SU 18 Review, Compilations, and Special Reports Flashcards
1.) The report should not refer to the statement of cash flows because a non-issuer does not prepare this statement
a. A, the original draft is correct. A nonissuer is required to present a statement of cash flows, and the review report should refer to the statement
2.) The first sentence of the first paragraph should state that the accounting and review standards are established by the federal government
a. C, neither the original draft nor manager’s comment is correct. The report should state that the SSARs are issued by the AICPA
3.) The last sentence of the first paragraph should state that the f/s are the representation of the CPA firm
a. A, the original draft is correct. The draft is correct as stated. The information in the f/s is representation of management
4.) The first sentence in the middle paragraph should refer to analytical procedures
a. B, the manager’s comment is correct. The sentence should read “A review consists principally of inquiries of company personnel and analytical procedures applied to financial data.”
5.) The second sentence in the second paragraph should state that the review is “substantially greater in scope”
a. A, the original draft is correct. The draft is correct as stated.
6.) The second sentence in the second paragraph should refer to “GAAS” not “GAAP”
a. B, the manager’s comment is correct. The manager is correct that the audit is conducted in accordance with GAAP
7.) The third paragraph should state “based on our study” rather than based on our examination
a. C, neither the original draft nor manager’s comment is correct. The paragraph should begin, “based on our review”
8.) The third paragraph should state, “conformity with standards established by ASB” rather than “conformity with GAAP”
a. A, the original draft is correct
The report on summary financial statements should indicate that the
Procedures performed included evaluating whether they are prepared in accordance with the applied criteria.
The report on the summary statements describes, among other things, the procedures performed. They primarily include (1) comparing the summary statements with the related information in the audited statements and (2) evaluating whether the summary statements are prepared in accordance with the criteria applied by management.
An auditor most likely will use analytical procedures to form an overall conclusion to
Determine whether additional audit evidence may be needed.
Analytical procedures should be used to assist the audit to form an overall conclusion. The purpose of those procedures is to determine whether the statements are consistent with the auditor’s understanding of the entity (AU-C 520). When analytical procedures reveal inconsistent fluctuations or relationships or significant differences, the auditor should investigate the results. Thus, the auditor should (1) make inquires of management, (2) corroborate the responses with other audit evidence, and (3) perform other necessary procedures.
Which of the following is a misstatement arising from fraud or an error as defined by the auditing standards?
Selecting an accounting policy that the auditor considers inappropriate.
Misstatements may result from fraud or error. Examples are (1) an inaccuracy in obtaining or processing data on which the financial statements are based, (2) an omission of an amount or disclosure, (3) a disclosure not presented in accordance with the applicable reporting framework, (4) an incorrect accounting estimate arising from overlooking or clearly misinterpreting facts, and (5) management judgments about accounting estimates that the auditor considers unreasonable, and (6) management’s selection or application of accounting policies that the auditor considers inappropriate (AU-C 450).
