Question 1

The IAASB and the AICPA identify three levels of assurance that can be provided in an attestation engagement.

Accepted Answer

False

Question 2

Negative assurance infers that nothing has come to the reviewer's attention that requires change.

Accepted Answer

Negative assurance provides limited assurance and suggests that based on the review conducted, nothing has come to the reviewer's attention that requires change.

Question 3

The standard report on a review of separately issued interim financial statements of public companies identifies the information reviewed, indicates that the standards of the PCAOB were followed in performing the review, explains the nature of a review, disclaims an opinion, and provides negative assurance that the auditor is not aware of any material departures from GAAP.

Accepted Answer

This is an accurate description of the standard report on a review of separately issued interim financial statements of public companies.

Question 4

An example of the subject matter of a non-audit attestation engagement is management's assertions about historical financial information and associated disclosures.

Accepted Answer

Non-audit attestation engagements typically involve subjects like compliance with regulations, internal controls, or performance metrics, rather than historical financial information, which is usually covered in audit engagements.

Question 5

The subject matter of an attestation engagement has to be as of a point in time.

Accepted Answer

An attestation engagement can cover subject matter as of a point in time or over a period of time, depending on the nature of the engagement and the criteria being assessed.

Question 6

An auditor does not express an opinion on the fairness of the financial statements when issuing a standard compilation report.

Accepted Answer

An auditor only provides a standard compilation report that presents the financial information as provided by the client, without providing an opinion on their fairness.

Question 7

The SEC requires publicly owned corporations to have their quarterly financial information reviewed by their independent auditors before it is issued.

Accepted Answer

This statement is true. The SEC (Securities and Exchange Commission) requires publicly owned corporations to have their quarterly financial information reviewed by their independent auditors before it is issued to ensure accuracy and reliability of the financial statements.

Question 8

The SEC requires publicly owned corporations to have their quarterly financial information reviewed by their independent auditors before it is issued, but does not require that the auditor's review report be included with the quarterly information, although many companies do include the auditor's report.

Accepted Answer

The statement is true. The SEC requires review of quarterly financial information by independent auditors, but does not mandate the inclusion of their report.

Question 9

One procedure that is common to an audit engagement, as well as to both the compilation and review engagement, is obtaining an engagement letter.

Accepted Answer

An engagement letter is a common procedure in all three types of engagements - audit, compilation, and review. The engagement letter outlines the terms of the engagement, the responsibilities of both parties, and the scope of the work to be performed. It is an important document that helps to establish clear communication between the auditor or accountant and the client.

Question 10

The subject matter of a non-audit attestation engagement can be quite varied.

Accepted Answer

A non-audit attestation engagement can cover a range of subject matters such as compliance with laws and regulations, effectiveness of internal controls, and financial forecasts.

Question 11

The auditor need not be independent to perform a review engagement as it has a scope that is far less than that of an audit.

Accepted Answer

Independence is a fundamental requirement for auditors in both audit and review engagements to ensure objectivity and credibility of the financial information.

Question 12

Review reports issued by auditors give positive assurance as to the fair presentation of financial statements.

Accepted Answer

The answer of Review reports issued by auditors give positive...

Question 13

The International Auditing and Assurance Standards Board's term assurance engagement means the same as The American Institute of Certified Public Accountants' term attestation engagement.

Accepted Answer

The International Auditing and Assurance Standards Board (IAASB) and The American Institute of Certified Public Accountants (AICPA) use different terms, but they both refer to similar engagements that involve evaluating and providing assurance on financial statements or other information. IAASB uses the term "assurance engagement," while AICPA uses the term "attestation engagement."

Question 14

It is common for an auditor to issue a compilation report on financial statements that omit all of the disclosures required by GAAP.

Accepted Answer

It is not uncommon for auditors to issue a compilation report on financial statements that omit all of the disclosures required by GAAP. However, it is important to note that this report does not provide assurance on the accuracy, completeness, or fairness of the financial statements.

Question 15

A compilation performed in accordance with AICPA standards may be performed by CPAs or accountants who are not certified or licensed.

Accepted Answer

The answer of A compilation performed in accordance with AICPA...

Question 16

The performance of inquiry and analytical review procedures to provide a reasonable basis for expressing limited assurance is required for a review service.

Accepted Answer

According to the International Standard on Review Engagements (ISRE) 2400, the performance of inquiry and analytical review procedures is required to provide a reasonable basis for expressing limited assurance in a review engagement. Therefore, the statement is true.

Question 17

The auditor should perform review procedures (a) on the quarterly information contained in the annual report to shareholders and (b) when engaged to review the quarterly information issued at the end of each of the first three quarters of the fiscal year.

Accepted Answer

According to auditing standards, the auditor should perform review procedures on both the quarterly information contained in the annual report to shareholders and the quarterly information issued at the end of each of the first three quarters of the fiscal year.

Question 18

In limited assurance engagements, practitioners perform limited procedures (usually analysis of an issue but without significant testing) and checks to see if anything comes to their attention indicating a problem.

Accepted Answer

Limited assurance engagements involve performing limited procedures and analytical reviews to identify potential issues which may require further attention or modification. Therefore, the statement is true.

Question 19

Review engagements provide limited assurance on financial statements and are less in scope than audits.

Accepted Answer

Review engagements are designed to provide a moderate level of assurance on financial statements, which is less than the high level of assurance provided by audits. Therefore, they are less in scope than audits.

Question 20

Regarding interim financial statement reviews, the standards do not require auditors to understand the client's accounting and financial reporting practices and its related internal controls over the preparation of annual and quarterly reports, since they are not expressing an opinion.

Accepted Answer

According to auditing standards, auditors are required to understand the client's accounting and financial reporting practices and its related internal controls over the preparation of annual and interim financial statements, including reviews. This understanding assists in evaluating the risk of material misstatement and designing appropriate audit procedures.

Quiz 17: Other Services Provided by Audit Firms