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CPA AUD > AUD 2 - Other Reports > Flashcards

AUD 2 - Other Reports Flashcards

1
Q

Which four areas do auditors address in special consideration engagements?

A

1) Audits of f/s prepared in accordance w/ a special purpose framework
2) Audits of single f/s and specific elements, accounts, or items of a f/s
3) Reporting on compliance w/ aspects of contractual or regulatory requirements associated with audited financials
4) Engagements to report on summary f/s

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2
Q

What does OCBOA stand for?

A

Other comprehensive bases of accounting

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3
Q

If the special purpose f/s are prepared in accordance with a regulatory basis and intended for general use, should the auditor include an emphasis of matter or other matter paragraph?

A

NO

EXPLANATION: Instead the auditor should express an opinion about whether the f/s are (1) fairly presented, in all material respects, in accordance with GAAP (2) prepared in accordance w/ the special purpose framework

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4
Q

Harris, CPA, has been asked to audit and report on the balance sheet of Fox Co., but not on the statements of income, RE, or CF. This audit will not be performed in conjunction with an audit of the complete set of f/s. Under these circumstances, ma y Harris accept the engagement?

A

YES

EXPLANATION: Accept the engagement b/c such engagements merely involve special considerations in the application of US GAAS

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5
Q

When auditing a single f/s or a specific element of a f/s, the auditor should obtain an understanding of what three things?

A
  • Purpose for which it is prepared
  • Intended users
  • Steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances
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6
Q

Given an example of interrelated items

A
  • sales and receivables
  • inventory and payables
  • fixed assets and depreciation
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7
Q

The auditor may only issue what type of assurance on compliance?

A

Negative assurance

EXPLANATION: We are “not” lawyers.

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8
Q

What are three key components in a separate report on compliance?

A
  • Audited f/s
  • Negative assurance
  • Restricted use
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9
Q

An auditor may express an opinion on an entity’s A/R balance even if the auditor has disclaimed an opinion on the f/s taken as a whole provided what?

A

Report on A/R is presented separately from the disclaimer of opinion on the f/s

EXPLANATION: If the auditor has disclaimed an opinion on the f/s taken as a whole, the auditor may express an opinion on an entity’s A/R balance only if the special report on A/R is presented separately and the A/R balance does not constitute a major portion of the entity’s complete set of f/s

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10
Q

Financial info is presented in a printed form that prescribes the wording of the independent auditor’s report. The form is not acceptable to the auditor b/c the form calls for statements that are inconsistent with the auditor’s responsibility. What would the auditor most likely do under these circumstances?

A

Reword the form or attach a separate report

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11
Q

Field is an employee of Gold Co. Hardy, CPA, is asked to express an opinion on Field’s profit participation in Gold’s net income. Hardy may accept this engagement only if what?

A

Hardy also audits Gold’s income statement and balance sheet

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12
Q

F/s prepared in accordance with a comprehensive basis of accounting other than GAAP that are not suitably titled require what sort of opinion?

A

Qualified opinion with a basis for modification paragraph

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13
Q

A report on OCBOA f/s should include an _______ __ ____ paragraph stating the basis, referring to the footnote that describes it, and indicating that it is a non-GAAP basis.

A

Emphasis-of-matter

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14
Q

Reports on special purpose frameworks are issued in conjuction with what?

A

Compliance w/ reporting requirements to be filed with a specific regulatory agency

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15
Q

CPAs can perform three levels of service w/r/t unaudited f/s of a nonissuer. What are these three levels?

A
  • Preparation
  • Review
  • Compilation
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16
Q

In preparing financial statements, is the CPA giving any assurance?

A

No assurance

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17
Q

Since preparation is a non-attest service, does it require a determination of whether the accountant is independent of the entity?

A

NO

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18
Q

What does SSARS stand for?

A

Statements on Standards for Accounting and Review Services

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19
Q

The Accounting and Review Services Committee of the AICPA is the authoritative body designated to issue pronouncements in connection w/ the unaudited financial statements of _______.

A

Nonissuers (private companies)

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20
Q

What professional standard applies to reviews of interim financial info of nonissuers whose annual f/s are audited?

A

SAS

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21
Q

All SSARS engagements require a written agreement with management regarding engagement terms. What is this agreement called?

A

Engagement letter

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22
Q

For reviews only, the auditor should obtain sufficient, _______ evidence.

A

appropriate

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23
Q

If the accountant is unable to include a “no assurance” statement on each page of the prepared f/s, the accountant should do one of what two things?

A

1) Issue a disclaimer OR

2) Perform a compilation engagement

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24
Q

What is included in a standard compilation report (Mr. Sag ceases to nag Ace)?

A

MR Management is responsible for the f/s
SAG Statements done according to accounting principles generally accepted in the United States
CES Compilation engagement done according to SSARS
NAG Not an audit or a review
ACE Accuracy, completeness, and expression of opinion is not being done

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25
Q

A compilation report prepared in accordance with a special purpose framework should include an additional paragraph that references __________ responsibility for determining the applicable reporting framework is acceptable.

A

Management’s

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26
Q

Is a compilation with omission of all disclosures okay?

A

Yes, but disclose it

27
Q

Review procedures should be _______.

A

Tailored

28
Q

What does SOAP stand for?

A

Summary of adjustments past

29
Q

A review that is incomplete will prevent the issuance of what?

A

A review report

30
Q

Does review documentation include audit test work?

A

No

31
Q

Does review documentation include communications with other accountants?

A

Yes

32
Q

Does review documentation include test of internal controls?

A

No

33
Q

What are the 8 requirements for a review engagement?

A

U LIAR CPA

Understand client

Learn about business
Inquire of inside personnel
Analytical procedures
Review - other procedures should be performed

Client rep letter
Professional judgement
Accountant should communicate results

34
Q

In the intro paragraph of a review report, there should be a statement that a review includes primarily applying what type of procedures to management’s financial data?

A

Analytical procedures

35
Q

In the intro paragraph of a review report, there should be a statement that a review is substantially less in scope than a what?

A

Audit

36
Q

In the accountant’s conclusion paragraph of the review report, the paragraph should state the accountant is not aware of what?

A

Any material modifications

37
Q

In an “Independent Accountant’s Review Report,” what are three key items in the intro paragraph (RAM SAD)?

A

RAM SAD

Reviewed
Applying analytical procedures
Making inquiries

Substantially less in scope
Audit
Do not express such an opinion

38
Q

In an “Independent Accountant’s Review Report,” what are the key items in the management responsibility paragraph (MR DIM)?

A

MR DIM

Management
Responsible

Design
Implementation
Maintenance of internal control

39
Q

In an “Independent Accountant’s Review Report,” what are the key items in the accountant’s responsibility paragraph (AR SAL)?

A

AR SAL

Accountant
Responsibility

SSARS
AICPA
Limited assurance

40
Q

In an “Independent Accountant’s Review Report,” what are the key items in the accountant’s conclusion paragraph (AC NAM)?

A

AC NAM

Accountant’s
Conclusion

Not
Aware
Material modifications

41
Q

When the compiled or reviewed f/s are accompanied by supplementary info, the accountant should indicate degree of what?

A

Degree of responsibility he is taking w/r/t the info in an other-matter paragraph OR separate report on supplementary info

42
Q

The accountant should include what sort of paragraph in the accountant’s compilation or review report when there is REQUIRED supplementary info?

A

Other-matter paragraph

43
Q

Gole, CPA, is engaged to review the Year 2 f/s of North Co, a nonissuer. Previously, Gole audited North’s Year 1 f/s and expressed an unmodified opinion. GOle decides to include a separate paragraph in the Year 2 review report b/c North plans to present comparative f/s for Year 2 and Year 1. What should this separate paragraph indicate?

A

No auditing procedures were performed after the date of the Year 1 auditor’s report

44
Q

True or false.

Letters for underwriters typically give negative assurance on unaudited interim financial information.

A

True

45
Q

What is defined as a letter from the CPA to the named underwriter just before the registration of the client’s securities?

A

Comfort letter

46
Q

Does a comfort letter update the opinion on previously issued f/s?

A

NO

47
Q

When a comfort letter is to be issued, the CPA is required to perform a ______ of interim financial info in accordance with auditing standards.

A

Review

48
Q

Should the auditor comment or provide assurance on market risk sensitive instruments?

A

NO

49
Q

Should the auditor comment or provide assurance on qualitative disclosures?

A

NO

50
Q

What are you auditing or examining in an attest engagement?

A

Something other than historical f/s

51
Q

What does SSAE stand for?

A

Statements on Standards for Attestation Engagements

52
Q

Do SSAE apply to operational audits, which are normally performed by internal auditors to evaluate the effectiveness and efficiency of various components or processes of a company?

A

NO

53
Q

What is defined as a framework for attest f(x) beyond historical f/s?

A

Attestation standards

54
Q

Attestation standards provide levels of assurance below that provided by a ________ audit.

A

GAAS

55
Q

What is an easy way to remember the 11 attestation standards?

A

TIPPY PASSER

56
Q

True or false.

A CPA is required to comply with the provisions of the SSAE when engaged to review MD&A prepared pursuant to rules and regulations adopted by the SEC.

A

True

57
Q

If an accountant performs a compilation or review, is a written report required?

A

YES

58
Q

In the compilation of f/s for a nonissuer, what are five things the accountant should understand about the client’s business (STAFF)?

A

STAFF

Staff qualifications
Transaction types and frequency
Accounting basis used to prep f/s
Form of accounting records
F/s form and content
59
Q

You should never associate yourself with false, fraudulent or _________ financial statements.

A

misleading

60
Q

A compilation report for a nonissuer is just one ______.

A

paragraph

61
Q

Written representations from the current management are required for what periods being reported on during an engagement to review the f/s of a nonissuer?

A

All periods

62
Q

Modifications are made to the standard review report only when there is what?

A

Departure from GAAP

63
Q

An accountant has compiled the f/s of a nonissuer but declines to issue a compilation report. Is this appropriate?

A

No

EXPLANATION: An inappropriate reporting decision, because SSARS require that a report be issued when an accountant has compiled f/s

64
Q

When an accountant compiles projected financial statements, the accountant’s report should include a separate paragraph that describes what?

A

Limitations on the projection’s usefulness

CPA AUD (7 decks)

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