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Flashcards in Study Unit 19: questions Deck (30)
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1
Q

In a compilation, the accounting will include a statement about assurance in the report, what kind of assurance?

A

The accountant does not express any form of assurance on the financial statements and it should indicate that in the report.

2
Q

What date should the compilation report be dated?

A

Completion of the compilation.

It is not the completion of field work, because field work is performed in attestation engagements, such as a financial statement audit or a review, not a compilation.

3
Q

Should a compilation report state that “we have compiled the FS” and that the “FSs have not been audited”?

A

Yes, the standard report for the compilation of a nonissuer’s FSs should state that the FSs have not been audited or reviewed. The report also should state that a comilation has been performed in accordnace with the SSARSs issued by the AICPA.

4
Q

A CPA should not express negative or limited assurance in:

A

a comilation report on FSs of a nonissuer.

5
Q

An accountant may compile a nonissuer’s financial statements intended for third-party use that omit all of the disclosures required by U.S. GAAP only if the omission is

A
  • Clearly indicated in the accountant’s report
  • Not undertaken with the intention of misleading the FS users.
6
Q

A CPA who is not independent may issue a

A

compilation report, however they need to disclose that in the report.

7
Q

What is an auditor’s responsibility in regards to a compilation?

A

Read, understand, and have knowledge of industry. DO NOT AUDIT

8
Q

In a compilation engagement, the accountant is not required to:

A

not required to make inquiries or perform analytical or other procedures to verify, corroborate, or review information supplied by the entity. However, analytical procedures are necessary in review and audit engagements.

9
Q

When disclosures are omitted, a paragraph is added to the compilation report stating that:

A

(1) management has elected to omit substantially all disclosures required by GAAP and
(2) , if the omissions were included, they might influence the users’ conclusions.

10
Q

If the accountant believes that modification of the compilation report is not adequate to indicate the deficiencies, (s)he should:

A

withdraw from the engagement.

11
Q

Does the SSARS compilation report need to be printed on Accountant’s Letterhead and be manually signed?

A

NO. The compilation report need not be printed on the accountant’s letterhead or manually signed by the accountant. However, the report must be signed by the accounting firm or the accountant as appropriate. Thus, the signature may be manual, printed, or digital.

12
Q

An accountant performs a preparation, compilation, or review engagement for a nonissuer in accordance with Statements on Standards for Accounting and Review Services (SSARS). A preparation is:

A

A preparation is a service to prepare financial statements without attaching a report or determining whether the accountant is independent.

A compilation is a service to assist management in presenting financial statements with a report attached.

A review is a service to obtain limited assurance that no material modifications need to be made to the statements for them to be in accordance with the applicable reporting framework.

13
Q

Does an accountant need to be independent to prepare FSs under SSARSs?

A

No, the accountant need not be independent or determine whether she or he is independent to prepare FSs.

14
Q

Does a preparation fo financial service require an engagement letter?

A

All SSARSs engagements require the accountant to obtain an engagement letter or other suitable form of written agreement.

15
Q

Under which one can the FSs be relased to outside users: compilations or preparations?

A

Both-SSARSs allow release of FSs for a preparation, compilation, or review service.

16
Q

In a preparation engagement, the FSs should include a statement such as?

A

“No assurance is provided”

A notation of each page (including notes) of FSs prepared by an accountant should state, “No assurance is provided.” The statement is intended to avoid misunderstanding of the accountant’s involvement.

17
Q

In a preparation engagement, the accountant’s name ordinarily is included where? on the face of the FSs, in the notes of the FSs, in the report?

A

None: it is not disclosed on the FSs.

The guidance on preparation services does not require an accountant’s name to be identified or associated with the financial statements. However, it also does not prohibit the identification of the accountant if a disclaimer is attached.

18
Q

Which item is not included in the accountant’s documentation of a preparation engagement?

A.A copy of the financial statements.

B.The engagement letter.

C.Significant judgments made by the accountant during the engagement.

D.A statement about whether the statements were fairly presented.

A

A statement about whether the statements were fairly presented.

Documentation in connection with each preparation engagement should provide a clear understanding of the work performed and, at a minimum, include (1) the engagement letter and (2) a copy of the financial statements that the accountant prepared. Also, significant consultations or significant professional judgments made during the engagement may be documented. However, a preparation engagement does not involve gathering evidence about the fairness of the financial statements.

19
Q

In a preparation service, management’s omission of substantially all disclosures ordinarily included in the financial statements should be disclosed where?

A

On the face of the financial statements.

20
Q

Which is a preparation service: Preparing a working trial balance or preparing standard monthly journal entries?

A

Neither-Preparing standard monthly journal entries or a working trial balance is not a preparation service.

21
Q

What does a review primarily consist of?

A

A review consists primarily of applying analytical procedures, making inquiries of management, and obtaining a management representation letter.

22
Q

The separate paragraph is added to the current period’s review report when the prior-period report is not reissued. The separate paragraph should indicate:

A

(1) that the prior-period statements were audited,
(2) the date of the previous report,
(3) the type of opinion expressed,
(4) the substantive reasons if the opinion was not unmodified, and
(5) that no audit procedures were performed after the date of the previous report.

23
Q

Is the distribution and use of an agreed upon procedures report limited or general?

A

Limited.

An independent practitioner may accept such an engagement if, among other things, the use of the report is restricted. The report should state that it is intended solely for the information and use of the specified parties and is not intended to be used and should not be used by anyone other than these specified parties.

24
Q

What are prospective financial statements?

A

Prospective financial statements are attestation engagements that present expected or hypothetical future resulta of an entity. There are two different types of prospective statements: Forecast and Projection.

25
Q

What is the difference between forecasts and projections? what kind of reports can be issued?

A

Forecasts: this presents what management expects to occur in the future based on expected conditions and expected courses of action. (Examination, compilation, agreed upon procedures). General or limited use

Projection: This presents what management believes will occur given certain hypothetical assumptions based on “What if” scenario. (Examination, compilation, agreed upon procedures). Only limited use.

26
Q

Must a practitioner be independent of the client and other specified parties to perform an agreed upon procedures engagement?

A

Yes, a practitioner must be independent of the client and other specified parties to perform an agreed-upon procedures engagement. The client hires the practitioner to assist specified parties in evaluating subject matter or an assertion as a result of the needs of the specified parties. The practitioner’s services are obtained because the specified parties require that findings be independently derived.

27
Q

What is a pro forma report?

A

An accountant may be asked to report on pro forma financial statements that are derived from historical FSs. This refers to a presentation in which info is restated for an event that actually hadn’t occured. An accountant may either REVIEW or EXAMINE the info.

28
Q

A practitioner may report on an examination of pro forma financial information (PFFI) if the related historical financial statements have been

A

Audited.

A practitioner may examine or review PFFI only if certain conditions are met. One condition is that the level of assurance provided be limited to that given on the historical statements. Accordingly, an examination that provides a basis for positive assurance is appropriate only if the historical statements have been audited.

29
Q

A practitioner may accept a compliance attest engagement to perform

A

An agreed upon procedures and an examination.

30
Q
A