AUD 6.5 - Review Reports

Question 1

The accountant should modify the review report when they become aware that the financial statements do not include:

Answer 1

The description of he special purpose framework
A summary of significant accounting policies
An adequate description about how the special purpose framework differs from GAAP
Informative disclosures

Question 2

At the accountants discretion, this can be added to their review report to discuss any uncertainties or inconsistencies or to emphasize any matter already disclosed in the financial statements such as subsequent events, significant related party transactions, or changes in accounting principle.

Answer 2

Emphasis of matter paragraph
Or
Other matter paragraph

Question 3

A review report prepared in accordance with a cash or tax special purpose framework should include:

Answer 3

An emphasis of matter paragraph that refers to the note to the financial statements that describe the framework

Question 4

A review report prepared in accordance with the regulatory or contractual basis of accounting special purpose framework should include:

Answer 4

A description of the purpose for which the financial statements are prepared and include an other matter paragraph restricting the use of the accountants review report

Question 5

If the accountant concludes that going concern is alleviated, the accountant may:

Answer 5

Include an emphasis of matter paragraph

Question 6

If the accountant concludes that going concern remains, the accountant should:

Answer 6

Include a “substantial doubt about the entity’s ability to continue as a going concern” section that includes the terms “substantial doubt” and “going concern”

Question 7

The accountant should express a modified conclusion on their review report if determined that the financial statements are manually misstated. When should that modified conclusion be Qualified and when should it be Adverse?

Answer 7

Qualified: effect of the matter is material but not pervasive
Adverse: effect of the matter is material and pervasive

Question 8

When a qualified conclusion is decided, the review report should be modified to include:

Answer 8

Conclusion section with a title “qualified conclusion”
“Basis for qualified conclusion” section before the conclusion section describing the matter

Question 9

When an adverse opinion is decided, the accountants review report should be modified to include:

Answer 9

Conclusion section titled “adverse conclusion”
“Basis for adverse opinion” section before the conclusion paragraph describing the matter

Question 10

Emphasis of matter and other matter paragraphs are required when:

Answer 10

Management revises the financial statements
Financials are prepared in accordance with a special purpose framework
Reporting on comparative statements and the prior period is audited
Substantial doubt about the entity’s ability to continue as a going concern

Question 11

When the periods presented in a comparative financial statements are either all compiled or all reviewed, the continuing accountant should:

Answer 11

Update the report on the prior period and issue it as part of the current report

Question 12

When the continuing accountant performs a review in the current period but a compilation in the prior period and is reporting on comparative statements, the accountant should

Answer 12

Update the report on the prior period and issue as the last paragraph of the current periods report

Question 13

When the continuing accountant performs a review in the prior period but a compilation in the current period and is reporting on comparative statements, the accountant should

Answer 13

Issue a compilation report and add a paragraph to the report on the current period statements
Or
Reissue the prior period review report either combined or separately. If combined, the report should state: no review procedures were performed after a certain date.

Question 14

When the continuing accountant performs a compilation or review in the prior period but a preparation in the current period and is reporting on comparative statements, the accountant should

Answer 14

There are no requirements to reference the prior period

Question 15

Is the accountant allowed to report on comparative financial statements when statements for one or more, but not all, of the periods presented omit substantially all of the disclosures required by GAAP?

Answer 15

No

Question 16

If during the current engagement an accountant becomes aware of information that would have affected the report on the prior period (subsequent events), what is required?

Answer 16

An other matter paragraph should be added to the prior period report that states:
1. Date of the original report
2. That the statements of the prior period have been changed
3. The reason for the change

Question 17

If a predecessor decides to reissue their compilation or review report (they are not required to), they should:

Answer 17

Read the statements and the report of the current period
Compare the prior period statements with those issued previously and currently
Obtain a letter from the successor accountants

Question 18

In the event that a predecessor accountants review or compilation report is not reissued, he successor accountant should either:

Answer 18

Make reference to the report of the predecessor accountants in the current report
Or
Perform that level of service themselves

Question 19

If making reference to the predecessor auditor in their review report, the successor accountant should expand the report by including an additional paragraph that mentions:

Answer 19

A statement that the prior periods were compiled or reviewed by another accountant
The date of their report
A description of any modifications

Question 20

When unaudited financial statements are presented in comparative form with audited financial statements, the unaudited financial statements should be clearly marked and the accountant should either:

Answer 20

Reissue the prior period report
Or
Include an other matter paragraph in the current report

Question 21

When prior period has been audited and the current period is unaudited and issuing on comparative statements, the accountant should:

Answer 21

Add an other matter paragraph that includes:
1. The prior period statements were audited
2. Date of previous reports
3. Opinions expressed
4. That no auditing procedures have been performed since the previous report date

Question 22

When prior period was not audited and the current period is audited and issuing on comparative statements, the accountant should:

Answer 22

Include an other matter paragraph that includes:
1. The service performed in the prior period
2. Date of the prior period report
3. Description of any material modifications
4. Statement that the service was less in scope than an audit and did not provide the basis for an opinion