AICPA CPA Auditing and Attestation Set 3

During an engagement to review the financial statements of a nonissuer an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should:

A. Express negative assurance on the accounting principles that do not conform with GAAP.
B. Disclose the departure from GAAP in a separate paragraph of the report.
C. Issue an adverse or an "except for" qualified opinion, depending on materiality.
D. Express positive assurance on the accounting principles that conform with GAAP.

Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements?

A. The accountant is independent with respect to the entity.
B. The financial statements have not been audited.
C. A compilation consists principally of inquiries and analytical procedures.
D. The accountant does not express any assurance on the financial statements.

Which of the following accounting services may an accountant perform without being required to issue a compilation or review report under the Statements onStandards for Accounting and Review Services?
I. Preparing a working trial balance.
II. Preparing standard monthly journal entries.

Which of the following inquiry or analytical procedures ordinarily is performed in an engagement to review a nonissuer's financial statements?

A. Analytical procedures designed to test the accounting records by obtaining corroborating evidential matter.
B. Inquiries concerning the entity's procedures for recording and summarizing transactions.
C. Analytical procedures designed to test management's assertions regarding continued existence.
D. Inquiries of the entity's attorney concerning contingent liabilities.

When compiling the financial statements of a nonissuer, an accountant should:
A. Review agreements with financial institutions for restrictions on cash balances.
B. Understand the accounting principles and practices of the entity's industry.
C. Inquire of key personnel concerning related parties and subsequent events.
D. Perform ratio analyses of the financial data of comparable prior periods.

Jones Retailing, a nonissuer, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements provided the:

A. Reason for omitting the disclosures is explained in the engagement letter and acknowledged in the management representation letter.
B. Financial statements are prepared on a comprehensive basis of accounting other than generally accepted accounting principles.
C. Use of the financial statements is restricted to internal use only.
D. Omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report

Which of the following procedures is usually performed by the accountant in a review engagement of a nonissuer?

A. Sending a letter of inquiry to the entity's lawyer.
B. Comparing the financial statements with statements for comparable prior periods.
C. Confirming a significant percentage of receivables by direct communication with debtors.
D. Communicating significant deficiencies discovered during the study of the internal control structure.

Which of the following procedures is more likely to be performed in a review engagement of a nonissuer than in a compilation engagement?

A. Gaining an understanding of the entity's business transactions.
B. Making a preliminary assessment of control risk.
C. Obtaining a representation letter from the chief executive officer.
D. Assisting the entity in adjusting the accounting records.

Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following engagements?

A. Proposing adjustments to the books of account for a partnership.
B. Reviewing interim financial data required to be filed with the SEC.
C. Preparing standard monthly journal entries.
D. Compiling an individual's personal financial statement to be used to obtain a mortgage.

When compiling a nonissuer's financial statements, an accountant would be least likely to:

A. Perform analytical procedures designed to identify relationships that appear to be unusual.
B. Read the compiled financial statements and consider whether they appear to include adequate disclosure.
C. Omit substantially all of the disclosures required by generally accepted accounting principles.
D. Issue a compilation report on one or more, but not all, of the basic financial statements.