A2 - Other Reports - Compilations and Reviews

Question 1

An accountant has compiled the financial statements of a nonissuer but declines to issue a compilation report. This is an example of:

Answer 1

An appropriate reporting decision, if the compiled financial statements are NOT expected to be used by a third party

Question 2

The accountant may decline to issue a compilation report provided that:

Answer 2

Each page of the financial statements is clearly marked to restrict its use and a written engagement letter is used to document the understanding with the client.

Question 3

Financial statements reviewed by an accountant should be accompanied by a report stating that a review:

Answer 3

Is substantially less in scope than an audit

Question 4

If an accountant is not independent, he may:

Answer 4

Issue a compilation report provided he complies with the compilation standards.

Question 5

What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts when reviewing the financial statements of a nonissuer?

Answer 5

Ratio Analysis

Question 6

Compiled financial statements should be accompanied by an accountant’s report stating that:

Answer 6

The accountant conducted the compilation in accordance with Statements on Standards for Accounting and Review Services (SSARS).

Question 7

What is the objective of a compilation?

Answer 7

The objective of a compilation is to assist management in presenting financial information in the form of financial statements

Question 8

What level of assurance does an accountant express in a review engagement?

Answer 8

Limited

Question 9

What is another word for “positive assurance?”

Answer 9

Opinion. An auditor gives positive assurance (i.e. an opinion)

Question 10

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:

Answer 10

Accounting and Review Services Committee

Question 11

An accountant who reviews the financial statements of a nonissuer should issue a report stating that a review:

Answer 11

Is substantially less in scope than an audit.

Question 12

A review consists of:

Answer 12

Inquiries and analytical procedures.

Question 13

The standard report issued by an accountant after reviewing the financial statements of a nonissuer states that a review includes:

Answer 13

Primarily applying analytical procedures to management’s financial data and making inquiries of company management. (AM I SAD MR FIRSALA, this is for the REVIEW REPORT)

Analytical procedures
Management’s financial data

Inquiries

Substantially less in scope than an
Audit
Does not express such opinion

Management’s
Responsibility

Financial statements
Internal control
Responsibility (Auditor's)
SSARS
AICPA
Limited
Assurance

Question 14

Financial statements of a nonissuer that have been reviewed by an accountant should be accompanied by a report stating that:

Answer 14

Management is responsible for the preparation and fair representation of the financial statements.

Question 15

Compilation Report (CAR MR ARSOM)

Answer 15

Compiled
not Audited
or Reviewed

Management’s
Responsibility

Accountant's
Responsibility
SSARS issued by the AICPA
Objective of a compilation is to assist
Management

Question 16

An accountant’s compilation report on the unaudited financial statements of a nonissuer should:

Answer 16

Disclaim an opinion on the financial statements. (CAR MR ARSOM)

Compiled
not Audited
or Reviewed

-therefore because of the “not reviewed or audited” the accountant does not expres an opinion or provide any assurance.

Question 17

The accountant is required to obtain a representation letter under what type of engagement?

Answer 17

Review and Audit. Not required for a compilation.