(A2, S3 &S4) Reporting on Comparative Financial Statements & Review of Interim Financials

Question 1

When unaudited financial statements of a nonissuer are presented in comparative form with audited financial statements in the subsequent year, the unaudited financial statements should be clearly marked to indicate their status and:

Answer 1

Either:

• The report on the unaudited financial statements should be reissued
• The report on the audited financial statements should include a separate paragraph describing the responsibility assumed for the unaudited financial statements.

Question 2

When audited financial statements are presented in comparative form with audited financial statements in a document filed with the Securities and Exchange Commission, such statements should be:

Answer 2

Marked as “unaudited,” but should not be referred to in the auditor’s report or withheld until audited.

Question 3

A CPA may not report on the comparative financial statements of a nonissuer if the Year 1 statements do not have GAAP disclosures but they Year 2 statements do have these disclosures because the statements are not comparable.
True or False?

Answer 3

True.

Question 4

What is a predecessor accountant required to do before reissuing a compilation report on the financial statements of a nonissuer for the prior year?

Answer 4

• Read the financial statements of the current period and the successor’s report
• Compare the prior year’s financial statements with those of the current year.
• Obtain a letter from the successor accountants indicating whether they are aware of any matter that might have a material effect on the financial statements, including disclosures, reported on by the predecessor accountant

Question 5

When the prior period has been audited, the accountant should issue the current period compilation or review report, and any additional paragraph should indicate:

Answer 5

• That prior period statements were audited
• The date of the previous report(s)
• The opinions expressed, and, if other than unmodified, the reasons for the modification
• That no auditing procedures have been performed since the previous report date

Question 6

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

Answer 6

Material modifications should be made to conform with generally accepted accounting principals.

Question 7

An audit report for a publicly held company provides positive assurance whereas the review report for the publicly held company provides negative assurance.
True or False?

Answer 7

True.