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Review and Compilation Engagements
66. Which of the following situations is not one where the practitioner will modify the standard compilation
report?
a.
There is an omission of disclosures for the compilation.
b.
A compilation report is not required
c.
The practitioner lacks independence.
d.
An understanding of internal controls cannot be obtained.
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Review and Compilation Engagements
67. What are the performance standards required for interim review engagements on the quarterly financial
information of public companies?
a.
Statements on Standards for Accounting and Review Services.
b.
Standards of the Public Company Accounting Oversight Board.
c.
Statements on Reviews for Public Registrants and Securities Acts.
d.
Standards set by the Public Oversight Board of the Enforcement Division of the SEC.
68. When are publicly owned companies required to file a Form 10Q with the SEC?
a.
Within 10 to 15 days (depending on the company size) after the end of each of the first three quarters
of the fiscal year
b.
Within 30 to 45 days (depending on the company size) after the end of each of the first three quarters
of the fiscal year
c.
Within 40 to 45 days (depending on the company size) after the end of each of the first three quarters
of the fiscal year
d.
Within 45 to 60 days (depending on the company size) after the end of each of the first three quarters
of the fiscal year
69. Which of the following procedures is not a review procedure for interim financial information?
a.
Making inquiries.
b.
Performing analytical procedures.
c.
Reading the minutes of the board of directors’ meetings
d.
Obtaining oral assurance from management that there are no subsequent events.
70. Which of the following items is not contained in the standard report on a review of separately issued interim
financial statements of public companies?
a.
A description of the information reviewed.
b.
A statement indicating that the standards of the PCAOB were followed in performing the review.
c.
A description of the nature of the review.
d.
Positive assurance that the auditor is not aware of any material departures from GAAP.
71. Which of the following is not a way that the disclosure and reporting requirements for interim financial
statements differ from those for annual financial statements?
a.
Accruals for estimates of bad debt are not usually as precise on interim dates as they are at year end.
b.
Information disclosed in the latest annual statements does not have to be repeated in the interim
statements except for continuing contingencies and other uncertainties.
c.
Accruals for estimates of income tax expenses are not usually as precise on interim dates as they are
at year end.
d.
The interim information does not have to be filed with the SEC for public companies.
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Providing Assurance on Interim Financial Information
72. Craig Marks, CPA performs an audit of Treasure, Inc., which keeps its financial statements on the tax basis
of accounting. Craig is aware of this fact and audits the financial statements on the criteria of the tax basis.
What type of engagement is this?
a.
This engagement is not permitted by the AICPA.
b.
This engagement is an audit that will result in the issuance of a special report.
c.
This engagement is a compilation.
d.
This engagement is only performed by tax accountants who do not provide attest services.
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Special Considerations for Reporting
73. Which one of the following reports is not a special report issued as a result of an examination?
a.
Report on a specified financial statement element.
b.
Report on compliance with contractual agreements.
c.
Agreed upon procedures.
d.
Report on information presented in prescribed forms.
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Special Considerations for Reporting
74. Other comprehensive bases of accounting do not include which of the following?
a.
Cash basis.
b.
Tax basis.
c.
Regulatory basis.
d.
Intended basis.
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Special Considerations for Reporting
75. When forming an opinion on special purpose financial statements, which of the following items does the
auditor not need to evaluate?
a.
Whether the financial statements adequately describe the applicable financial reporting framework.
Chapter 17 – Other Services Provided by Audit Firms
b.
Whether the financial statements have the appropriate title.
c.
Whether the financial statements include a summary of significant accounting policies.
d.
Whether the financial statements differ in GAAS presentation.
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Special Considerations for Reporting
76. For which of the following special purpose financial statements is a dual opinion on a special purpose
framework and GAAP required?
a.
Cash basis.
b.
Tax basis.
c.
Regulatory basis for general use.
d.
Contractual basis.
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77. For which of the following special purpose financial statements is an emphasis-of-matter paragraph alerting
readers about the preparation in accordance with the special purpose framework not required?
a.
Cash basis.
b.
Tax basis.
c.
Regulatory basis for general use.
d.
Contractual basis.
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Special Considerations for Reporting
78. For which of the following special purpose financial statements is a description of purpose for which special
purpose financial statements are prepared not required?
a.
Cash basis.
b.
Regulatory basis for use by management and the regulator only.
c.
Regulatory basis for general use.
d.
Contractual basis.
Chapter 17 – Other Services Provided by Audit Firms
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Special Considerations for Reporting
79. For which of the following special purpose financial statements is an other-matter paragraph restricting the
use of the auditor’s report required?
a.
Cash basis.
b.
Tax basis.
c.
Regulatory basis for general use.
d.
Contractual basis.
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Special Considerations for Reporting
80. In which of the following cases should the auditor’s report on compliance not include a statement that
nothing came to the auditor’s attention that caused the auditor to believe that the entity failed to comply with
specified aspects of the contractual agreements or regulatory requirements?
a.
When the auditor has not identified any instances of noncompliance.
b.
When the auditor has expressed an unmodified or qualified opinion on the financial statements to
which the applicable covenants of such contractual agreements or regulatory requirements relate.
c.
When the applicable covenants or regulatory requirements relate to accounting matters that have
been subjected to the audit procedures applied in the audit of financial statements.
d.
When the auditor needs to obtain further evidence to corroborate audit evidence acquired from
management and the accounting records.
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Special Considerations for Reporting
81. Which of the following statements is false regarding agreed-upon procedures engagements?
a.
In this type of engagement, the independent practitioner is engaged to assist in evaluating subject
matter or an assertion.
b.
In this type of engagement, the nature, timing, and extent of agreed-upon procedures is the same for
all engagements.
Chapter 17 – Other Services Provided by Audit Firms
c.
In this type of engagement, the practitioner does not perform a review, and does not provide an
opinion or negative assurance.
d.
In this type of engagement, the report should indicate that it is restricted in its use to specified parties.
b
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Attestation on Agreed-Upon Procedures , Financial Forecasts and Projections, and
Pro Forma Financial Information
82. Which of the following statements is false regarding responsibilities associated with agreed-upon
procedures engagements?
a.
The responsibility of the practitioner is to conduct the procedures and report the findings in
accordance with applicable professional standards.
b.
The practitioner must have adequate knowledge of the subject matter.
c.
The practitioner is required to determine if there exists a difference between the agreed-upon
procedures requested by the specified parties and the procedures that the practitioner would have
decided to conduct if the practitioner would have been engaged to perform another form of
engagement.
d.
The practitioner should not agree to perform agreed-upon procedures that are overly subjective.
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Attestation on Agreed-Upon Procedures , Financial Forecasts and Projections, and
Pro Forma Financial Information
83. Which of the following procedures is an appropriate agreed-upon procedure?
a.
Evaluating the competency or objectivity of another party.
b.
Performing of mathematical computations.
c.
Obtaining an understanding about a particular subject.
d.
Reading the work performed by others solely to describe their findings.
b
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84. Which of the following procedures is an inappropriate agreed-upon procedure?
Chapter 17 – Other Services Provided by Audit Firms
a.
Comparison of documents, schedules, or analyses.
b.
Performance of mathematical computations.
c.
Confirmation of specific information with third parties.
d.
Evaluation of the competency or objectivity of another party.
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Attestation on Agreed-Upon Procedures , Financial Forecasts and Projections, and
85. Which of the following activity is not part of the compilation of prospective financial statements?
a.
Assembling prospective financial statements based on the responsible party’s assumptions.
b.
Performing compilation procedures, including reading the prospective financial statements, along
with their assumptions and accounting policies, and considering whether they appear to be presented
in conformity with AICPA presentation guidelines and that they are not obviously inappropriate.
c.
Issuing a compilation report.
d.
Providing assurance on the prospective financial statements.
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Attestation on Agreed-Upon Procedures , Financial Forecasts and Projections, and
Pro Forma Financial Information
86. Which of the following activities is not part of the examination of prospective financial statements?
a.
Evaluating the support underlying the assumptions.
b.
Evaluating the preparation of the prospective financial statements.
c.
Evaluating the presentation of the prospective financial statements for conformity with AICPA
presentation guidelines.
d.
Assembling the prospective financial statements.
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87. Pro forma financial information is often used to illustrate the effects of various types of transactions. Pro
Chapter 17 – Other Services Provided by Audit Firms
forma financial information would be least likely to be used with which of the following transactions?
a.
Setting up a bond sinking fund.
b.
Disposing of a significant segment of a business.
c.
Proposing the sale of securities and applying the proceeds to a project.
d.
Business combinations.
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Pro Forma Financial Information
88. Which of the following guidelines is not a presentation that pro forma financial information should adhere
to?
a.
It should describe the transaction or event that is reflected in the pro forma financial information.
b.
It should describe significant assumptions used to develop the pro format adjustments.
c.
It should make clear that the pro forma financial information is indicative of results that would have
been achieved had the transaction or event actually taken place at an earlier time.
d.
It should describe any significant uncertainties about those assumptions.
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Pro Forma Financial Information
89. Which of the following procedures is not appropriate for examining or reviewing pro forma financial
information?
a.
Obtaining less evidence in an examination engagement than in a review engagement.
b.
Obtaining an understanding of the underlying transaction or event.
c.
Discussing management’s assumptions regarding the effects of the transaction or event.
d.
Evaluating whether pro forma adjustments are completely recorded.
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90. Which of the following statements best describes the primary difference between an audit and forensic
accounting?
a.
An audit has the focused responsibility to detect fraud in the client organization, while forensic
accounting sets out to prevent fraud.
b.
An audit has no responsibility for detecting fraud, while forensic accounting provides an audit
specific to material fraud discovery.
c.
An audit must follow Generally Accepted Auditing Standards, while the forensic accountant is bound
to Generally Accepted Fraud Standards.
d.
An audit utilizes sampling techniques to detect material misstatements, while forensic accounting
examines the entire population of fraudulent transactions.
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Forensic Accounting
91. Which of the following statements is false regarding forensic accounting?
a.
Forensic accounting builds support for legal action against the person committing the fraud by
identifying the fraud, calculating the damages caused by the fraud, and building both factual and
testimonial evidence of the fraud.
b.
Forensic accountants rely on sampling of fraud-related documents to accurately measure the cost of
the fraud.
c.
One aspect of forensic accounting focuses on identifying the person who has perpetrated the fraud
and having that person confess to the fraud.
d.
Interviewing is one of the most important forensic accounting skills.
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Forensic Accounting
92. Which of the following situations is least likely to initiate a forensic accounting engagement?
a.
Where management suspects a fraud is occurring within the organization.
b.
Where strong internal controls exist.
c.
Where an auditor recommends a separate forensic engagement due to hints of fraud uncovered
during an audit.
d.
Where auditors deem there are situations of heightened fraud risk.
93. Which of the following descriptions is not a key priority to support the work of professional accountants in
embedding sustainable practices?
a.
Raising awareness and facilitating sharing and collaboration across the global accountancy
community.
b.
Incorporating accounting for sustainability within professional training and education.
c.
Using traditional ways of thinking about organizational performance.
d.
Establishing an international integrated reporting committee to develop a new reporting model that
will better reflect the interconnected impact of financial, environmental, social, and governance
factors on the long-term performance and condition of an organization.
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Sustainability Reporting and Assurance
94. Which of the following descriptions best explains triple bottom line reporting?
a.
It is reporting on assets, liabilities, and stockholders’ equity.
b.
It is reporting on financial, environmental and social performance.
c.
It is reporting on auditing, accounting, and ethics.
d.
It is reporting with respect to laws, norms, and performance standards.
b
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Sustainability Reporting and Assurance
95. Which of the following statements is false regarding reporting on sustainability activities and outcomes?
a.
Investor interest, socially responsible investment funds, and the Dow Jones Sustainability Index have
increased demand for these sustainability disclosures.
b.
Specific sustainability disclosures that companies make vary little from company to company.
c.
Many corporate websites now include sustainability reports, and the placement on those websites is
usually quite prominent.
d.
Regarding sustainability, companies determine what to report and how to report it by using various
available guidelines, the most prominent of which is the Global Reporting Initiative (GRI) G3
Reporting Framework.
United States – AK – AICPA BB-Critical thinking
Forensic Accounting
96. Which of the following is not considered a part of external assurance over sustainability reporting, as stated
by the Global Reporting Initiative (GRI) Reporting Framework?
a.
External assurance engagements should be conducted by those with competence in the subject matter
and assurance practices
b.
External assurance engagements should assess whether the sustainability report is reasonable,
balanced, and appropriately inclusive.
c.
External assurance engagements should assess the extent to which the report preparer has applied the
GRI Reporting Framework in reaching its conclusions.
d.
External assurance engagements can be issued by the CFO of the company issuing the sustainability
report.
d
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Sustainability Reporting and Assurance
97. Types of Assurance Engagements
What is the difference between reasonable assurance engagements and limited assurance engagements?
(usually analysis of an issue but without significant testing) and checks to see if
anything comes to their attention indicating a problem.
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98. Compilation Reporting
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Sustainability Reporting and Assurance
Chapter 17 – Other Services Provided by Audit Firms
For a compilation report, identify:
A.
for what type of organization the report may be performed;
B.
the procedures the auditor performs;
C.
the type of assurance provided;
D.
the requirements for auditor independence.
A.
The compilation report can be performed only for nonpublic entities.
C.
The compilation report provides no assurance.
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Review and Compilation Engagements
99. Compilation Reporting
A banker friend and you were discussing compiled financial statements. He said,” When CPAs associate their
name with compiled financial statements, their only responsibility is to the client and that is limited to the
proper summarization and presentation on the financial statement information provided by the client. The
opinion clearly states that the auditor has not conducted an audit and does not express an opinion on this fair
presentation. Therefore, if users rely on compiled financial statements, they do so at their own peril and can
never hold the CPA responsible for inadequate performance. Users should interpret the financial statements as if
they had been prepared by management.”
REQUIRED: How would you respond to your friend?
100. Review reports
For a review report, identify:
A.
for whom what type of the organization the report may be performed;
B.
the procedures the auditor performs;
C.
the type of assurance provided;
D.
the requirement for auditor independence.
A.
Review reports may be performed for both public and nonpublic companies.
C.
The review report provides limited assurance.
D.
The auditor is required to be independent to perform a review.
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Review and Compilation Engagements
101. Compilation reports and disclosures
You have been engaged to perform a compilation service for Raven Company. Management informs you that it
will not include the required disclosures in the financial statements. What effect will this have on the
engagement?
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Review and Compilation Engagements
102. Review of Interim Financial Information
What are some common procedures that the auditor will complete when performing a review of interim
financial information?
103. Special Reports
AU-C Section 805 provides guidance on audits of single financial statements and specific elements, accounts,
or items of a financial statement. What are some examples of these types of situations?
104. Pro Forma Financial Information
What is the difference between historical financial information and pro forma financial information? Discuss
the guidelines that should be adhered to when presenting pro forma financial information.
indicative of results that would have been achieved had the transaction or event
actually taken place at an earlier time.
105. Star Appliance Corp. has requested that Malfie Thomas, CPA provide a report, including a debt
compliance letter, to Great Northern Bank about the existence or nonexistence of certain loan conditions. The
Chapter 17 – Other Services Provided by Audit Firms
conditions to be reported on are the working capital ratio, dividends paid on preferred stock, aging of accounts
receivable, and the competence of management. This is Malfie’s first experience with Star appliance. Should
Malfie accept this engagement? Provide justification for your answer.
106. Forensic accounting
Contrast the financial statement auditor’s consideration of fraud to that of a forensic accountant.
107. Sustainability Reporting
Why is there a demand for independent assurance on sustainability reporting? Describe the features of external
assurance over sustainability provided in the Global Reporting Initiative Reporting Framework.