Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements?
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1 .On February 25, a CPA issued an auditor's report expressing an unmodified opinion on financial statements for the year ended January 31. On March 2, the CPA learned that on February 11, the entity incurred a material loss on an uncollectible trade receivable as a result of the deteriorating financial condition of the entity's principal customer that led to the customer's bankruptcy. Management then refused to adjust the financial statements for this subsequent event. The CPA determined that the information is reliable and that there are creditors currently relying on the financial statements. The CPA's next course of action most likely would be to:
A Notify each member of the entity's board of directors about management's refusal to adjust the financial statements. B Notify the entity's creditors that the financial statements and the related auditor's report should no longer be relied on. C Issue revised financial statements and distribute the...
2 .An audit report is dated February 1, Year 2. Which of the following events, occurring on February 12, Year 2, is most likely to cause the auditor to request that the financial statements be revised?
A The auditor becomes aware that a material purchase included in the Year 1 financial statements was not paid for until Year 2. B The auditor becomes aware that a key member of management is resigning. C The auditor becomes aware that the staff accountant did not properly complete a crucial step in ...
3 .Which of the following circumstances most likely would require an auditor to apply an omitted procedure after the audit report issuance date?
A Generally accepted accounting principles are violated. B The auditor's report is unsupported as a result of the omitted procedure. C The engagement letter requires the procedure to be performed. D The client has requested that the procedure be performed.
4 .If information accompanying the basic financial statements has been subjected to auditing procedures, the auditor may include in the auditor's report on the financial statements an opinion that the accompanying information is fairly stated in:
A Conformity with generally accepted accounting principles. B Accordance with attestation standards expressing a conclusion about management's assertions. C Accordance with generally accepted auditing standards. D All material respects in relation to the financial statements as a whole.
5 .Blue, CPA, has been asked to issue a written report on the application of the requirements of an applicable financial reporting framework to a specific transaction by an entity that is audited by another CP Blue may accept this engagement, but should:
A Consult with the continuing CPA to obtain information relevant to the transaction. B Notify the entity that the report is for the general use of all interested parties. C Disclaim any opinion that the hypothetical application of the applicable financial reporting framework conforms with generally ...
7 .An accountant has been engaged to compile pro forma financial statements. During the accountant's acceptance procedures, it is discovered that the accountant is not independent with respect to the company. What action should the accountant take with regard to the compilation?
A The accountant should discuss the lack of independence with legal counsel to determine whether it is appropriate to accept the engagement. B The accountant should disclose the lack of independence in the accountant's compilation report. C The accountant should compile the pro forma financial state...
8 .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 riskof material misstatementdue to fraudDiscovery of significantdeficiencies in the design ofthe entity's internal control
A Yes........Yes B No.........Yes C No.........No D Yes........No
9 .Which of the following is not true about documentation requirements related to a review of a nonissuer's financial statements?
A A management representation letter should be included in the documentation files. B Written documentation from a compilation engagement may be used to provide support for the review report. C The auditor must document evidence obtained about the operating effectiveness of controls. D Documentation...
10 .Which of the following procedures most likely would be performed in a review engagement of a nonissuer's financial statements in accordance with Statements on Standards for Accounting and Review Services?
A Examining subsequent cash receipts. B Observing a year-end inventory count. C Making inquiries of management. D Assessing the internal control system.
