M4-Review Engagements Flashcards
Financial statements of a nonissuer that have been reviewed by an accountant should be accompanied by a report stating that management is responsible for the preparation and fair presentation of the financial statements. (true or false)
true
The standard review report issued in accordance with SSARS should state that the CPA is not aware of any material modifications that should be made to the financial statements. (true or false)
true
Review engagements do not require testing of processes used by management. (true or false)
true
A review includes inquiry of management. Therefore, a memo on a discussion with the CFO regarding a suspected kiting scheme should be included in the documentation for a review engagement. (true or false)
true
- A review does NOT require testing of controls.
- Inquiry of parties outside of management is NOT a required procedure in a review.
- Testing procedures, such as inspection, are not required to be performed in a review.
In a review engagement, the accountant is required to obtain a representation letter from management. (true or false)
true
-The accountant is not required to obtain an understanding of the client’s internal control in a review of unaudited financial statements of a nonissuer performed in accordance with SSARS.
An accountant’s report on a review of the unaudited financial statements of a non-issuer should provide limited assurance on the financial statements by stating that the accountant performed procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. (true or false)
true
- an accountant must be independent of the client to issue a review report on its financial statements
- A review report is required to be issued in a review engagement, even if the financial statements are not expected to be used by third parties.
Written representations from the current management are REQUIRED for ALL periods being reported on. (true or false)
true
Financial statements reviewed by an accountant should be accompanied by a report stating that a review is substantially less in scope than an audit. (true or false)
true
An accountant with an immaterial direct financial interest in a client is no longer independent with respect to that client. The accountant is precluded from issuing a review report on the financial statements of an entity with respect to which he is not independent. If the accountant is not independent, he may issue a compilation report provided he complies with the compilation standards. (true or false)
true
Ratio analysis is often used to examine relationships between balance sheet accounts. (true or false)
true
-Trend analysis would be more appropriate for examining income statement accounts.
Comparing the financial statements with statements for comparable prior periods (analytical procedures) is a procedure that is usually performed by the accountant in a review engagement of a nonissuer. (true or false)
true
Obtaining a representation letter from the CEO is more likely to be performed in a review engagement of a nonissuer (where obtaining the letter is required) than in a compilation engagement. (true or false)
true
The accountant is not required to evaluate control risk or test the operating effectiveness of controls in a review of a nonpublic entity’s financial statements. (true or false)
true
In reviewing the financial statements of a nonissuer, the accountant’s first step would be to obtain a general understanding of the entity’s organization, its operating characteristics, and its products or services. (true or false)
true
A review consists of inquiries and analytical procedures. Comparison of current year and prior year account balances is an analytical procedure that would often be performed as part of a review. (true or false)
true
