statements of the U.S. entity without obtaining certification in the other country. Choice "c" is
incorrect. The auditor need not disclaim an opinion on the financial statements prepared in
conformity with another country's accounting principles.
Choice "d" is incorrect. A waiver to perform the engagement is not necessary.
QUESTION: 102
In connection with a proposal to obtain a new client, an accountant in public practice is asked to
prepare a written report on the application of accounting principles to a specific transaction. The
accountant's report should include a statement that:

A. Any difference in the facts, circumstances, or assumptions presented may change the report.
B. The engagement was performed in accordance with Statements on Standards for Consulting
Services.
C. The guidance provided is for management use only and may not be communicated to the
prior or continuing auditors.
D. Nothing came to the accountant's attention that caused the accountant to believe that the
accounting principles violated GAAP.

Answer(s): A
Explanation:
Choice "a" is correct. The accountant's report on the application of accounting principles should
include a statement that should any facts or circumstances differ from those presented to the
accountant, the accountant's conclusions may change.
Choice "b" is incorrect. The report should state that the engagement was performed in
accordance with "AICPA Standards," not statements on Standards for Consulting Services.
Choice "c" is incorrect. The report's use is restricted to "specified parties," which may include
parties other than management (e.g., the board of directors). Also, the preparers of the financial
statements and the reporting accountant should consult with the entity's continuing accountant.
Choice "d" is incorrect. The report does not provide negative assurance with respect to GAAP;
rather, it may describe the appropriate accounting principles to be applied.
QUESTION: 103
Blue, CPA, has been asked to render an opinion on the application of accounting principles to a
specific transaction by an entity that is audited by another CPA. Blue may accept this
engagement, but should:

A. Consult with the continuing CPA to obtain information relevant to the transaction.
B. Report the engagement's findings to the entity's audit committee, the continuing CPA, and
management.
C. Disclaim any opinion that the hypothetical application of accounting principles conforms with
generally accepted accounting principles.
D. Notify the entity that the report is for the general use of all interested parties.

Answer(s): A
Explanation:
Choice "a" is correct. When rendering an opinion on the application of accounting principles to a
specific transaction, the reporting CPA should consult with the continuing CPA to obtain
information relevant to the transaction.
Choice "b" is incorrect. The reporting CPA has no obligation to report the engagement's findings

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