Chapter 17 – Other Services Provided by Audit Firms
1. 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.
a.
True
b.
False
True
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Non-Audit Attestation Services Provided by Audit Firms
2. The subject matter of an attestation engagement has to be as of a point in time.
a.
True
b.
False
False
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Non-Audit Attestation Services Provided by Audit Firms
3. The IAASB and the AICPA identify three levels of assurance that can be provided in an attestation
engagement.
a.
True
b.
False
False
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Non-Audit Attestation Services Provided by Audit Firms
4. 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.
a.
True
b.
False
True
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5. An example of the subject matter of a non-audit attestation engagement is management’s assertions about
historical financial information and associated disclosures.
a.
True
b.
False
False
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Non-Audit Attestation Services Provided by Audit Firms
6. The subject matter of a non-audit attestation engagement can be quite varied.
a.
True
b.
False
True
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Non-Audit Attestation Services Provided by Audit Firms
7. Review reports issued by auditors give positive assurance as to the fair presentation of financial statements.
a.
True
b.
False
False
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Review and Compilation Engagements
8. Negative assurance infers that nothing has come to the reviewer’s attention that requires change.
a.
True
b.
False
True
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9. Review engagements provide limited assurance on financial statements and are less in scope than audits.
a.
True
b.
False
True
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Review and Compilation Engagements
10. An auditor does not express an opinion on the fairness of the financial statements when issuing a standard
compilation report.
a.
True
b.
False
True
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Review and Compilation Engagements
11. One procedure that is common to an audit engagement, as well as to both the compilation and review
engagement, is obtaining an engagement letter.
a.
True
b.
False
True
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Review and Compilation Engagements
12. 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.
a.
True
b.
False
False
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13. The performance of inquiry and analytical review procedures to provide a reasonable basis for expressing
limited assurance is required for a review service.
a.
True
b.
False
True
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Review and Compilation Engagements
14. A compilation performed in accordance with AICPA standards may be performed by CPAs or accountants
who are not certified or licensed.
a.
True
b.
False
False
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Review and Compilation Engagements
15. It is common for an auditor to issue a compilation report on financial statements that omit all of the
disclosures required by GAAP.
a.
True
b.
False
True
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Review and Compilation Engagements
16. 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.
a.
True
b.
False
17. 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.
a.
True
b.
False
18. The SEC requires publicly owned corporations to have their quarterly financial information reviewed by
their independent auditors before it is issued.
a.
True
b.
False
19. 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.
a.
True
b.
False
20. 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.
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Providing Assurance on Interim Financial Information
Chapter 17 – Other Services Provided by Audit Firms
a.
True
b.
False
21. The SEC requires public filers to have quarterly financial information reviewed by independent auditors.
a.
True
b.
False
22. A review report issued by a public accounting firm on a public client’s interim financial statements includes
reference to adherence to the standards of the Public Company Accounting Oversight Board.
a.
True
b.
False
23. Accruals, such as estimates of bad debt and income tax expenses, are not usually as precise on interim
financial reports as they are on year-end financial reports.
a.
True
b.
False
24. A special purpose framework can use a cash basis financial reporting framework.
Chapter 17 – Other Services Provided by Audit Firms
a.
True
b.
False
True
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Special Considerations for Reporting
25. Reporting on a specified account is a form of special report that an auditor may issue in relation to a specific
basis of accounting.
a.
True
b.
False
True
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Special Considerations for Reporting
26. Special reports would include compliance with contractual agreements.
a.
True
b.
False
True
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Special Considerations for Reporting
27. When forming an opinion on special purpose financial statements, the auditor should evaluate whether the
financial statements include a summary of significant accounting policies.
a.
True
b.
False
True
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28. An other-matter paragraph restricting the use of the auditor’s report is a reporting requirement for a cash
Chapter 17 – Other Services Provided by Audit Firms
basis special purpose financial statement.
a.
True
b.
False
False
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Special Considerations for Reporting
29. When auditing only a single financial statement or a specific element, account, or item of a financial
statement, the auditor will have a better understanding of the entity than if the auditor audited the entity’s
complete set of financial statements.
a.
True
b.
False
False
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Special Considerations for Reporting
30. When a public accounting firm issues a report on financial statements that are issued on an other
comprehensive basis of accounting, this special report includes an opinion paragraph identical to an adverse
opinion.
a.
True
b.
False
False
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Special Considerations for Reporting
31. A report on compliance with a contractual agreement typically involves the use of negative assurance by the
auditor in a separate report.
a.
True
b.
False
True
32. A state insurance commission requires an insurance company to prepare its financial statements in
accordance with Statutory Accounting Principles. This situation may prevent an auditor from issuing a special
report on the financial statements as the Statutory Accounting Principles are not a recognized alternative
comprehensive basis.
a.
True
b.
False
False
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Pro Forma Financial Information
33. A company issuing prospective financial statements can receive a compilation on the statements but not an
examination.
a.
True
b.
False
False
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Pro Forma Financial Information
34. A report on agreed-upon procedures issued by accountants provides a form of attestation assurance.
a.
True
b.
False
True
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Pro Forma Financial Information
35. Attestation standards require that the practitioner evaluate whether there is reasonable criteria capable of
reasonably consistent estimation by which to judge the assertions being made in a financial forecast.
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Pro Forma Financial Information
Chapter 17 – Other Services Provided by Audit Firms
a.
True
b.
False
True
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Pro Forma Financial Information
36. Pro forma financial information shows what the significant effects might have been had a consummated or
proposed transaction or event occurred at an earlier date.
a.
True
b.
False
True
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Pro Forma Financial Information
37. In agreed-upon procedure engagements, the practitioner does not perform a review, and does not provide an
opinion or negative assurance.
a.
True
b.
False
True
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Pro Forma Financial Information
38. One aspect of forensic accounting focuses on identifying the person who has perpetrated the fraud and
having that person confess to the fraud.
a.
True
b.
False
True
39. Forensic accountants need to have excellent interviewing and people skills.
a.
True
b.
False
True
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Forensic Accounting
40. The focus of forensic accounting is similar to financial statement auditing in that it is directed to the fairness
of financial statements.
a.
True
b.
False
False
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Forensic Accounting
41. Many corporate websites now include sustainability reports, and the placement on those websites is usually
quite prominent.
a.
True
b.
False
True
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Sustainability Reporting and Assurance
42. Currently, there are various frameworks and standards to assist companies in producing relevant and reliable
sustainability data for external users.
a.
True
b.
False
True
1
Forensic Accounting
43. Some companies choose to provide no objective assurance regarding their sustainability reports.
a.
True
b.
False
False
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Sustainability Reporting and Assurance
44. Which of the following is not subject matter that would be attested to in a non-audit attestation
engagement?
a.
Historical events such as the price of a market basket of goods on a certain date.
b.
Corporate governance, compliance with law and regulations, or human resource practices.
c.
Management’s assertions about historical financial information and associated disclosures.
d.
Prospective financial information, performance measurements, or backlog data.
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Non-Audit Attestation Services Provided by Audit Firms
45. Which of the following is not a critical component of attestation services?
a.
Information or process (the subject matter) on which the assurance service is provided.
b.
Criteria for evaluation, such as compliance with regulations.
c.
Sufficient appropriate evidence.
d.
Two parties involved, the practitioner (or the CPA) and the intended users of the report.
d
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Non-Audit Attestation Services Provided by Audit Firms
46. What are the two levels of assurance that can be provided in an attestation engagement?
a.
Risk assurance and reduction assurance.
b.
Professional assurance and compliance assurance.
c.
Sufficient assurance and appropriate assurance.
d.
Reasonable assurance and limited assurance.
47. What are the two topics that attestation standards provide guidance on?
a.
They provide a plan for the engagement and criteria about who can participate in the engagement.
b.
They provide guidance about gathering evidence regarding specific assertions and communicate an
opinion on the fairness of the presentation to a third party.
c.
They provide sufficient assurance on subject matter and appropriate assurance about reporting.
d.
They provide guidance on reviewing evidence and compiling evidence.
b
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Non-Audit Attestation Services Provided by Audit Firms
48. Which of the following is not an AICPA standard of reporting for attestation engagements?
a.
The practitioner must identify the subject matter or the assertion being reported on and state the
character of the engagement in the report.
b.
The practitioner must state the practitioner’s conclusion about the subject matter or the assertion in
relation to the criteria against which the subject matter was evaluated in the report.
c.
The practitioner must obtain sufficient evidence to provide a reasonable basis for the conclusions that
is expressed in the report.
d.
The practitioner must state all of the practitioner’s significant reservations about the engagement, the
subject matter, and if applicable, the assertion related thereto in the report.
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Non-Audit Attestation Services Provided by Audit Firms
49. Which of the following is not an AICPA general standard for attestation engagements?
a.
The practitioner must have adequate technical training and proficiency to perform the attestation
engagement.
b.
The practitioner must have reason to believe that the subject matter is capable of evaluation against
criteria that are suitable and available to users.
c.
The practitioner must adequately plan the work and must properly supervise any assistants.
d.
The practitioner must exercise due professional care in the planning and performance of the
engagement and the preparation of the report.
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Non-Audit Attestation Services Provided by Audit Firms
Chapter 17 – Other Services Provided by Audit Firms
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Non-Audit Attestation Services Provided by Audit Firms
50. Which one of the following statements is false regarding a review?
a.
A review involves assessing fraud risk.
b.
A review does not involve obtaining an understanding of the entity’s internal control.
c.
A review does not involve testing accounting records by obtaining sufficient appropriate evidence
through inspection, observation, confirmation, or examining source documents.
d.
A review does not involve a practitioner obtaining assurance that he or she will become aware of all
significant matters that would be investigated in an audit.
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Review and Compilation Engagements
51. Which of the following standards represents the standards followed by CPAs providing a review of a client’s
financial statements?
a.
Statements on Standards for Accounting and Review Services.
b.
Statements on Auditing Standards.
c.
Statements on Standards for Consulting and Review Services.
d.
Statements on Accounting Principles.
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Review and Compilation Engagements
52. What types of companies can have a compilation performed in accordance with the AICPA standards?
a.
Public Companies: Yes; Nonpublic Companies: Yes
b.
Public Companies: No; Nonpublic Companies: No
c.
Public Companies: No; Nonpublic Companies: Yes
d.
Public Companies: Yes; Nonpublic Companies: No
53. When an accountant is asked to compile financial statements that omit substantially all of the required
disclosures, which of the following actions is appropriate?
a.
The CPA cannot accept the engagement.
b.
The CPA may accept the engagement.
c.
The CPA may accept the engagement if the CPA believes the omission is not undertaken to mislead
users.
d.
The CPA must express an adverse opinion.
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Review and Compilation Engagements
54. When the CPA is not independent with respect to a compilation client, what should the CPA do?
a.
The CPA must not accept the engagement.
b.
The CPA must include a separate paragraph in the report stating the lack of independence.
c.
The CPA must change the engagement to a review engagement.
d.
The CPA must issue a disclaimer.
b
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Review and Compilation Engagements
55. What does the review service provided by the CPA firm require?
a.
It requires the CPA to make inquiries concerning matters affecting the financial statements.
b.
It requires the CPA to confirm accounts receivable.
c.
It requires the CPA to test internal controls.
d.
It requires the CPA to provide reasonable assurance.
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Review and Compilation Engagements
56. For which of the following services must a CPA be independent?
a.
Audits: Yes; Reviews: Yes; Compilations: Yes
b.
Audits: Yes; Reviews: Yes; Compilations: No
c.
Audits: Yes; Reviews: No; Compilations: No
d.
Audits: Yes; Reviews: No; Compilations: Yes
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Review and Compilation Engagements
57. Which of the following is an accounting service that involves performing inquiry and analytical procedures
as a reasonable basis for expressing limited assurance that no material modifications need to be made to the
financial statements in order for the financial statements to conform to GAAP?
a.
A compilation.
b.
An audit.
c.
A review.
d.
An agreed upon procedure.
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Review and Compilation Engagements
58. A review report provides the user with which one of the following types of assurance?
a.
Reasonable assurance.
b.
Basic assurance.
c.
Absolute assurance.
d.
Limited assurance.
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Review and Compilation Engagements
59. A compilation report provides the user with which one of the following types of assurance?
a.
No assurance.
b.
Absolute assurance.
c.
Limited assurance.
Chapter 17 – Other Services Provided by Audit Firms
d.
Negative assurance.
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Review and Compilation Engagements
60. Which of the following engagements requires less evidence than a review of financial statements?
a.
A compilation.
b.
An audit.
c.
An examination.
d.
Attestation.
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Review and Compilation Engagements
61. Which of the following services provides limited assurance?
a.
Review.
b.
Audit.
c.
Examination.
d.
Compilation.
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Review and Compilation Engagements
62. Which one of the following procedures is not a standard procedure when performing a review?
a.
Assess the internal control over financial reporting.
b.
Read the financial statements to determine whether they appear to conform to GAAP.
c.
Obtain or prepare a trial balance of the general ledger and foot and reconcile it to the general ledger.
d.
Trace the financial statement amounts to the trial balance.
63. How many paragraphs does the standard review report for U.S. nonpublic companies or development stage
companies have?
a.
One.
b.
Two.
c.
Three.
d.
Four.
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Review and Compilation Engagements
64. Which of the following engagements is sometimes referred to as bookkeeping services?
a.
Reviews.
b.
Special reports.
c.
Compilations.
d.
Audits.
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Review and Compilation Engagements
65. Which of the following statements is false regarding compilation procedures?
a.
The practitioner should have a general knowledge of the organization’s industry, the nature of its
accounting records, the accounting basis to be used (GAAP or a special purpose framework other
than GAAP), and the form and content of the financial statements.
b.
The practitioner is required to make inquiries or perform procedures to verify, corroborate, or review
information provided by the client.
c.
The practitioner is not required to obtain an understanding of internal control over financial
reporting.
d.
The practitioner should read the financial statements, including footnotes, to make sure that they are
appropriate in form and free from obvious material misstatement.
b
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Review and Compilation Engagements