Other Reports

Question 1

An entity prepares its financial statements on its income tax basis. A description of how that basis differs from GAAP should be included in the
A. Notes to the financial statements.
B. Auditor’s engagement letter.
C. Management representation letter.
D. Introductory paragraph of the auditor’s report.

Answer 1

A

Question 2

Reports are considered special reports when issued in conjunction with
A. Interim financial information reviewed to determine whether material modifications should be made to conform with GAAP.
B. Feasibility studies presented to illustrate an entity’s results of operations.
C. Compliance with aspects of regulatory requirements related to audited financial statements.
D. Pro forma financial presentations designed to demonstrate the effects of hypothetical transactions

Answer 2

C

Question 3

Which of the following procedures should a user auditor include in the audit plan to create the most efficient audit when an audit client uses a service organization for several processes?
A. Review the service auditor’s report on controls placed in operation.
B. Review the service auditor’s report and outline the accounting system in a memo to the working papers.
C. Audit the service organization’s controls, assess risk, and prepare the audit plan.
D. Audit the service organization’s controls to test the work of the service auditor

Answer 3

A

Question 4

When an entity’s auditor issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive
A. Negative assurance on capsule information.
B. Positive assurance on supplementary disclosures.
C. A limited opinion on “pro forma” financial statements.
D. A disclaimer on prospective financial statements

Answer 4

A - In a typical comfort letter, the auditor will provide negative assurance on capsule information

Question 5

When auditing an entity’s financial statements in accordance with Government Auditing Standards, an auditor should prepare a written report on the auditor’s
A. Identification of the causes of performance problems and recommendations for actions to improve operations.
B. Understanding of the internal control structure and assessment of control risk.
C. Fieldwork and procedures that substantiated the auditor’s specific findings and conclusions.
D. Opinion on the entity’s attainment of the goals and objectives specified by applicable laws and regulations

Answer 5

B

Question 6

In performing a financial statement audit in accordance with Government Auditing Standards, an auditor is required to report on the entity’s compliance with laws and regulations. This report should
A. State that compliance with laws and regulations is the responsibility of the entity’s management.
B. Describe the laws and regulations that the entity should comply with.
C. Provide an opinion on overall compliance with laws and regulations.
D. Indicate that the auditor does not possess legal skills and cannot make legal judgments

Answer 6

A

Question 7

The clarified SSARSs applicable to preparing financial statements (AR-C 70) apply to each of the following, except for
A. Preparing a financial statement forecast.
B. Preparing a balance sheet with substantially all disclosures omitted.
C. Preparing financial statements in connection with business valuation services.
D. Preparing financial statements for the review by another accountant (different firm)

Answer 7

C

Question 8

Which of the following services, if any, may an accountant who is not independent provide?
	A.  	Compilations, but not reviews.
	B.  	Reviews, but not compilations.
	C.  	Both compilations and reviews.
	D.  	No services

Answer 8

A

Question 9

An accountant agrees to the client’s request to change an engagement from a review to a compilation of financial statements. The compilation report should include
A. No reference to the original engagement.
B. Reference to a departure from GAAS.
C. Scope limitations that may have resulted in the change of engagement.
D. Information about review procedures already performed

Answer 9

A

Question 10

During a review of the GAAP-based financial statements of a nonpublic entity, an accountant becomes aware of a lack of adequate disclosure that is material to the financial statements.

If management refuses to correct the financial statement presentations, the accountant should
A. Issue an adverse opinion.
B. Issue an “except for” qualified opinion.
C. Disclose this departure from generally accepted accounting principles in a separate paragraph of the report.
D. Express only limited assurance on the financial statement presentations.

Answer 10

C