The standard report issued by an accountant after reviewing the financial statements of a nonissuer states that:
Answer(s): C
Choice "c" is correct. The standard report issued by an accountant after reviewing the FS of a nonissuer states that the accountant is not aware of any material modifications that should be made to the financial statements (see the third paragraph of the standard review report). This is a "negative assurance."Choice "a" is incorrect. The standard audit report includes a statement regarding assessing the accounting principles used and significant estimates made by management. Choice "b" is incorrect. The standard audit report includes a statement regarding examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Choice "d" is incorrect. A compilation report states that the accountant does not express an opinion or any other form of assurance on the financial statements. A review report provides limited assurance.
Which of the following procedures is not usually performed by the accountant during a review engagement of a nonissuer?
Answer(s): D
Choice "d" is correct. Since internal control inquiries are not part of a review, there is generally no consideration of internal control in a review engagement. Choice "a" is incorrect. Inquiries to be made during a review may relate to meetings of the board of directors.Choice "b" is incorrect. A standard review report does state that the review was performed in accordance with SSARS, issued by the AICPA.Choice "c" is incorrect. Analytical procedures to be performed during a review should include reading the financial statements.
When reporting on financial statements prepared on the same basis of accounting used for income tax purposes, the auditor should include in the report a paragraph that:
Answer(s): A
Choice "a" is correct. When reporting on financial statements prepared on the same basis of accounting used for income tax purposes, the auditor should include in the report a paragraph that states that the income tax basis of accounting is a comprehensive basis of accounting other than GAAP (included in the third paragraph of the special report). Choice "b" is incorrect. The special report does not justify the use of the income tax basis of accounting.Choice "c" is incorrect. The financial statements are audited in accordance with GAAS (as stated in the first sentence in the second paragraph of the report). Choice "d" is incorrect. The report does not refer to the authoritative pronouncements that explain the income tax basis of accounting being used.
Which of the following statements should not be included in an accountant's standard report based on the compilation of an entity's financial statements?
Choice "c" is correct. An accountant's standard compilation report of an entity's financial statements should not include a statement that the accountant does not express an opinion but expresses only limited assurance on the financial statements. An accountant should not express any level of assurance on compiled financial statements.Choice "a" is incorrect. An accountant's standard compilation report should include the statement that the compilation was performed in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA.Choice "b" is incorrect. An accountant's standard compilation report should include the statement that the accountant has not audited or reviewed the financial statements. Choice "d" is incorrect. An accountant's standard compilation report should include the statement that a compilation is limited to presenting, in the form of financial statements, information that is the representation of management.
The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for:
Choice "d" is correct. The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for reporting whether material modifications should be made to conform with GAAP.Choice "a" is incorrect. Prospective financial information (concerning future events) is not part of the interim financial information filed by a public company. Choice "b" is incorrect. No form of opinion is expressed based on a review; however, limited assurance is provided regarding the financial statements. Choice "c" is incorrect. The objective of an interim review is not to provide guidance regarding the timing of audit procedures.
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