SOLVED

11) Auditors frequently audit statements that were prepared on a comprehensive basis of accounting other than GAAP. When this occurs: A) generally accepted auditing standards apply to these engagements and the reporting requirements differ. B) generally accepted auditing standards apply to these engagements and the reporting requirements are the same as well. C) generally accepted auditing standards do not apply to these examinations and the reporting requirements differ also. D) generally accepted auditing standards do not apply to this engagement and the reporting requirements remain the same for the CPA. 12) The concept of reasonable assurance is provided for in which one of the following engagements? A) review B) compilation C) audit D) none of the above 13) You are preparing to issue a report on the compilation of financial statements for a non-public company. Prior to issuing the report you should: A) read the financial statements to determine if they are free from obvious material errors. B) perform analytical procedures to determine if they are free from material misstatements. C) perform tests of balances on selected accounts to determine if they are free from material misstatements. D) perform limited control tests to determine if there are any material misstatements. 14) Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services? A) A review requires more substantive evidence than an audit. B) An audit requires less evidence related to internal control than a review. C) A review requires less evidence than an audit. D) None of the above statements is true. 15) An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review: A) is substantially equivalent in scope to an audit. B) is substantially more in scope than a compilation. C) is substantially less in scope than an audit. D) provides only limited assurance that the financial statements are fairly presented. 16) An accountant has accepted an engagement in which the audit procedures of inquiry and analytical procedures will be employed. These procedures will form the basis for issuance of: A) a compilation report. B) audit report on supplemental information issued by the client. C) management advisory report requested by the audit committee. D) review report on comparative financial statements for a non-public company. 17) You are a CPA retained by the manager of a cooperative retirement village to do “write-up work.” You are expected to prepare unaudited financial statements with each page marked “unaudited” and accompanied by a disclaimer of opinion stating no audit was performed. In performing the work, you discover that there are no invoices to support a claim for a $25,000 disbursement. The manager informs you that all the disbursements are proper. What should you do? A) Submit the expected statements but omit $25,000 of unsupported disbursements. B) Include the unsupported disbursements in the statements since you are not expected to make an audit. C) Obtain from the manager a written statement that you informed him of the missing invoices and include his assurance that the disbursements are proper. D) Notify the owners that some of the claimed disbursements are unsupported and withdraw if the situation is not satisfactorily resolved. 18) In a review service where the client has failed to follow GAAP, the accountant is: A) not required to determine the effect of a departure if management has not done so, but that fact must be disclosed in the report. B) required to determine the effect of a departure if management has not done so, and that fact must be disclosed in the report. C) not required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report. D) required to determine the effect of a departure if management has not done so, and that fact need not be disclosed in the report. 19) Your accounting firm has accepted a compilation engagement from a client in which your firm is not independent. In that case you: A) may not accept the engagement. B) may accept the engagement and disclose the lack of independence. C) may accept the engagement and not disclose the lack of independence. D) may accept the engagement and disclose the lack of independence and the reason for the lack of independence. 20) Before performing a review of a nonpublic entity’s financial statements, an accountant should: A) complete a series of inquiries concerning the entity’s procedures for recording, classifying, and summarizing transactions. B) obtain a sufficient level of knowledge of the accounting principles and practices of the industry in which the entity operates. C) inquire whether management has omitted substantially all of the disclosures required by generally accepted accounting principles. D) apply analytical procedures to provide limited assurance that no material modifications should be made to the financial statements. 21) An auditor who was engaged to perform an examination of the financial statements of a nonpublic entity has been asked by the client to refrain from performing various audit procedures and change the nature of the engagement to a review of the financial statements in accordance with standards established by the AICPA. The client’s request was made because the cost to complete the examination was significant. Under these circumstances, the auditor would most likely: A) qualify the auditor’s report and refer to the scope limitation. B) view the request as an indication of a possible irregularity. C) complete the examination that was in progress. D) honor the client’s request. 22) Negative assurance is not permissible in: A) reports based upon a review engagement. B) letters required by security underwriters for data pertinent to SEC registration statements. C) reports based on an audit of interim financial statements of a closely held business entity. D) reports relating to the results of agreed-upon procedures to one or more specified elements, accounts, or items of financial statement.