An attest engagement is one in which a CPA is engaged to:
Answer(s): A
Choice "a" is correct. An attest engagement is one in which a CPA is engaged to issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about subject matter, that is the responsibility of another party.Choice "b" is incorrect. Providing tax advice or preparing a tax return based upon financial information the CPA has not audited or reviewed does not require the CPA to "attest" to anything. Choice "c" is incorrect. Testifying as an expert witness in accounting, auditing, or tax matters given certain stipulated facts is not considered to be an attestation engagement. Choice "d" is incorrect. Assembling the financial statements of a nonissuer based on the assumptions of the entity's management without expressing any assurance is a compilation engagement that falls under SSARS and no attestation is provided.
Which of the following professional services would be considered an attest engagement?
Answer(s): B
Choice "b" is correct. An engagement to report on management's discussion and analysis (MD&A) would be considered an attest engagement, because the accountant is issuing an examination, review, or agreed-upon procedures report on another party's assertion. Choice "a" is incorrect. A management consulting engagement to provide EDP advice to a client is not considered to be an attest engagement, because the accountant is not issuing an examination, review, or agreed-upon procedures report on another party's assertion. Choice "c" is incorrect. An income tax engagement to prepare federal and state tax returns is not considered to be an attest engagement.Choice "d" is incorrect. The compilation of financial statements from a client's accounting records (a compilation engagement) is not considered to be an attest engagement. (Note that although a compilation of prospective financial statements is covered under Statements on Standards for Attestation Engagements, the question does not indicate that prospective financial statements are involved).
Which of the following statements concerning prospective financial statements is correct?
Answer(s): C
Choice "c" is correct. Any type of prospective financial statements (financial forecasts and financial projections) would normally be appropriate for limited use. Choice "a" is incorrect. Both financial forecasts and financial projections are appropriate for limited use.Choice "b" is incorrect. Financial projections are appropriate for limited use only - not for general use.Choice "d" is incorrect. Normally financial projections are not appropriate for general use, but financial forecasts are.
Negative assurance may be expressed when an accountant is requested to report on the:
Choice "c" is correct. Negative assurance may be expressed when an accountant is requested to report on the results of performing a review of management's assertion. Choice "a" is incorrect. No assurance is provided in a compilation of prospective financial statements. Choice "b" is incorrect. Whether an entity is in compliance with the provisions of the Foreign Corrupt Practices Act is a legal determination. An accountant may perform an examination or an agreed-upon procedures engagement with respect to such compliance but may not perform a review, and therefore would not express negative assurance.Choice "d" is incorrect. When reporting on an audit of historical financial statements, negative assurance is not an appropriate reporting option. The auditor must either express an opinion (positive assurance) or disclaim an opinion (no assurance).
When an accountant examines a financial forecast that fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumptions in the accountant's report and issue a (an):
Answer(s): D
Choice "d" is correct. When an accountant examines a financial forecast that fails to disclose significant assumptions used to prepare the forecast, the accountant should issue an adverse opinion.Choice "a" is incorrect. A qualified opinion might be appropriate when AICPA presentation guidelines are not followed, but would not be used when "several significant assumptions used to prepare the forecast" are not disclosed.Choice "b" is incorrect. "Subject to" is not acceptable wording for an accountant's report. Choice "c" is incorrect. An unqualified opinion is not acceptable when significant assumptions are not disclosed.
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