the use of the report