Prospective financial information presented in the format of historical financial statements that omit either gross profit or net income is deemed to be a:
Answer(s): A
Choice "a" is correct. "Partial presentations" are presentations of prospective financial information which would not ordinarily be appropriate for general use because they omit one or more of these essential elements: (a) sales or gross revenue, (b) gross profit or cost of sales, (c) unusual or infrequently occurring items, (d) provision for income taxes, (e) discontinued operations or extraordinary items, (f) income from continuing operations, (g) net income, (h) earnings per share, and (i) significant changes in financial position.Choices "b", "c", and "d" are incorrect. Projected balance sheets, financial forecasts and financial projections are forms of prospective financial statements.
Which of the following activities would most likely be considered an attestation engagement?
Answer(s): B
Choice "b" is correct. Attest engagements may result in reports related to compliance with laws and regulations.Choices "a", "c", and "d" are incorrect. Attestation engagements specifically exclude consulting services, advocacy services, and return preparation.
Which of the following professional services would be considered an attestation engagement?
Answer(s): D
Choice "d" is correct. Preparing future financial statements constitutes a compilation of prospective financial statements, which is considered to be an attestation service. Choices "a" and "c" are incorrect. Attestation engagements specifically exclude advocacy services and consulting services.Choice "b" is incorrect. Attest engagements include those in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of another party, as well as engagements related to prospective financial statements. Performing the role of in-house controller part-time does not fit into any of these categories.
When an accountant compiles a financial forecast, the accountant's report should include a(an):
Choice "b" is correct. Whenever an accountant reports on prospective financial statements, the report should include a caveat that prospective results may not be achieved. Choice "a" is incorrect. A compilation report on a financial forecast does not include an of the differences between a forecast and a projection. Choice "c" is incorrect. Whenever an accountant reports on prospective financial statements, the report should include a statement 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. A compilation report on a financial forecast does not include a disclaimer of opinion on the reliability of the entity's internal controls.
Which of the following is a professional engagement that a CPA may perform to provide assurance on a system's reliability?
Choice "d" is correct. A SysTrust engagement is an attest engagement that provides assurance on the reliability of any defined electronic system.Choice "a" is incorrect. There is no professional engagement by this name. Choice "b" is incorrect. There is no professional engagement by this name. Choice "c" is incorrect. There is no professional engagement by this name.
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