Chapter 17

Question 1

The report on summary financial statements should include:

Answer 1

1. Comparing the summary statements with the related information in the audited statements, and
2. Evaluating whether the summary statements are prepared in accordance with the criteria applied by management.

Question 2

What does the report on summary of financial statements describe?

Answer 2

It describes among other things, the procedures performed.

Question 3

When an auditor report is incorporated by reference in an SEC registration statement,, a prospectus that includes a statement about the auditors involvement should refer to the auditor as?

Answer 3

Expert in auditing and accounting.

Question 4

A review primarily involves

Answer 4

Performing analytical, and inquiry procedures.

A review does NOT involve:

1. Testing accounting records and the effectiveness of controls.
2. Obtaining corroborating evidence
3. Applying certain other auditing procedures, or
4. Becoming aware of all significant matters identified in an audit.

Question 5

A report based on a review of interim financial information should state that

Answer 5

The financial statements are the responsibility of management.

Question 6

What is the objective of a review of interim financial information of an issuer?

Answer 6

To provide an auditor with a basis for reporting whether he/she is aware of material modifications that should be made for such information to conform with the applicable financial reporting framework.

This objective differs significantly from that of an audit, which is to provide a basis for expressing an opinion.

Question 7

What are summary financial statements?

Answer 7

Summary financial statements consist of historical information derived from financial statements audited in accordance with GAAS by the same auditor

Question 8

The auditor should not accept an engagement to report summary statements unless:

Answer 8

1. She has been engaged to audit the statements from which they derived.

The report expresses an opinion on whether the summary statement are consistent, in all material respects, with the audited statements, in accordance with the applied criteria.

Question 9

If management fails to present required supplementary information, the auditor should express an

Answer 9

Unmodified opinion with an other matters paragraph.

Question 10

Does omission of required supplementary information affect the financial statements report?

Answer 10

No.

Question 11

In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the requirements of an applicable financial reporting framework to a specific transaction.
The accountant report should include a statement that:

Answer 11

Any difference in fact, circumstances, or assumptions presented may change the report.

The accountant report is addressed to the requesting party.

Question 12

What should an accountants report contain?

Answer 12

The report is addressed to the requesting party, and it should contain:

1. A description of the engagement, and a statement that it was performed in accordance with AU-C915;
2. A description of the transaction, and identification of the entity.
3. A description of the financial reporting framework applied (including its country of origin), the type of report that may be issued, and the reason for the conclusion.
4. A statement that the responsibility for proper accounting is with the preparers of the financial statements.
5. Statements of the facts, circumstances, and assumptions and their sources;
6. A statement that any difference in facts, etc., may change the report;
7. An alert restricting the use of the report to specified parties;
8. if the accountant is not independent, a statement of the lack of independence.

Question 13

When the financial statements and auditor report is intended for use only outside the US., the auditor is permitted to report using either:

Answer 13

1. A U.S form of reporting reflecting that the statements reported on have been prepared in accordance with a reporting framework generally accepted in another country, or
2. The report form and content of the other country (or, if applicable, as set forth in the international standards on auditing.)