AUD

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

Question 201

Kell engaged March, CPA, to submit to Kell a written personal financial plan containing unaudited personal financial statements. March anticipates omitting certain disclosures required by GAAP because the engagement's sole purpose is to assist Kell in developing a personal financial plan. For March to be exempt from complying with the requirements of SSARS 1, Compilation and Review of Financial Statements, Kell is required to agree that the:

  1. Financial statements will not be presented in comparative form with those of the prior period.
  2. Omitted disclosures required by GAAP are not material.
  3. Financial statements will not be disclosed to a non-CPA financial planner.
  4. Financial statements will not be used to obtain credit.

Question 202

When providing limited assurance that the financial statements of a nonissuer require no material modifications to be in accordance with generally accepted accounting principles, the accountant should:

  1. Assess the risk that a material misstatement could occur in a financial statement assertion.
  2. Confirm with the entity's lawyer that material loss contingencies are disclosed.
  3. Understand the accounting principles of the industry in which the entity operates.
  4. Develop audit programs to determine whether the entity's financial statements are fairly presented.

Question 203

What type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts when reviewing the financial statements of a nonissuer?

  1. Trend analysis.
  2. Regression analysis.
  3. Ratio analysis.
  4. Risk analysis.

Question 204

Compiled financial statements should be accompanied by an accountant's report stating that:

  1. A compilation includes assessing the accounting principles used and significant management estimates, as well as evaluating the overall financial statement presentation.
  2. The accountant compiled the financial statements in accordance with Statements on Standards for Accounting and Review Services.
  3. A compilation is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion.
  4. The accountant is not aware of any material modifications that should be made to the financial statements to conform with GAAP.