Study unit 1 MCQ Flashcards
Williams & Co. is a medium-sized CPA firm enrolled in the Private Companies Practice Section (PCPS). The firm is to have a peer review under the AICPA Peer Review program. The review will most likely be performed by
Peer review is a necessary part of the practice-monitoring requirement for AICPA membership. A peer review of a firm enrolled in the AICPA Peer Review program may be performed by a review team organized by (1) a firm engaged by the reviewed firm or (2) a state CPA society. Also, an association of firms may be authorized to aid its members by organizing review teams (PR 100). Furthermore, a PCPS firm need not perform the peer review of a PCPS firm, and the team captain need not be a PCPS member.
Which of the following is a management assertion regarding account balances at the period end?
Assertions about account balances reported in the balance sheet at period end include those related to (1) rights and obligations, (2) existence, (3) completeness, and (4) valuation and allocation. The assertions about rights and obligations are that the entity holds or controls the rights to assets, and liabilities are its obligations (AU-C 315).
A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to
An attest engagement is one in which the practitioner is engaged to issue or does issue an examination, review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter, that is the responsibility of another party. The SSAEs cover attest engagements, including the 11 attestation standards; agreed-upon procedures engagements; financial forecasts and projections; reporting on pro forma financial information; reporting on an entity’s internal control over financial reporting; compliance attestation; and management’s discussion and analysis
A CPA is required to comply with the provisions of Statements on Standards for Accounting and Review Services (SSARSs) when
Assisting in Adjusting the Books No Consulting on of Account Accounting Matters No
SSARSs apply to the professional responsibilities of accountants who compile or review the unaudited financial statements or financial information of a nonpublic entity. The objective of a compilation is to assist management in presenting financial information in the form of financial statements. But the accountant does not undertake to obtain or provide any assurance that no material modifications should be made for the statements to conform with the applicable financial reporting framework. The objective of a review is to obtain limited assurance that no material modifications should be made for the statement to conform with the applicable financial reporting framework (AR 60). Neither assisting in adjusting the books of account nor consulting on accounting matters is a compilation or review.
Which of the following is true regarding the SysTrust assurance service?
1. SysTrust reports are always based on a period of time, not a particular moment in time.
- In a SysTrust engagement, a CPA expresses an opinion on the type and quality of information processed by a system.
- When expressing a qualified or adverse report, the practitioner should report on management’s assertion.
- SysTrust is a consulting service designed to increase the comfort of management and other stakeholders about a company’s systems.
System reliability is dynamic, not static. Thus, the report should be based on a span of time. Anwer is first one.
The client of the practitioner providing ElderCare (PrimePlus) services may be
The client varies with the engagement. The practitioner must understand who the client is and who has final authority to resolve issues during the engagement. If the client is a family member or some third party, that person must have power of attorney over the elderly person involved.
Which of the following statements best describes the primary purpose of Statements on Auditing Standards (SASs)?
Generally accepted auditing standards are defined as SASs. Conduct Rule 202 requires members who perform professional services to comply with standards promulgated by bodies designated by the AICPA Council. Thus, an AICPA member who performs an audit of a nonissuer must comply with SASs promulgated by the Auditing Standards Board (ASB).
The audit work performed by each assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the
According to AU-C 220, QC 10, and AS No. 10, a review considers whether, for example, (1) the work supports the conclusions and is properly documented, (2) the evidence is sufficient and appropriate to support the auditor’s report, and (3) the objectives of the procedures have been achieved.
A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be dissociated from the resolution of the matter. The audit documentation would probably be
A public accounting firm should have policies and procedures that address differences of opinion. They should enable an engagement team member to document his/her disagreement with the conclusions reached after proper consultation. The policies and procedures should require that (1) conclusions be documented and implemented and (2) the report not be released until the matter is resolved (QC 10). For an audit of an issuer, AS No. 3, Audit Documentation, requires working papers to document significant findings issues. They include “disagreements among members of the engagement team or with others consulted on the engagement about final conclusions reached on significant accounting or auditing matters.”
In pursuing a CPA firm’s quality control objectives, a CPA firm may maintain records indicating which partners or employees of the CPA firm were previously employed by the CPA firm’s clients. Which quality control element is this procedure most likely to satisfy?
Relevant ethical requirements.
This answer is correct.
CPA firms should avoid situations in which third parties might question the firm’s independence. Thus, they should adhere to the independence and other principles established by the AICPA Code of Professional Conduct and the requirements of regulators and other authorities (QC 10).
A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client would most likely include
Consideration of the business reputation of the client’s principal owners, key management, related parties, and those charged with governance.
This answer is correct.
CPA firms should have policies and procedures to determine whether to accept or continue a client or to perform a specific engagement. The firm’s policies and procedures should provide reasonable assurance that it (1) has considered the integrity of the client and the risks involved, (2) is competent, (3) has the necessary capabilities and resources, and (4) is able to comply with the applicable requirements (QC 10).
Users of an issuer’s financial statements demand independent audits because
Management may not be objective in reporting.
This answer is correct.
Management and financial statement users may have an adversarial relationship because their interests in the firm are different. The independent auditor provides assurance that the financial statements are not biased for or against any interest.
One purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to
Provide reasonable assurance that the integrity of the client is considered.
This answer is correct.
CPA firms should have policies and procedures to determine whether to accept or continue a client or to perform a specific engagement. The firm’s policies and procedures should provide reasonable assurance that it (1) has considered the integrity of the client and the risks involved, (2) is competent, (3) has the necessary capabilities and resources, and (4) is able to comply with applicable requirements (QC 10).
In connection with the element of human resources, a CPA firm’s system of quality control should ordinarily provide that all personnel
Participate in professional development activities that enable them to fulfill responsibilities assigned.
This answer is correct.
The firm’s policies and procedures should provide for all personnel to receive general and industry-specific CPE and engage in other professional development activities. The purpose is to enable personnel to carry out assigned responsibilities and satisfy CPE requirements of the AICPA and regulatory agencies, such as the GAO and state boards of accountancy (QC 10).
The authoritative body designated to promulgate standards concerning an accountant’s association with unaudited financial statements of an entity that is not required to file financial statements with an agency regulating the issuance of the entity’s securities is the
Accounting and Review Services Committee.
This answer is correct.
The AICPA bylaws designate the Accounting and Review Services Committee as the senior technical committee authorized to issue pronouncements in connection with the unaudited financial statements or other unaudited financial information of a nonissuer.
