Question 1

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

Accepted Answer

According to SSARS standards, the accountant is required to obtain a letter of representation from management during a review of financial statements.

Question 2

CPAs must be independent to issue a review report.

Accepted Answer

According to the AICPA's professional standards, a review report can only be issued by a CPA who is independent of the client.

Question 3

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.

Accepted Answer

The answer of A financial statement review conducted in compliance...

Question 4

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

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) sets standards for audits and interim reviews of financial information for public companies. The American Institute of Certified Public Accountants (AICPA) sets standards for non-public company audits and reviews. The Securities and Exchange Commission (SEC) has regulatory oversight over public companies, but does not set standards for interim reviews. The Statement on Standards for Accounting and Review Services (SSARS) sets standards for non-public company reviews and compilations.

Question 5

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

Accepted Answer

Review reports are typically dated as of the completion date of the review, not the client's balance sheet date.

Question 6

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

Accepted Answer

The answer of A financial statement review conducted in compliance...

Question 7

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.

Accepted Answer

The answer of Draft a report that would be appropriate...

Question 8

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

Accepted Answer

The answer of Discuss the six SSARS requirements that must...

Question 9

SSARS are issued by the SEC.

Accepted Answer

SSARS (Statements on Standards for Accounting and Review Services) are issued by the American Institute of Certified Public Accountants (AICPA), not the Securities and Exchange Commission (SEC).

Question 10

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

Accepted Answer

Nonpublic entities are required to include the reference "See independent accountant's review report" on each page of their reviewed financial statements. This reference indicates that the financial statements have been subject to review procedures conducted by an independent accountant, but that the accountant did not express an opinion on those statements. It distinguishes the reviewed financial statements from audited financial statements, which require an auditor to express an opinion on the statements. Additionally, it informs users of the financial statements that there is an accompanying independent accountant's review report that includes further details on the nature and scope of the accountant's review procedures. Therefore, Choice C is the best choice for this question.

Question 11

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

Accepted Answer

The answer of Discuss each of the three types of...

Question 12

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.

Accepted Answer

The answer of Draft a report that would be appropriate...

Question 13

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

Accepted Answer

According to the AICPA's Statements on Standards for Accounting and Review Services (SSARS), a compilation report can be issued by a CPA firm even if it is not independent with respect to the client. However, the report should disclose the lack of independence.

Question 14

The last paragraph of the accountant's review report:

Accepted Answer

The last paragraph of the accountant's review report typically includes negative assurance language stating that the accountant is not aware of any material modifications that need to be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework. This expresses limited assurance and ensures that the accountant is not providing an opinion on the financial statements. Therefore, the correct option is C.

Question 15

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

Accepted Answer

SSARS sets the standards for accounting and review services performed by CPAs for nonpublic entities, including compilations and reviews of financial statements.

Question 16

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.

Accepted Answer

This description refers to a compilation engagement, not a review engagement. In a review engagement, the accountant performs inquiry and analytical procedures to provide a limited assurance that there are no material modifications that should be made to the financial statements.

Question 17

CPAs must be independent to issue a compilation report.

Accepted Answer

CPAs do not need to be independent to issue a compilation report, but they must disclose any lack of independence in the report.

Question 18

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

Accepted Answer

The Securities and Exchange Commission requires quarterly financial information as a part of the 10-Q report, which is filed by public companies within 45 days after the end of each of the first three fiscal quarters. The 10-K report is an annual report that includes a comprehensive overview of the company's financial performance and operations. The 8-K report is filed to provide information regarding significant events such as mergers, acquisitions, and other material corporate changes. The auditor's report is a document that expresses an independent auditor's opinion on the financial statements of a company.

Question 19

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."

Accepted Answer

This is required by the AICPA's Statements on Standards for Accounting and Review Services (SSARS). If the auditor lacks independence, this fact must be disclosed in the compilation report.

Question 20

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

Accepted Answer

For compilation services, the accountant is not required to obtain an understanding of the client's internal control as the accountant is not expected to provide any assurance on the financial statements.

Quiz 25: Other Assurance Services