Deck 25: Other Assurance Services

Question 1

The concept of limited assurance is provided for in which of the following engagements?

A) Audit
B) Review
C) Compilation
D) Agreed-upon procedures

Answer 1

B

Question 2

Compilation reports may be of all but which of the following types?

A) Compilation with limited independence
B) Compilation with full disclosure
C) Compilation without independence
D) Compilation that omits substantially all disclosures

Answer 2

A

Question 3

Evidence for a review engagement consists primarily of:

A)
B)
C)
D)

Answer 3

B

Question 4

The highest level of assurance is provided for in which one of the following engagements?

A) Review
B) Compilation
C) Audit
D) None of the above

Question 5

You are preparing to issue a report on the compilation of financial statements for a nonpublic company.Prior to issuing the report you should:

A) read the financial statements to determine if they are free from obvious material errors.
B) perform analytical procedures to determine if they are free from material misstatements.
C) perform tests of balances on selected accounts to determine if they are free from material misstatements.
D) perform limited control tests to determine if there are any material misstatements.

Question 6

The two types of services provided in connection with the Statements on Standards for Accounting and Review Services are:

A) audit and examination services.
B) compilation and review services.
C) examination and review services.
D) management advisory services and compilations.

Question 7

For compilations,an accountant does which of the following?

A)
B)
C)
D)

Question 8

In a review service where the client has failed to follow applicable accounting standards,the accountant is:

A) not required to determine the effect of a departure if management has not done so, but that fact must be disclosed in the report.
B) required to determine the effect of a departure if management has not done so, and that fact must be disclosed in the report.
C) not required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report.
D) required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report.

Question 9

Which of the following would not be included in a CPA's report based upon a review of the financial statements of a nonpublic entity?

A) A statement that the review was in accordance with generally accepted auditing standards
B) A statement that all information included in the financial statements is the representation of management
C) A statement describing the principal procedures performed
D) A statement describing the auditor's conclusions based upon the results of the review

Question 10

Assurance provided by a review is substantially less than an audit.Which of the following statements is true regarding these services?

A) A review requires more substantive evidence than an audit.
B) An audit requires less evidence related to internal control than a review.
C) A review requires less evidence than an audit.
D) None of the above statements is true.

Question 11

The standards which govern the CPA's association with unaudited financial statements of nonpublic companies are the:

A) AICPA's Code of Professional Conduct.
B) Statements on Auditing Standards (SASs).
C) Statements of Standards on Attestation Engagements (SSAEs).
D) Statements on Standards for Accounting and Review Services (SSARS).

Question 12

Your accounting firm has accepted a compilation engagement from a client in which your firm is not independent.In that case you:

A) may not accept the engagement.
B) may accept the engagement and disclose the lack of independence.
C) may accept the engagement and not disclose the lack of independence.
D) may accept the engagement and disclose the lack of independence and the reason for the lack of independence.

Question 13

An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review:

A) is substantially equivalent in scope to an audit.
B) is substantially more in scope than a compilation.
C) is substantially less in scope than an audit.
D) provides only limited assurance that the financial statements are fairly presented.

Question 14

An accountant has accepted an engagement in which the audit procedures of inquiry and analytical procedures will be employed.These procedures will form the basis for issuance of:

A) a compilation report.
B) audit report on supplemental information issued by the client.
C) management advisory report requested by the audit committee.
D) review report on financial statements for a nonpublic company.

Question 15

Practitioners who perform reviews and compilations are referred to in the SSARS standards as:

A) bookkeepers.
B) accountants.
C) auditors.
D) CPAs.

Question 16

The statement that "We are not aware of any material modifications that should be made to the accompanying financial statements" expresses which of the following?

A) Disclaimer of an opinion
B) Negative assurance
C) Negative confirmation
D) Shared opinion

Question 17

A CPA firm can issue a compilation report:

A) only if the partners are independent.
B) only if all the partners and the staff in the office performing the engagement are independent.
C) if the partners have no material or direct immaterial interest in client.
D) even if it is not independent.

Question 18

One of the first steps that should be performed for a review of a nonpublic entity's financial statements is to:

A) read the financial statements.
B) obtain knowledge of the accounting principles and practices of the client's industry.
C) inquire whether management has omitted substantially all of the disclosures required by applicable accounting standards.
D) apply analytical procedures to provide limited assurance that no material modifications should be made to the financial statements.

Question 19

All of the following are steps that should be performed in a review engagement except for:

A) understand the company's ownership structure.
B) read the company's financial statements.
C) perform analytical procedures.
D) assess fraud risk.

Question 20

When the accountant has performed a review and has determined that no material changes to the financial statements are needed,the first paragraph of the review report:

A) expresses positive assurance about the financial statements.
B) notes the accountant's responsibility to conduct the review.
C) identifies the entity and the period of financial statements subject to the review.
D) specifies that management is responsible for the financial statements.

Question 21

When performing a review (SSARS review)of financial statements,the accountant is required to obtain a letter of representation from management.

Question 22

CPAs must be independent to issue a review report.

Question 23

A financial statement review conducted in compliance with SSARS requires the accountant to obtain evidence to express negative assurance.One of these procedures is to "perform analytical procedures." List three other procedures the accountant must perform.

Question 24

An interim review of the financial information for public companies is performed following standards of the:

A) AICPA.
B) PCAOB.
C) SEC.
D) SSARS.

Question 25

Review reports are normally dated as of the client's balance sheet date.

Question 26

A financial statement review conducted in compliance with SSARS includes obtaining an understanding of internal control.

Question 27

Draft a report that would be appropriate when an independent accountant has performed a compilation of financial statements which substantially omits all disclosures and the statement of cash flows required by accounting principles generally accepted in the United States of America.

Question 28

Discuss the six SSARS requirements that must be met when an accountant is performing a compilation of financial statements.

Question 29

SSARS are issued by the SEC.

Question 30

Each page of the financial statements reviewed for a nonpublic entity should include the reference:

A) "These financial statements are unaudited."
B) "We express no assurance on these financial statements."
C) "See independent accountant's review report."
D) "See the audit opinion for the review procedures performed."

Question 31

Discuss each of the three types of compilation reports and the circumstances in which each should be used.

Question 32

Draft a report that would be appropriate when an independent accountant has performed a compilation of financial statements with disclosures in accordance with accounting principles generally accepted in the United States of America.

Question 33

A CPA firm can issue a compilation report even if it is not independent with respect to the client.

Question 34

The last paragraph of the accountant's review report:

A) details the responsibilities of management.
B) details the responsibilities of the accountant.
C) expresses limited assurance in the form of negative assurance.
D) lists the analytical procedures performed.

Question 35

Statements on Standards for Accounting and Review Services (SSARS)govern the CPA's association with unaudited financial statements of nonpublic companies.

Question 36

A nonaudit engagement in which the accountant undertakes to present,in the form of financial statements,information that is the representation of management,without undertaking to express any assurance on the statements is called a review engagement.

Question 37

CPAs must be independent to issue a compilation report.

Question 38

The Securities and Exchange Commission requires quarterly financial information as a part of the:

A) 10-K report.
B) 10-Q report.
C) 8-K report.
D) auditor's report.

Question 39

If an auditor performs a compilation but lacks independence,an additional paragraph must be added which states that:
" We are not independent with respect to XYZ Company."

Question 40

When performing compilation services,the accountant is not required to obtain an understanding of the client's internal control.

Question 41

When a CPA performs an examination engagement under the attestation standards,the amount of evidence gathered is ________ and the level of assurance is ________.

A) extensive, varying
B) significant, high
C) extensive, high
D) significant, moderate

Question 42

When performing an attestation engagement a CPA is required to adhere to the Statements on Standards for Attestation Engagements.Describe below the Standards of Field Work for attestation engagements.

Question 43

An agreed-upon procedures engagement is one in which:

A) the CPA and management agree that procedures will be applied to all accounts and circumstances.
B) the CPA and management agree that procedures will not be applied to all accounts and circumstances.
C) the CPA, the responsible party making the assertions, and the specific persons who are the intended users of the CPA's report agree to all the procedures the CPA will perform.
D) the CPA, the responsible party making the assertions, and the specific persons who are the intended users of the CPA's report agree that the CPA will apply his judgment to determine the procedures to be performed.

Question 44

Distribution of which of the following types of reports is limited?

A) Audit
B) Review
C) Agreed-upon procedures
D) Examination

Question 45

Which of the following is not one of the types of engagements and related forms of conclusions that are defined by the attestation standards?

A) Reviews
B) Compilations
C) Examinations
D) Agreed-upon procedures

Question 46

Statements on Standards for Attestation Engagements are established by the:

A) Securities and Exchange Commission.
B) Public Company Accounting Oversight Board.
C) Auditing Standards Board of the AICPA.
D) Accounting and Review Services Committee.

Question 47

Specific attestation standards have been developed in all but which of the following areas?

A) Pro forma financial information
B) Compliance with laws and regulations
C) Prospective financial statements
D) Standards have been developed for all of the above.

Question 48

The distribution of which of the following types of reports is unrestricted?

A) Examinations and reviews
B) Reviews and agreed-upon procedures
C) Examinations and agreed-upon procedures
D) Examinations, reviews, and agreed-upon procedures

Question 49

As a CPA,you have been engaged to perform an attestation engagement.You would typically:

A) express a conclusion about an assertion.
B) provide management consulting services.
C) prepare financial forecasts to secure in preparation for receiving debt funding.
D) compile financial statements for the client.

Question 50

Reports on agreed-upon procedures are intended to be distributed:

A) to only the involved parties, who would have the requisite knowledge about those procedures and the level of assurance resulting from them.
B) to only the involved parties, who would have the requisite knowledge about those procedures but not the level of assurance resulting from them.
C) to any party to whom the client wishes.
D) only to the stockholders of the client.

Question 51

SSAEs are issued by the AICPA.

Question 52

Which of the following is not a standard contained in both the Attestation Standards and Generally Accepted Auditing Standards with regards to the standards of field work?

A) The examination is to be performed by a person having adequate technical training.
B) An independence in mental attitude is to be maintained.
C) Sufficient evidence is to be obtained.
D) The practitioner must obtain a sufficient understanding of the client's internal control.

Question 53

Auditors of the financial statements of public companies must follow the guidelines in the SSAEs.

Question 54

An examination results in a conclusion that represents ________ assurance.

A) limited assurance
B) negative
C) positive
D) unequivocal

Question 55

When performing a review of interim information for a public company,the accountant ordinarily does not perform tests of the accounting records,independent confirmations,or physical examinations.

Question 56

The quarterly reports submitted to the SEC by the client:

A) have to be audited and the CPA firm must be identified.
B) do not have to be audited, but the CPA firm which does the annual audit must be identified.
C) have to be audited, but the CPA firm does not have to be identified.
D) do not have to be audited, but the CPA firm which does the annual audit must review the quarterly statements before they are submitted to the SEC.

Question 57

Which of the following is a attestation standard under the standards of reporting?

A) The practitioner must have adequate technical training.
B) The practitioner must adequately plan the work.
C) The practitioner must evaluate internal controls.
D) The practitioner must identify the subject matter or assertion being reported on.

Question 58

Which of the following results in a conclusion that represents positive assurance?

A) Review
B) Compilation
C) Examination
D) Agreed upon procedure engagement

Question 59

Which of the following types of engagement reports would provide positive assurance?

A) An examination
B) A review
C) An agreed-upon procedures engagement
D) A compilation

Question 60

The auditor must obtain evidence that the interim financial information agrees or reconciles with the accounting records for a public company interim review.

Question 61

There are five Trust Service principles,including security and integrity.

Question 62

WebTrust services are performed under the direction of the SSARS.

Question 63

Examination attestation engagements result in a conclusion that is in a positive form,whereas review attestation engagements result in a conclusion in the form of a negative assurance.

Question 64

Which are prospective financial statements that present an entity's expected financial position,results of operations,and cash flows,to the best of the responsible party's knowledge and belief?

A)
B)
C)
D)

Question 65

Of the three types of attestation engagements,examination engagements provide a higher level of assurance than agreed-upon procedures engagements but less than review engagements.

Question 66

Who developed the WebTrust service?
Briefly explain this service.

Question 67

The guidance for service auditors has been moved to the attestation standards.

Question 68

In a Type 2 engagement,the service auditor performs tests of the operating effectiveness of the controls,but does not have to perform any of the procedures performed in a Type 1 engagement.

Question 69

In a WebTrust attestation engagement the client engages a CPA to provide what level of assurance that the company's website complies with Trust Services principles?

A) absolute
B) reasonable
C) limited
D) moderate

Question 70

The WebTrust service requires that a CPA update its testing of the e-commerce aspects of a entity's web site at least every:

A) ninety days.
B) month.
C) six months.
D) twelve months.

Question 71

The use of positive assurance is appropriate in a review attestation report.

Question 72

Which are prospective financial statements that present an entity's financial position,results of operations,and cash flows,to the best of the responsible party's knowledge and belief,given one or more hypothetical assumptions?

A)
B)
C)
D)

Question 73

As a CPA you have been asked to examine an entity's financial projections.Acceptance of the engagement would be appropriate if distribution is limited to:

A) stockholders of record as of the date of the report.
B) potential investors and creditors by posting on the company's website.
C) general public by posting on the company's website.
D) a financial institution for which the company is negotiating a loan.

Question 74

Which of the following is a type of prospective financial statement as defined by the AICPA attestation standards?

A)
B)
C)
D)

Question 75

Systrust services are performed under the direction of the SSAEs.

Question 76

CPAs must obtain a specific license to perform WebTrust or SysTrust services.

Question 77

Briefly describe each of the five Trust Services principles.

Question 78

Which of the following services is performed under the attestation standards?

A)
B)
C)
D)

Question 79

The service auditor's Type 2 report contains:

A) an opinion on the reasonableness of the financial statements.
B) the two opinions about the description and suitability of the design of controls that are issued in a Type 1 report plus an additional opinion about the operating effectiveness of controls throughout the period.
C) contains an opinion only on the operating effectiveness of the controls.
D) an opinion on the service company's website.

Question 80

Briefly describe a SysTrust engagement.