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A CPA should not normally refer to which one of the following subjects in a "comfort letter" to underwriters?


A) The independence of the CPA.
B) Changes in financial-statement items during a period subsequent to the date and period of the latest financial statements in the registration statement.
C) Unaudited financial statements and schedules in the registration statement.
D) Management's determination of line of business classifications.

E) A) and B)
F) B) and C)

Correct Answer

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For a CPA,a client imposed scope limitation during a review of financial statements is most likely to result in:


A) Resignation from the engagement.
B) Issuance of a disclaimer of opinion.
C) Issuance of an adverse opinion.
D) Only an explanatory paragraph added to report, with no change in the assurance provided.

E) B) and C)
F) B) and D)

Correct Answer

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An auditor's report on financial statements prepared in accordance with a special purpose financial reporting framework of accounting other than generally accepted accounting principles should include all of the following except:


A) Reference to the note to the financial statements that describes the basis of preparation of the financial statements.
B) Disclosure that the audit was performed in accordance with generally accepted auditing standards.
C) An opinion as to whether the basis of accounting used is appropriate under the circumstances.
D) An opinion as to whether the financial statements are presented fairly in conformity with the basis of accounting described.

E) A) and B)
F) None of the above

Correct Answer

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The accountants' compilation report should be dated as of the date of:


A) Completion of fieldwork.
B) Completion of the compilation.
C) Transmittal of the compilation report.
D) The latest subsequent event referred to in the notes to the financial statements.

E) A) and D)
F) A) and B)

Correct Answer

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When an auditor reports on financial statements prepared on an entity's income tax basis,the auditor's report should:


A) Disclose that the income tax basis is a basis of accounting other than generally accepted accounting principles.
B) Disclaim an opinion on whether the statements were examined in accordance with generally accepted auditing standards.
C) Not express an opinion on whether the statements are presented in conformity with the basis of accounting used.
D) Include an explanation of how the results of operations differ from the cash receipts and disbursements basis of accounting.

E) A) and B)
F) A) and C)

Correct Answer

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Which of the following is correct concerning financial statements prepared in the United States for use in another country?


A) The auditor must follow GAAP of both the United States and of the other country.
B) The type of audit report issued depends upon whether it is for use primarily outside the United States.
C) The audit must only follow US GAAP.
D) Auditors from the other country must be involved with the audit to assure adequate performance of that country's standards.

E) A) and D)
F) A) and C)

Correct Answer

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The objective of a review of interim financial information is to provide the accountant with a basis for reporting whether:


A) A reasonable basis exists for expressing an updated opinion regarding the financial statements that were previously audited.
B) Material modifications should be made to conform with generally accepted accounting principles.
C) The financial statements are presented fairly in accordance with standards of interim reporting.
D) The financial statements are presented fairly in accordance with generally accepted accounting principles.

E) A) and C)
F) B) and D)

Correct Answer

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If the auditor believes that financial statements prepared on the entity's income tax basis are not suitably titled,the auditor should:


A) Issue a disclaimer of opinion.
B) Explain in the notes to the financial statements the terminology used.
C) Issue a compilation report.
D) Modify the auditor's report to disclose any reservations.

E) All of the above
F) B) and C)

Correct Answer

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Comfort letters are ordinarily signed by the:


A) Client.
B) Client's lawyer.
C) Independent auditor.
D) Internal auditor.

E) B) and C)
F) A) and B)

Correct Answer

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A practitioner's report on agreed-upon procedures that is in the form of procedures and findings should contain


A) Negative assurance that the procedures did not necessarily disclose all reportable conditions.
B) An acknowledgment of the practitioner's responsibility for the sufficiency of the procedures.
C) A statement of restrictions on the use of the report.
D) A disclaimer of opinion on the entity's financial statements.

E) None of the above
F) B) and C)

Correct Answer

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Inquiry and analytical procedures ordinarily performed during a review of a nonpublic entity's financial statements include:


A) Analytical procedures designed to identify reportable conditions related to internal control.
B) Inquiries concerning actions taken at meetings of the stockholders and the board of directors.
C) Analytical procedures designed to test the accounting records by obtaining corroborating evidential matter.
D) Inquiries of knowledgeable outside parties such as the client's attorneys and bankers.

E) A) and C)
F) B) and C)

Correct Answer

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Which of the following circumstances requires modification of the accountant's report on a review of interim financial information of publicly held entity? Inconsistent Accounting Principle ApplicationInadequate Disclosure A)   Yes  Yes  B)   Yes  No  C)   No  Yes  D)   No  No \begin{array}{c}&\text{Inconsistent Accounting}\\\ & \text{Principle Application}&\text{Inadequate Disclosure}\\\text { A) } & \text { Yes } & \text { Yes } \\\text { B) } & \text { Yes } & \text { No } \\\text { C) } & \text { No } & \text { Yes } \\\text { D) } & \text { No } & \text { No }\end{array}


A) Option A
B) Option B
C) Option C
D) Option D

E) All of the above
F) None of the above

Correct Answer

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Which of the following does not result in a modification of a compilation report?


A) A lack of independence on the part of the auditors.
B) A departure from generally accepted accounting principles.
C) A lack of adequate disclosure in the financial statements.
D) A lack of consistent application of generally accepted accounting principles.

E) B) and C)
F) A) and D)

Correct Answer

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Which of the following requires modification of a review report:


A) A change in accounting principles.
B) A substantial doubt about a company's ability to continue as a going concern.
C) A departure from generally accepted accounting principles.
D) A change in an accounting estimate.

E) A) and B)
F) B) and D)

Correct Answer

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Interim information of public companies.


A) Must be as comprehensive as that filed annually with the Securities and Exchange Commission.
B) Must be reviewed by CPAs before it is filed with the Securities and Exchange Commission.
C) Must be reviewed continuously by CPAs using continuous auditing techniques.
D) Requires no accountant association until it becomes a part of the companies' annual financial information.

E) None of the above
F) B) and D)

Correct Answer

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Which of the following is not an example of financial statements that use a special purpose financial reporting framework?


A) Of a partnership which follows accounting practices used to file its tax return.
B) Prepared for limited purposes such as relating to a contract a company has entered into.
C) Of an organization that has limited the scope of the auditor's examination.
D) Of an organization that follows procedures of a regulatory agency that oversees the company and its operations.

E) All of the above
F) B) and D)

Correct Answer

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The auditors must issue a compilation report if they prepare a client's financial statements and submit them to a client who intends to use them for external purposes.

A) True
B) False

Correct Answer

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An audit opinion on cash basis financial statements is an example of an opinion on financial statements that follow a special purpose financial reporting framework.

A) True
B) False

Correct Answer

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The auditors should take exception to assets presented at their estimate current values in personal financial statements.

A) True
B) False

Correct Answer

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