Question 1

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

Accepted Answer

A standard compilation report only provides limited assurance that the financial statements are free from material misstatements but does not express an opinion on their fairness.

Question 2

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

False

Question 3

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

Obtaining an engagement letter is a common procedure in all three types of engagements - audit, compilation, and review.

Question 4

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 terms assurance engagement and attestation engagement are used interchangeably by different accounting and auditing organizations. The International Auditing and Assurance Standards Board (IAASB) uses the term assurance engagement while The American Institute of Certified Public Accountants (AICPA) uses the term attestation engagement. However, both terms refer to engagements in which an independent auditor provides assurance on the reliability and relevance of certain information or assertions made by management.

Question 5

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

Accepted Answer

Non-audit attestation engagements can cover a broad range of subject matter, such as the effectiveness of internal controls, compliance with regulatory requirements, and the accuracy of financial forecasts, among others.

Question 6

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

Accepted Answer

The SEC (Securities and Exchange Commission) requires quarterly financial information of publicly owned corporations to be reviewed by an independent auditor before it is issued to ensure accuracy and transparency.

Question 7

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

Accepted Answer

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

Question 8

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

Inquiry and analytical review procedures are required for a review service to provide limited assurance on the financial statements.

Question 9

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

Accepted Answer

Negative assurance provides limited assurance to the users of financial statements that nothing has come to the attention of the reviewer that suggests that any material modifications are required. It should be noted that negative assurance does not provide a high level of assurance like positive assurance.

Question 10

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

A compilation report typically only presents the financial statements without providing any assurance or opinion on them. However, it is not common for a compilation report to omit all disclosures required by GAAP, as such disclosures are often necessary for the financial statements to be fairly presented.

Question 11

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 12

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 13

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 corporations to have their quarterly financial information reviewed by their independent auditors, but they do not require the auditor's review report to be included with the information. However, many companies do choose to include the auditor's report with their quarterly information.

Question 14

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 checks to see if any issues come to the practitioner's attention. However, these procedures may include some testing, but it is not as extensive or detailed as in a full assurance engagement.

Question 15

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.

Question 16

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 the quarterly information contained in the annual report to shareholders and also on the quarterly information issued at the end of each of the first three quarters of the fiscal year.

Question 17

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

Accepted Answer

The answer of The subject matter of an attestation engagement...

Question 18

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

The answer of An example of the subject matter of...

Question 19

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 20

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

Accepted Answer

The answer of The IAASB and the AICPA identify three...

Quiz 17: Other Services Provided by Audit Firms

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

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.

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

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.

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

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

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

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

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

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

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

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.

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.

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.

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

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

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

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