Chapter 2

Question 1

Financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP that are not suitably titled require a

Answer 1

qualified opinion with a basis of modification paragraph.

Question 2

Complied financial statements that omit substantially all of the disclosures required by GAAP are not comparable to

Answer 2

financials that include such disclosures. Accordingly, the auditor may not report on the comparative financials.

Question 3

Considerations of significant weaknesses in internal control helps the the accountant identify the

Answer 3

types of material misstatements that may occur in the interim financial information, and to consider the likelihood of their occurrence.

Question 4

The objective of a review of interim financial information is to provide the accountant with

Answer 4

a basis for reporting whether material modifications should be made to such information to conform to GAAP, through inquiry and analytical procedures.

Question 5

If a report on a review of interim financial information is presented in a registration statement, the prospectus should include a statement that states that

Answer 5

the report is not a “report” or “part” of the registration statement. The accountant should also read the other portions of the registration statement to ensure that their name is not used in a manner that indicates greater responsibility than they intend.

Question 6

A comfort letter is a letter containing a negative assurance from

Answer 6

the CPA to the underwriter or certain other requesting parties just before the registration of the client’s securities.

Question 7

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

Answer 7

a departure from GAAP.

Question 8

SSARS explicitly states that SSARS does not apply when

Answer 8

an accountant prepares financials to be included with personal financial plans.

Question 9

What is the authoritative body designed to promulgate standards concerning an accountant’s association with unaudited financials of a nonissuer

Answer 9

the Accounting and Review Services Committee

Question 10

A sufficient understanding of internal controls is

Answer 10

not required to be obtained in an attestation engagement.

Question 11

When an accountant accepts a compilation engagement, they should indicate that it is

Answer 11

limited in scope and would not include an opinion or assurance on the projected financials or related assumptions. Compilation engagements do not include an evaluation of the support for the assumptions underlying the projection.