When an accountant examines projected financial statements, the accountant's report should include a separate paragraph that:
Answer(s): A
Choice "a" is correct. The accountant's standard report on an examination of projected financial statements should include a caveat that the projected results may not be achieveD. This is included in a separate paragraph that describes the limitations on the usefulness of the presentation: "...there will usually be differences between the forecasted and actual results... [that] may be material." Choice "b" is incorrect. The accountant's report on the examination of projected financial statements would not include an of the differences between an examination and an audit. Choice "c" is incorrect. A statement is included which specifically states that the accountant assumes no responsibility to update the report for events and circumstances occurring after the date of the report.Choice "d" is incorrect. The accountant does express an opinion that "the underlying assumptions provide a reasonable basis for management's forecast."
An examination of a financial forecast is a professional service that involves:
Answer(s): D
Choice "d" is correct. An examination of a financial forecast is a professional service that involves:1) evaluating the preparation of the prospective financial statements,2) evaluating the support underlying the assumptions,3) evaluating the presentation of the prospective financial statements in conformity with AICPA guidelines, and4) issuing an examination report.Choice "a" is incorrect. Compiling or assembling a financial forecast based on management's assumptions is part of a compilation engagement, not an examination engagement. Choice "b" is incorrect. A financial forecast may be issued for general use. Choice "c" is incorrect. The accountant's standard report specifically states that the accountant assumes no responsibility to update the report for events and circumstances occurring after the date of the report.
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:
Choice "a" is correct. An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that certain conditions are met, including that the use of the report be restricted to the specified parties.Choice "b" is incorrect. There is no requirement that the prospective financial statements be examined.In fact, the practitioner's report on the application of agreed-upon procedures states that the auditor did not perform an examination.Choice "c" is incorrect. The specified parties must understand that they take responsibility for the sufficiency of the attest procedures.Choice "d" is incorrect. No assurance is expressed in an agreed-upon procedures engagement.
An accountant's compilation report on a financial forecast should include a statement that:
Answer(s): C
Choice "c" is correct. The accountant's compilation report on a client's financial forecast should include a caveat that the prospective results may not be achieved. Choice "a" is incorrect. The historical financial statements upon which the forecast is based need not be audited, nor must they accompany the forecast compilation. Choice "b" is incorrect. The accountant expresses no assurance in the compilation report on forecasted statements.Choice "d" is incorrect. A compilation of a financial forecast would not include evaluation of the support for the assumptions underlying the forecast.
Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards?
Choice "a" is correct. Attestation standards provide a framework for the attest function beyond historical financial statements.Choice "b" is incorrect. The independence standard is almost the same for both attest engagements and audits.Choice "c" is incorrect. An attest engagement may be part of a larger engagement (such as a business acquisition study or a feasibility study).Choice "d" is incorrect. Attestation standards include two of the three GAAS fieldwork standards:planning/supervision and evidence. They do not include the internal control standard.
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