How does an accountant make the following representations when issuing the standard report for the compilation of a nonissuer's financial statements?
Answer(s): B
Choice "b" is correct. Financial statements of a nonissuer that have been compiled should be accompanied by a report explicitly stating that the accountant has compiled the financial statements and stating that the accountant has not audited or reviewed the financial statements. Choices "a", "c", and "d" are incorrect, since these representations are made explicitly as per above.
Financial statements of a nonissuer that have been reviewed by an accountant should be accompanied by a report stating that:
Choice "b" is correct. Financial statements of a nonissuer that have been reviewed by an accountant should be accompanied by a report stating that all information included in the financial statements is the representation of the management of the entity (per the first paragraph of the review report). Choice "a" is incorrect. The report does not state that the scope of the inquiry and analytical procedures performed by the accountant has not been restricted. Choice "c" is incorrect. An audit (and not a review) includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Choice "d" is incorrect. The report does not state that a review is greater in scope than a compilation. In addition, presenting financial statements that are free of material misstatements is not the objective of a compilation.
Performing inquiry and analytical procedures is the primary basis for an accountant to issue a:
Answer(s): D
Choice "d" is correct. Performing inquiry and analytical procedures is the primary basis for an accountant to issue a review report on comparative financial statements for a nonissuer in its second year of operations.Choice "a" is incorrect. Reporting on compliance with requirements governing major federal assistance programs in accordance with the Single Audit Act is an attest engagement designed to provide a high level of assurance on an assertion (an "examination"). Inquiry and analytical procedures alone generally would be insufficient to support this level of assurance. Choice "b" is incorrect. Prospective financial statements that present an entity's expected financial position (given one or more hypothetical assumptions) may be subject to (1) an examination; (2) a compilation; or (3) agreed-upon procedures; but not to a review. Choice "c" is incorrect. Management advisory services (also known as consulting services) require the accountant to develop findings, conclusions, and recommendations. Generally this would require procedures beyond inquiry and analytical procedures.
An auditor's report on financial statements prepared in accordance with an other comprehensive basis of accounting should include all of the following, except:
Answer(s): A
Choice "a" is correct. The auditor would not indicate in his/her report an opinion as to whether the method of accounting used is appropriate.Choice "b" is incorrect. The auditor would include in his report an opinion as to whether the financial statements are presented fairly in conformity with the other comprehensive basis of accounting. Choice "c" is incorrect. The auditor would include in his report reference to the note to the financial statements that describes the basis of presentation.Choice "d" is incorrect. The auditor would include in his report a statement that the basis of presentation is a comprehensive basis of accounting other than generally accepted accounting principles.
When an independent accountant's report based on a review of interim financial information is presented in a registration statement, a prospectus should include a statement about the accountant's involvement.This statement should clarify that the:
Choice "b" is correct. When an independent accountant's report based on a review of interim financial information is presented in a registration statement, the prospectus should include a statement clarifying that the accountant's review report is not a "part" of the registration statement within the meaning of the Securities Act of 1933.Choice "a" is incorrect. The accountant is an "expert" within the meaning of the Securities Act of 1933.Choice "c" is incorrect. The accountant generally does not perform any auditing procedures during a review.Choice "d" is incorrect. The fact that the accountant's review is performed in accordance with standards established by the AICPA is not mentioned in the statement (about the accountant's involvement) in the prospectus.
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