A2 - Compilation and Review of F/S

Question 1

In a compilation engagement, the objective is to___.

Answer 1

Present in the form of F/S that is the representation of management w/out undertaking to express any assurance on the F/S. The CPA does not perform any audit or review procedures.

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Question 2

A CPA may express limited (negative) assurance on the F/S that have not been audited. The objective of a review engagement is to express ____.

Answer 2

Limited assurance that there are no material modifications that should be made to the F/S in order for the statements to be in conformity with the applicable financial reporting framework. A review is based on inquiry and analytical procedures performed by the CPA,

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Question 3

Compilation is not an ____ engagement, it is an ___ engagement.

A review is both an ____ and ___ engagement.

Answer 3

Compilation is not an assurance engagement, it is an attest engagement.

A review is both an assurance and attest engagement.

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Question 4

When an accountant performs more than one service (i.e., a compilation and an audit), the accountant generally should issue the report that is appropriate for the ___ level of service rendered.

Answer 4

highest

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Question 5

Submission is defined as ____.

Answer 5

Presenting F/S to a client or third party that the accountant has prepared, either manually or through the use of computer software.

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Question 6

Preparation implies that___

Answer 6

The accountant has created F/S that would not otherwise exist.

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Question 7

If the accountant prepares many adjusting or correcting entries, this could be considered preparation of F/S and ____would apply.

Answer 7

SSARS

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Question 8

An accountant performing a compilation is required to have a general understanding of the client’s business and the accounting principles and practices used by the client, including:

Answer 8

STAFF

Staff qualifications

Transaction types and frequency

Accounting basis used to prepare the F/S

Form of the accounting records

F/S’ form and content

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Question 9

Documentation in a Compilation Engagement should include:

Answer 9

1. Engagement Letter
2. Any significant findings or issues
3. Oral or written communications w/ management regarding fraud or illegal acts that came to the accountant’s attention

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Question 10

Compiled F/S that omit GAAP disclosures are acceptable if the:

Answer 10

• F/S are otherwise in conformity w/ GAAP
• Reason for omission was not to deceive the user
• Compilation warns the user of missing disclosures

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Question 11

The accountant will be exempt from complying with the requirements of SSARS if:

Answer 11

The client agrees and the accountant states in the report that the personal F/S will not be used to obtain credit or for any purpose other than developing the financial plan; and

Nothing comes to the accountant’s attention indicating that the F/S will be used to obtain credit

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Question 12

An accountant who submits unaudited F/S to the client that are not expected to use used by third party may use an _____ rather than a compilation report.

Answer 12

engagement letter

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Question 13

When ____ (not a report) is issued, the accountant should include a reference on each page of the F/S restricting the use.

Answer 13

engagement letter

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Question 14

The performance requirements applicable to a review are:

Answer 14

U LIAR CPA

Understanding the client should established

Learn and/or obtain sufficient knowledge of the entity’s business

Inquiries should be addressed to appropriate individuals

Analytical procedures should be performed

Review – other procedures should be performed

Client representation letter should be obtained from management

Professional judgment should be used to evaluate results

Accountant (CPA) should communicate results

Question 15

Review

The successor accountant_______ to communicate with the predecessor accountant regarding acceptance if the engagement and matters of continuing accounting significance.

A) Required

B) may decide; but is not required

Answer 15

B

Question 16

Review

Inquires are of ____ personal, not ___ people or entities.

Answer 16

Internal ; external

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Question 17

Review - Accountant Communicates Results

Each page of the statements should be marked “__”

Answer 17

See Independent Accountant’s Review Report

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Question 18

_Review - Report Modifcations _

When the accountant believes modification of the report is appropriate, a seperate paragraph disclosing the departure should be added ______.

Answer 18

to the end of the report.

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Question 19

An opinion, even qualified or adverse, requires an audit. When an accountant performing a compilation or a review becomes aware of a GAAP departure, the report would be ________. An opinion would _____.

Answer 19

Modified or the accountant withdraw

Not be expressed.

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Question 20

Compiltations and Review:

When the F/S are accompanied by supplementary information for analysis, the accountant should ____.

Answer 20

Indicate the degree of responsibility he or she is taking with respect to the information.

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Question 21

Change in engagement

Before agreeing to a change, an accountant should consider the:

Answer 21

1. Reason for the request, especially if there are scope limitations
2. Effort required to complete the engagement, and
3. Estimated additional costs to complete the engagement.

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