CPA Auditing and Attestation (AUD) : Accounting & Review Service Engagements & Interim Reviews
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Example Questions
Example Question #1 : Preparation Vs Compilation Vs Review Engagements
The Compilation audit report will:
Discuss internal control findings
Express an opinion based on GAAP
State that the Financial Statements are the responsibility of management
Discuss auditing procedures
State that the Financial Statements are the responsibility of management
Although the firm may assist management in the preparation of statements, the compilation audit report will state that the report is the responsibility of management.
Example Question #1 : Preparation Vs Compilation Vs Review Engagements
A review engagement provides what level of assurance regarding the applicable financial framework
sufficient assurance
limited assurance
absolute assurance
minimal assurance
limited assurance
A review engagement provides limited assurance. Limited assurance is given that the financial statements comply with the applicable reporting framework.
Example Question #2 : Preparation Vs Compilation Vs Review Engagements
A review engagement should express which of the following terms:
Managements responsibilities
Auditors Responsibilities
Managements objectives
All of the answer choices are correct
All of the answer choices are correct
AR Section 90; review of financial statements. Section .04 states that the engagement determines: management responsibility, the auditor’s responsibility, and management objectives.
Example Question #3 : Preparation Vs Compilation Vs Review Engagements
Regarding the review of financial statements of a non-issuer performed in accordance with SSARS, the CPA is required to obtain:
A letter of consent from the prior auditor
An understanding of internal control
Sufficient evidence supporting management's assertions
A client representation letter
A client representation letter
The CPA is required to obtain a representation letter from management for all financial statements and periods covered by the review report.
Example Question #4 : Preparation Vs Compilation Vs Review Engagements
Of the following statements, which is correct regarding a review of a nonpublic entity financial statements in accordance with SSARS?
The CPA is required to assess the risk of fraud
It is not necessary for the CPA to obtain a management representation letter
An opinion is expressed in the review report
The CPA must be independent to issue the review report
The CPA must be independent to issue the review report
In order to issue a review report on the financial statements of a nonpublic entity, the accountant must be independent.
Example Question #6 : Preparation Vs Compilation Vs Review Engagements
When a preparer conducts a preparation engagement, the accountant should:
Both
Neither
Issue a disclaimer of opinion if he or she is unable to include a statement on each page of the financial statements
Perform a compilation engagement if he or she is unable to include a statement on each page of the financial statements
Both
With a preparation requirement, the preparer must include a statement on each page of the financials. If he or she cannot, these two options are the only options.
Example Question #1 : Letters For Underwriters
The auditor should state in the comfort letter that:
The auditor is independent
negative assurances are provided
The auditor is using generally accepted auditing standards
The auditor is not independent
The auditor is using generally accepted auditing standards
AU 920 requires that the auditors state their independence in the comfort letter. As directed in paragraph .35 “The auditor should state in the comfort letter that the auditor is independent, or the date through which the auditor was independent, with respect to the entity, and identify the applicable independence rules.”
Example Question #2 : Letters For Underwriters
Before agreeing on the scope of services, the auditor should
Clearly communicate no assurance will be provided
Ask to meet with the requesting party
All of the answer choices are correct
Obtain an understanding regarding the specific matters
All of the answer choices are correct
Under AU 920 before agreeing on the scope of services the auditor must obtain certain assurances and perform certain procedures. These procedures include obtaining an understanding regarding specific matters, meeting with the requesting party, and providing clear communication stating no assurance will be provided.
Example Question #1 : Accounting & Review Service Engagements & Interim Reviews
In the comfort letter, the auditor should
Make reference to the audit
State an opinion
Repeat the audit
None of the answer choices are correct
Make reference to the audit
AU 920 indicates that the auditor should make reference to the audit. Section .28 states that “The auditor should, in the comfort letter, make reference to, but not repeat, the report on the audited financial statements included in the securities offering. (Ref: par. .A28)”.
Example Question #2 : Accounting & Review Service Engagements & Interim Reviews
Ordinarily, comfort letters are addressed to:
The SEC
The client audit committee
The underwriters of securities
Creditor financial institutions
The underwriters of securities
Comfort letters are addressed to underwriters of securities ordinarily and most likely convey negative assurance on financial information.
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