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:
Answer(s): C
Choice "c" is correct. The accounting and review services committee is the authoritative body designated to promulgate standards concerning an accountant's association with unaudited financial statements of a nonissuer (i.e., an entity that is not required to file financial statements with an agency regulating the issuance of the entity's securities). Choice "a" is incorrect. The Financial Accounting Standards Board (FASB) is responsible for GAAP standards.Choice "b" is incorrect. The General Accounting Office (GAO) is responsible for audit standards under the federal "Single Audit Act."Choice "d" is incorrect. The Auditing Standards Board (ASB) is responsible for auditing standards under GAAS.
When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonissuer, the accountant generally should issue the report that is appropriate for:
Answer(s): B
Choice "b" is correct. When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonissuer, the accountant generally should issue the report that is appropriate for the highest level of service rendered.Choices "a", "c", and "d" are incorrect. The report should be appropriate for the highest level of service rendered.
An accountant who reviews the financial statements of a nonissuer should issue a report stating that a review:
Answer(s): A
Choice "a" is correct. An accountant who reviews the financial statements of a nonissuer should issue a report stating that a review is substantially less in scope than an audit. (This is why you have to "memorize" the key phrases in the review and compilation reports.) Choice "b" is incorrect. Internal control inquiries are not part of a review, and therefore assurances related to internal control are inappropriate.Choice "c" is incorrect. A review does provide limited assurance as to GAAP, but this is not the appropriate wording for the report.Choice "d" is incorrect. Review report language compares a review with an audit, not with a compilation.
Before performing a review of a nonissuer's financial statements, an accountant should:
Choice "c" is correct. Before performing a review of a nonissuer's financial statements, an accountant should obtain a sufficient level of knowledge of the accounting principles and practices of the industry in which the entity operates.Choices "a", "b", and "d" are incorrect. These are appropriate steps performed during the review, not prior to it.
Which of the following is not true about documentation requirements related to a review of a nonissuer's financial statements?
Choice "c" is correct. The accountant is not required to evaluate control risk or test the operating effectiveness of controls in a review of a nonpublic entity's financial statements. Choice "a" is incorrect. Written documentation from other types of engagements may be used to provide support for the review report.Choice "b" is incorrect. A management representation letter should be obtained in review engagements, and a copy should be included in the documentation files. Choice "d" is incorrect. Documentation should include the results of analytical procedures (i.e., procedures performed, expectations and how they were developed, results of comparison to recorded amounts, and procedures performed with respect to significant differences).
Post your Comments and Discuss AICPA CPA-Auditing exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CPA-Auditing content, but please register or login to continue.