May an accountant accept an engagement to compile or review the financial statements of a not-for- profit entity if the accountant is unfamiliar with the specialized industry accounting principles, but plans to obtain the required level of knowledge before compiling or reviewing the financial statements?
Answer(s): D
Choice "d" is correct. Knowledge of the accounting principles and practices of the industry is required in order to perform a compilation or review engagement; however, there is no requirement that such knowledge be obtained prior to accepting such an engagement.Choices "a", "b", and "c" are incorrect, per above.
An accountant should perform analytical procedures during an engagement to:
Choice "d" is correct. Analytical procedures are part of a review engagement, but not necessary for a compilation engagement.Choices "a", "b", and "c" are incorrect, per above Explanations.
Which of the following procedures most likely would not be included in a review engagement of a nonissuer?
Answer(s): C
Choice "c" is correct. An accountant is not required to assess control risk as part of a review engagement. Assessment of control risk would be appropriate for an audit engagement. Choice "a" is incorrect. Obtaining a management representation letter is an appropriate review procedure.Choice "b" is incorrect. Considering whether the financial statements are in accordance with GAAP is an appropriate review procedure.Choice "d" is incorrect. Inquiring of management regarding subsequent events is an appropriate review procedure.
Compiled financial statements should be accompanied by a report stating that:
Choice "c" is correct. The accountant's report includes a statement that the compilation is limited to presenting in the form of financial statements information that is the representation of management.Choice "a" is incorrect. The report must state that the financial statements have not been audited or reviewed, but does not compare the scope of a compilation to the scope of a review or an audit. Choice "b" is incorrect. The accountant expresses no assurance in a compilation engagement; limited assurance is expressed in a review engagement.Choice "d" is incorrect. The financial statements are compiled in accordance with SSARS issued by the AICPA, rather than "standards established by the Auditing Standards Board."
An accountant may compile a nonissuer's financial statements that omit all of the disclosures required by GAAP only if the omission is:I). Clearly indicated in the accountant's report.II). Not undertaken with the intention of misleading the financial statement users.
Choice "c" is correct. An accountant may issue a compilation report for a client's financial statements that omit all required GAAP disclosures, provided the omission is not intended to mislead financial statement users and the omission is clearly indicated in the accountant's report. Choices "a", "b", and "d" are incorrect, per above Explanation.
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