AUD 5.4 - Agreed Upon Procedrues And Prospective Financial Statements

Question 1

Under an agreed-upon procedures engagement, who assumes responsibility for whether the procedures are sufficient?

Answer 1

The client

Question 2

An agreed-upon procedures engagement may be performed as long as all of the following conditions exist:

Answer 2

Independence of the practitioner
Agreement of the parties
Measuraility and consistency
Sufficiency of procedures
General or restricted use of the report
Responsibility for the subject matter
(If engagements on prospective financial statements) - a summary of significant assumptions

Question 3

If engagements to perform agreed-upon procedures on prospective financial statements, then what is required to be included?

Answer 3

A summary of significant assumptions must be included

Question 4

Forward looking financial statements based on projections:

Answer 4

Prospective financial statements

Question 5

What periods can prospective financial statements cover? What periods can they not cover?

Answer 5

Can cover a period that has partially expired
Cannot cover periods that have completely expired

Question 6

What are the two types of prospective financial statements?

Answer 6

Financial forecasts
Financial projections

Question 7

Reflect the expected financial results for a future period based on expected conditions and expected courses of actions:

Answer 7

Financial forecasts

Question 8

Reflect the financial position and results of operations based on a “what if” type of scenario/hypothetical assumptions:

Answer 8

Financial projections

Question 9

Can financial forecasts be general and limited use? Can financial projections be general and limited use?

Answer 9

Forecasts - general or limited use
Projections - limited use

Question 10

What are the four engagements a practitioner could be associated with prospective financial statements?

Answer 10

Preparation engagement
Compilation engagement
Examination engagement
Agreed-upon procedures engagement

Question 11

Is a review of prospective financial statements allowed?

Answer 11

NO

Question 12

Who provides guidance for the compilations of prospective financial statements?

Answer 12

SSARS

Question 13

To properly assemble the financial data based on the responsible party’s assumptions:

Answer 13

Compilation of prospective financial statements

Question 14

Who provides guidance on the preparation of prospective financial statements?

Answer 14

SSARS

Question 15

A practitioner should only prepare prospective financial information that:

Answer 15

Includes the summary of significant assumptions
And
If a financial projection, includes identification of the hypothetical assumptions and describes the limitations on the useful of the presentation

Question 16

The purpose of an examination of prospective financial statements is to:

Answer 16

Express an opinion on whether the statements are presented in conformity with AICPA standards
And
The underlying assumptions provide a reasonable basis for the prospective statements

Question 17

What is required for examination engagements?

Answer 17

Independence

Question 18

If AICPA presentation quidelines are not followed in an examination of prospective financial statements, what opinion would be required?

Answer 18

Qualified or adverse

Question 19

If significant assumptions are not disclosed in an examination of prospective financial statements, what opinion would be required?

Answer 19

Adverse

Question 20

If basis is not reasonable in an examination of prospective financial statements, what opinion would be required?

Answer 20

Adverse

Question 21

If there is a scope limitation in an examination of prospective financial statements, what opinion would be required?

Answer 21

Disclaimer of opinion

Question 22

A presentation of prospective financial information that excludes one of the following essential elements: sales, GP, infrequent items, income tax expense, etc. and are

Answer 22

Partial presentation

Question 23

Partial presentations are ok for general or limited use?

Answer 23

Limited use only

Question 24

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
Identification of prospective financial statements?

Answer 24

Compilation: Yes
Examination: Yes
Agreed-upon procedures: Yes

Question 25

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
Compliance with AICPA standards?

Answer 25

Compilation: Yes
Examination: Yes
Agreed-upon procedures: Yes

Question 26

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
Limitation of scope?

Answer 26

Compilation: Yes
Examination: No
Agreed-upon procedures: Yes

Question 27

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
An enumeration of procedures performed?

Answer 27

Compilation: No
Examination: No
Agreed-upon procedures: Yes

Question 28

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
A caveat that prospective results may not be achieved?

Answer 28

Compilation: Yes
Examination: Yes
Agreed-upon procedures: Yes

Question 29

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
CPA has no responsibility for updating the report:

Answer 29

Compilation: Yes
Examination: Yes
Agreed-upon procedures: Yes

Question 30

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
Opinion on PFS accordance with AICPA presentation guidelines?

Answer 30

Compilation: No
Examination: Yes
Agreed-upon procedures: No

Question 31

Which reports (compilation, examination, and agreed-upon procedures reports) include a statement regarding:
Limited use of the report?

Answer 31

Compilation: only required for projection
Examination: only required for projection
Agreed-upon procedures: only required for projection

Question 32

Used to demonstrate the effect of a future or hypothetical even by showing how it might have affected the historical financials if it had occurred during the period covered by those financials:

Answer 32

Pro-forma financial statements

Question 33

The practitioners report for pro-forma financial statements should make reference to….and should state whether….

Answer 33

Reference the financial statements from which the historical financial information was derived
And
Whether the financial statements were audited or reviewed