Which of the following best describes a CPA's engagement to report on a nonissuer's internal control over financial reporting?

Question

Quizplus · Accepted Answer

Choice "A" is correct. An engagement to report on an entity's internal control is best described as an attestation engagement to examine and report on management's written assertions about the effectiveness of its internal control. Choice "B" is incorrect. An audit involves expressing (or disclaiming) an opinion on historical financial statements. An engagement to report on internal control is an attestation engagement and not an audit. Thus, the engagement is covered under the attestation standards rather than GAAS. Choice "C" is incorrect. A prospective engagement is not appropriate for a report on internal control. In fact, the CPA's report includes an "inherent limitations" paragraph stating that projections of the internal control evaluation to the future are risky, since conditions or the degree of compliance may change. Choice "D" is incorrect. In a consulting engagement, the practitioner develops findings, conclusions, and recommendations, but does not report on an assertion that is the responsibility of another party. When a CPA reports on an entity's internal control, he or she is in effect reporting on management's assertion.

Which of the Following Best Describes a CPA's Engagement to Report