Chapter 8

Question 1

What is “other information?”

Answer 1

Information that is not part of the basic financial statements?

Question 2

Is “other information,” audited?

Answer 2

No. The auditor just reads the information to make sure there are no material inconsistencies.

Question 3

Is supplementary information audited?

Answer 3

Yes. The auditor’s opinion covers supplementary information, but it is NOT part of the basic financial statements.

Question 4

Where is supplemental information reported in the auditor’s report?

Answer 4

In an other-matter paragraph or a separate report.

Question 5

When is an auditor NOT allowed to express an opinion on the supplementary information?

Answer 5

When the basic financial statements are given an adverse or disclaimer of opinion.

Question 6

Does an auditor audit required supplementary information?

Answer 6

No, but they are required to apply limited review procedures

Should talk about RSI in the report in an other matter paragraph if there is a problem

Question 7

What happens if segment information is missing from the notes to the financial statements?

Answer 7

The auditor will give a qualified or adverse opinion

Question 8

When can an auditor NOT do an audit on a single financial statement or single element of the financial statements?

Answer 8

When the opinion on the financial statements as a whole is either an adverse or disclaimer of opinion.

Question 9

When can a compliance report in connection with audited financial statements NOT be expressed?

Answer 9

If there has been an adverse or disclaimer of opinion on the financial statements

Question 10

What is an attestation engagement?

Answer 10

Any engagement in which the account expresses a written conclusion about the reliability of a written assertion by another party

Question 11

What are the three types of attest engagements?

Answer 11

Examination

Review

Agreed-upon procedures

Question 12

What is an examination?

Answer 12

Engagement where the end result is to express an opinion (reasonable assurance)

Question 13

What is a review?

Answer 13

An engagement where the end result is to express a conclusion with limited assurance (negative assurance)

Question 14

What are agreed upon procedures?

Answer 14

Engagement where the end result is to report on the accountant’s findings (no opinion or conclusion)

Distribution of this report is RESTRICTED to certain users.

Question 15

What is the most important precondition for accepting an attestation engagement?

Answer 15

The accountant must be independent

Question 16

What should the accountant do if the client wants to change the terms of the engagement?

Answer 16

The accountant should only change if there is a reasonable justification.

If there is, then the accountant should issue the appropriate report and not refer to the original engagement or procedures performed

Question 17

What is a forecast statement?

Answer 17

Prospective statement that presents what management expects to occur in the future based on expected conditions and courses of action

Question 18

What is a projection statement?

Answer 18

Prospective statement that shows what management believes will happen given certain hypothetical assumptions (what if scenario)

Question 19

What three items can a review NOT be used for?

Answer 19

1. Prospective financial information
2. Internal control
3. Compliance with laws, rules, regulations, contracts, and grants

Question 20

What are some special items that are required in a prospective and projection financial statement reports?

Answer 20

• A warning (caveat) that prospective results may not be achieved
• A statement that the account has no responsibility to update the report for events occurring after the report date
• Must make limited use for a projection

Question 21

When can you accept an engagement to examine or review MD&A information?

Answer 21

If the most recent period covered by the MD&A was audited by the CPA and all other periods covered were aduited by the CPA or the predecessor

Question 22

When can you accept a pro forma examination or review?

Answer 22

As long as the financial statements from which the pro forma statements were audited or reviewed

Question 23

What is a comfort letter?

Answer 23

Letter to underwriter that provides some level or assurance on the information the underwriter must provide to the SEC

Question 24

What types of entities used GAGAS financial audits?

Answer 24

Certain governmental and nongovernmental entities (non-profits, contractors, etc) that receive or administer government assistance.

Question 25

What type of entities use single audits?

Answer 25

Non-federal entities (cities, universities, non-profits) receiving major financial assistance (>= 750k a fiscal year)

Question 26

What additional requirements are required for GAGAS financial audits?

Answer 26

• Reasonable assurance of detecting material misstatements from noncompliance with contract provisions or grant agreements that are direct or material
• A report on internal control that describes the scope of testing on internal controls and any significant deficiencies or material weaknesses
• Compliance with laws and regulations

Question 27

What are the additional requirements for a single audit?

Answer 27

• Schedule of federal award expenditures and wether it is fairly stated
• Schedule of findings and questioned costs
• A copy of the financial statements
• Compliance with laws and regulations applicable to each major program