AUD

AUD practice questions, page 40 of 41, with answer review and explanations.

Question 196

An accountant has compiled the financial statements of a nonissuer but declines to issue a compilation report. This is an example of:

  1. An inappropriate reporting decision, because SSARS require that a report be issued whenever an accountant is associated with financial statements.
  2. An inappropriate reporting decision, if the accountant is not independent with respect to the nonpublic entity.
  3. An appropriate reporting decision, if the compiled financial statements are not expected to be used by a third party.
  4. An appropriate reporting decision, as long as the financial statements are prepared in conformity with GAAP.

Question 197

An accountant compiles unaudited financial statements that are not expected to be used by a third party. The accountant may decline to issue a compilation report provided: I. Each page of the financial statements is clearly marked to restrict its use. II. A written engagement letter is used to document the understanding with the client. III. A written representation letter is obtained from the client's management.

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 198

An accountant has compiled the financial statements of a nonissuer in accordance with Statements on Standards for Accounting and Review Services (SSARS). The financial statements are expected to be used by a third party. Does SSARS require that the compilation report be printed on the accountant's letterhead and that the report be manually signed by the accountant?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Question 199

An accountant is required to comply with the provisions of Statements on Standards for Accounting and Review Services when: I. Reproducing client-prepared financial statements without modification, as an accommodation to a client. II. Preparing standard monthly journal entries for depreciation and expiration of prepaid expenses.

  1. I only.
  2. II only.
  3. Both I and II.
  4. Neither I nor II.

Question 200

If requested to perform a review engagement for a nonissuer in which an accountant has an immaterial direct financial interest, the accountant is:

  1. Not independent and, therefore, may not be associated with the financial statements.
  2. Not independent and, therefore, may not issue a review report.
  3. Not independent and, therefore, may issue a review report, but may not issue an auditor's opinion.
  4. Independent because the financial interest is immaterial and, therefore, may issue a review report.