CPA Auditing and Attestation practice questions, page 41 of 41, with answer review and explanations.
Question 201
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.
I only.
II only.
Both I and II.
Neither I nor II.
Question 202
If requested to perform a review engagement for a nonissuer in which an accountant has an immaterial direct financial interest, the accountant is:
Not independent and, therefore, may not be associated with the financial statements.
Not independent and, therefore, may not issue a review report.
Not independent and, therefore, may issue a review report, but may not issue an auditor's opinion.
Independent because the financial interest is immaterial and, therefore, may issue a review report. B
Question 203
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:
Financial statements will not be presented in comparative form with those of the prior period.
Omitted disclosures required by GAAP are not material.
Financial statements will not be disclosed to a non-CPA financial planner.
Financial statements will not be used to obtain credit.
Question 204
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:
Assess the risk that a material misstatement could occur in a financial statement assertion.
Confirm with the entity's lawyer that material loss contingencies are disclosed.
Understand the accounting principles of the industry in which the entity operates.
Develop audit programs to determine whether the entity's financial statements are fairly presented.
Question 205
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?