In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction.The accountant's report should include a statement that
Any difference in the facts, circumstances, or assumptions presented may change the report.
When reporting on financial statements prepared on the same basis of accounting as that used for income tax purposes, the auditor should include in the report a paragraph that
States that the income tax basis of accounting is a basis of accounting other than generally accepted accounting principles.
When an entity's auditor issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive
Negative assurance on capsule information.
Comfort letters ordinarily are
Comfort letters are requested by and addressed to underwriters and other parties. They provide the underwriter with "reasonable grounds to believe there are no material omissions or misstatements in financial statements related to a 1933 Act securities offering." They are addressed to the underwriter (or other requesting parties) and signed by the auditor.
Which of the following statements is a standard applicable to financial statement audits in accordance with Government Auditing Standards (the Yellow Book)?
An auditor should report on the scope of the auditor's testing of compliance with laws and regulations.Financial statement audits in accordance with Government Auditing Standards require the following reports:an audit report;a report on internal control;a report on compliance with laws, regulations, and the provisions of contracts or grant agreements. The compliance report would identify the scope of the auditor's testing of compliance with laws and regulations.
In reporting under Government Auditing Standards, an auditor most likely would be required to report a falsification of accounting records directly to a federal inspector general when the falsification is
Communicated by the auditor to the auditee and the auditee fails to make a required report of the matter.
In an audit in accordance with Government Auditing Standards an auditor is required to report on the auditor's tests of the entity's compliance with applicable laws and regulations.This requirement is satisfied by designing the audit to provide
Reasonable assurance of detecting misstatements that are material to the financial statements.When auditing under Government Auditing Standards, the auditor is required to report on the auditor's tests of the entity's compliance with applicable laws and regulations. Designing the audit to provide reasonable assurance of detecting misstatements that are material to the financial statements will satisfy that requirement. Such a design would encompass the detection of misstatements arising from noncompliance with provisions of contracts or grant agreements that have a direct and material effect on the determination of financial statement amounts.
A CPA is required to comply with the provisions of Statements on Standards for Accounting and Review Services when
The Statements on Standards for Accounting and Review Services are not applicable when: 1) preparing a working trial balance; 2) assisting in adjusting the books of account; 3) consulting on accounting, tax, and similar matters; 4) preparing tax returns ; 5) providing bookkeeping or data processing services, and 6) processing financial data for clients of other accounting firms.
The clarified SSARSs applicable to preparation engagements (AR-C 70) do not apply to the following engagements, except for
Preparing financial statements to be presented alongside a personal financial plan.
An accountant has been engaged to compile the financial statements of a nonpublic entity in accordance with Statements on Standards for Accounting and Review Services (SSARS).Do the SSARSs require that the compilation report be printed on the accountant's letterhead and that the report be manually signed by the accountant?
The SSARSs do not require that the compilation report be printed on the accountant's letterhead or that the report be manually signed by the accountant. The compilation report requires the signature of the accountant (or firm), but that signature may be printed or manually signed. The compilation report requires the identification of the accountant's city and state, which may be accomplished by presenting the report on the accountant's letterhead; otherwise, that information may be provided in the signature block.
If requested to perform a compilation engagement for a nonissuer in which an accountant has an immaterial direct financial interest, the accountant is
Not independent and, therefore, may issue a compilation report, but may not issue a review report.
Blue, CPA, has been asked to render an opinion on the application of accounting principles to a specific transaction by an entity that is audited by another CPA.
Consult with the continuing CPA to obtain information relative to the transaction.
An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements.
Refer to the report issued on the audited financial statements.
Payroll Data Co. (PDC) processes payroll transactions for a retailer.Cook, CPA, is engaged to express an opinion on a description of PDC's internal controls placed in operation as of a specific date. These controls are relevant to the retailer's internal control, so Cook's report may be useful in providing the retailer's independent auditor with information necessary to plan a financial statement audit. Cook's report should
Contain a disclaimer of opinion on the operating effectiveness of PDC's controls.
In reporting on compliance with laws and regulations during a financial statement audit in accordance with Government Auditing Standards, an auditor should include in the auditor's report
Material instances of fraud and illegal acts that were discovered.
The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits.Which of the following is a supplemental reporting standard for government financial audits?
A written report on the auditor's understanding of the entity's internal control structure and assessment of control risk should be prepared.
Which of the following statements is a standard applicable to financial statement audits in accordance with Government Auditing Standards?
An auditor should report on the scope of the auditor's testing of internal controls.
The authoritative body designated to promulgate standards concerning an accountant's association with unaudited financial statements of an entity that is not required to file financial statements with an agency regulating the issuance of the entity's securities is the
Accounting and Review Services Committee.The standards that address unaudited financial statements are the Statements on Standards for Accounting and Review Services. These standards are issued by the AICPA's Accounting and Review Services Committee.
The clarified SSARSs deal with each of the following engagements involving nonissuers, except for
Performing agreed-upon procedures on financial statement items.
The clarified SSARSs applicable to preparing financial statements (AR-C 70) apply to each of the following, except for
Preparing financial statements in connection with business valuation services.
Clark, CPA, compiled and properly reported on the financial statements of Green Co., a nonpublic entity, for the year ended March 31, 20X1. These financial statements omitted substantially all disclosures required by generally accepted accounting principles (GAAP).Green asked Clark to compile the statements for the year ended March 31, 20X2, and to include all GAAP disclosures for the 20X2 statements only, but otherwise present both years' financial statements in comparative form. What is Clark's responsibility concerning the proposed engagement?
Clark may not report on the comparative financial statements because the 20X1 statements are not comparable to the 20X2 statements that include the GAAP disclosures.
When an accountant is engaged to compile a nonpublic entity's financial statements that omit substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements are
Not designed for those who are uninformed about the omitted disclosures.
When engaged to compile the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entity's accounting principles and practices.This requirement most likely will include obtaining a general understanding of the
Stated qualifications of the entity's accounting personnel.
Which of the following procedures is more likely to be performed in a review engagement of a nonpublic entity than in a compilation engagement?
Obtaining a representation letter from the chief executive officer.
A CPA is engaged to audit the financial statements of a nonissuer. After the audit begins, the client's management questions the extent of procedures and objects to the confirmation of certain contracts. The client asks the accountant to change the scope of the engagement from an audit to a review. Under these circumstances, the accountant should do each of the following, EXCEPT
Issue an accountant's review report with a separate paragraph discussing the change in engagement scope.
Financial statements of a nonpublic entity that have been reviewed by an accountant should be accompanied by a report stating that a review
Consists principally of inquiries of the entity's management and analytical procedures applied to financial data.
Which of the following procedures would be generally performed when evaluating the accounts receivable balance in an engagement to review financial statements in accordance with Statements on Standards for Accounting and Review Services?
Perform a reasonableness test of the balance by computing days' sales in receivables.
A CPA is reporting on comparative financial statements of a nonissuer. The CPA audited the prior year's financial statements and reviewed those of the current year in accordance with Statements on Standards for Accounting and Review Services (SSARS). The CPA has added a separate paragraph to the review report to describe the responsibility assumed for the prior year's audited financial statements. This separate paragraph should indicate
The type of opinion expressed previously. |