Comptronix Corporation Case Study

A439 Advanced Auditing be and Review run stop Home Quiz February 6, 2008Instructions1. On the Scantrom var. in loge labeled Test No. print Review serve. 2. Use the Scantron form to indicate your answers to the questions below.3. Turn-in the Scantron sheet on the due date.4. Open book, open none, online searches atomic number 18 all allowed.5. NOT allowed using other students, people or certified public banknoteant exam critique books. Suggestion If you plan to take the Auditing portion of the certified public restrainer Exam soon, take 10 15 minutes to look backward your notes and text, and so take the quiz without notes, etc.After that if you want to do research and change answers do so, just keep track of the original answers so you can task your companionship take for this topic.Questions1. Which of the following dictations is correct regarding a palingenesis encounter of a private callers fiscal statements performed in pact with the Statements on Stand ards for Accounting and Review Services (SSARs)? a. An comptroller must apply an discretion with the knob in an meshing letter. b. An controller must scram an understanding of the thickenings inhering control when performing a reassessment. . A review provides an accountant with a foundation garment for demoing express mail trust on the pecuniary statements. d. A review base contains an accountants opinion of the fiscal statements taken as a whole.2. Which of the following procedures does a CPA normally perform first in a review fighting in congruity with Statements on Standards for Accounting and Review Services (SSARS)? a. Inquiry regarding the clients principles and practices and the method of applying them b. Inquiry concerning the effectiveness of the clients system of internal ontrol c. Inquiry to identify transactions in the midst of related parties and management d. Inquiry of the clients professional advisors including bankers, damages agents, and consul tants.3. northeastward Co. , a privately held entity, asked its tax accountant, King, a CPA in public practice, to generate Norths interim financial statements on Kings personal computer when King prep ard Norths quarterly tax return. King should not submit these financial statements to North unless, as a minimum, King complies with the provisions of a. Statements on Standards for Accounting and Review Services. b. Statements on Standards for Un studyed Financial Services. c. Statements on Standards for Consulting Services. d. Statements on Standards for Attestation Engagements.4. Statements on Standards for Accounting and Review Services establish regulations and procedures for which of the following engagements? a. Assisting in adjusting the books of account for a partnership. b. Reviewing interim financial information required to be filed by public companies with the SEC. . Processing financial data for clients of other report firms. d. lay in an individuals personal financia l statement to be use to obtain a mortgage.5. May an accountant accept an engagement to bundle or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the vary industry accounting principles but plans to obtain the required level of knowledge before compiling or reviewing the financial statements? a. b. c. d. Compilation No Yes No Yes Review No No Yes Yes6. In a review engagement, the accountant should establish an understanding with the entity, preferably in writing, regarding the services to be performed. the understanding should include all of the following except a a. Description of the nature and limitations of the services to be performed. b. Description of the tarradiddle the accountant expects to issue. c. Provision that the engagement cannot be relied upon to disclose errors, fraud, or illegal acts. d. Provision that any errors, fraud, or illegal acts that come to the accountants attention need not be reported.7. Statements on Standards for Accounting and Review Services (SSARSs) require an accountant to report when the accountant has a. Typed client-prep ard financial statements, without modification, as an accommodation to the client. b. Provided a client with a financial statement format that does not include one dollar bill amounts to be used by the client in preparing financial statements. c. Proposed correcting journal entries to be recorded by the client that change client-prep ared financial statements. d. Prepared, through the use of computer software, financial statements to be used by tierce parties.8. When an accountant performs more than one level of service (for example, a compiling and a review, or a compiling and an audit) concerning the financial statements of a private entity, the accountant ordinarily should issue the report that is appropriate for a. The lowest level of service rendered. b. The highest level of service rendered. c. A compilation engagement. d. A review engagem ent.9. An accountant should not submit unaudited financial statements to the management of a private company unless, at a minimum, the accountant a. Assists in adjusting the books of account and preparing the effort balance. b. Types or reproduces the financial statements. c. Complies with the standards applicable to compilation engagements. d. Applies analytical procedures to the financial statements.10. When act to compile the financial statements of a nonpublic entity, an accountant is required to let a level of knowledge of the entitys accounting principles and practices. This requirement just about apt(predicate) will include obtaining a general understanding of the a. declared qualifications of the entitys accounting personnel. b. Design of the entitys internal controls that have been implemented. c. happen factors relating to misstatements arising from illegal acts. d. inwrought control awareness of the entitys senior management.11. When compiling a nonpublic entitys financial statements, an accountant is least likely to a. Perform analytical procedures designed to identify relationships that appear to be unusual. b. withdraw the compiled financial statements and consider whether they appear to include adequate disclosure. c. Omit advantageously all of the disclosures required by generally current accounting principles. . come on a compilation report on one or more, but not all, of the basic financial statements.12. Which of the following should not be include in an accountants standard report based upon the compilation of an entitys financial statements? a. A statement that a compilation is limited to presenting in the form of financial statements information that is the representation of management. b. A statement that the compilation was performed in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA. c. A statement that the accountant has not audited or reviewed the statements. d. A statement t hat the accountant does not express an opinion but provides totally negative assurance on the statements.13. How does an accountant make the following representations when issuing the standard report for the compilation of a nonpublic entitys financial statements? The Financial Statements Have Not Been Audited a. b. c. d. Implicitly explicitly Implicitly Explicitly The Accountant Has Compiled the Financial Statements Implicitly Explicitly Explicitly Implicitly14. When an accountant attaches a compilation report to a nonpublic entitys financial statements that drop off substantially all disclosures required by GAAP, the accountant should indicate in the compilation report that the financial statements are a. Not designed for those who are uninformed about the omitted disclosures. b. Prepared in conformity with a wide basis of accounting other than GAAP. c. Not compiled in accordance with Statements on Standards for Accounting and Review Services. d. Special-purpose financial stat ements that are not similar to those of forward periods.15. Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonpublic entitys financial statements? a. The accountant is main(a) with respect to the entity. b. The financial statements have not been audited. c. A compilation consists primarily of inquiries and analytical procedures. d. The accountant does not express any assurance on the financial statements.16. Miller, CPA, is engaged to compile the financial statements of Web Co. , a nonpublic entity, in conformity with the income tax basis of accounting. If Webs financial statements do not disclose the basis of accounting used, Miller should a. relegate the basis of accounting in the accountants compilation report. b. distinctly label each page Distribution Restricted satisfying Modifications Required. c. bare a special report describing the effect of in the incomplete presentation. d. swallo w up from the engagement and provide no further services to Web.17. Which of the following should be the first step in reviewing the financial statements of a nonpublic entity? a. canvass the financial statements with statements for comparable prior periods and with anticipated results. . Completing a serial of inquiries concerning the entitys procedures for recording, classifying, and summarizing transactions. c. Obtaining a general understanding of the entitys organization, its operating characteristics, and its products or services. d. Applying analytical procedures designed to identify relationships and individual items that appear to be unusual.18. In reviewing the financial statements of a nonpublic entity, an accountant is required to metamorphose the standard review report for which of the following matters? Inability to Assess he Risks of Material Misstatement Due to Fraud a. b. c. d. Discovery of Significant Deficiencies in the Design of the Internal Control____ Yes Yes No No Yes No Yes No19. Which of the following procedures should an accountant perform during an engagement to review the financial statements of a nonpublic entity? a. Communicating control deficiencies observe during the assessment of control risk. b. Obtaining a client representation letter from members of management. c. send bank confirmation letters to the entitys financial institutions. . Examining cash disbursements in the subsequent period for unrecorded liabilities.20. Which of the following procedures is usually performed by the accountant in a review engagement of a nonpublic entity? a. conduce a letter of inquiry to the entitys lawyer. b. Comparing the financial statements with statements for comparable prior periods. c. Confirming a significant percentage of receivables by direct communication with debtors. d. Communicating control deficiencies discovered during the consideration of internal control.21. playing inquiry and analytical procedures is the primary basis for an accountant to issue a a. Report on compliance with requirements governing major federal assist programs in accordance with the single Audit Act. b. Review report on prospective financial statements that present an entitys expected financial position, give one or more hypothetical assumptions. c. Management consultive report prepared at the request of a clients audit committee. d. Review report on comparative financial statements for a nonpublic entity in its second year of operations.22.Financial statements of a nonpublic entity that have been reviewed by an accountant should be accompanied by a report stating that a review a. Provides only limited assurance that the financial statements are pretty presented. b. Includes examining, on a test basis, information that is the representation of management. c. Consists principally of inquiries of company personnel and analytical procedures applied to financial data. d. Does not contemplate obtaining corroborating evidential ma tter or applying certain other procedures ordinarily performed during an audit.23.An accountant who reviews the financial statements of a nonpublic entity should issue a report stating that a review a. Is substantially less in scope than an audit. b. Provides negative assurance that internal control is functioning as designed. c. Provides only limited assurance that the financial statements are fairly presented. d. Is substantially more in scope than a compilation.24. An accountants standard report on a review of the financial statements of a nonpublic entity should state that the accountant a. Does not express an opinion or any form of limited assurance on the financial statements. . Is not aware of any material modifications that should be make to the financial statements for them to conform with GAAP. c. Obtained reasonable assurance about whether the financial statements are free of material misstatement. d. Examined evidence, on a test basis, supporting the amounts and disclosu res in the financial statements.25. Baker, CPA, was engaged to review the financial statements of Hall Company, a nonpublic entity. Evidence came to Bakers attention that indicated substantial doubt as to Halls ability to continue as a going concern.The principal conditions and events that caused the substantial doubt have been fully disclosed in the notes to Halls financial statements. Which of the following statements best describes Bakers reporting responsibility concerning this matter? a. Baker is not required to modify the accountants review report. b. Baker is not permitted to modify the accountants review report. c. Baker should issue an accountants compilation report instead of a review report. d. Baker should express a qualified opinion in the accounts review report.26.When an attendant reports on financial statements prepared on an entitys income tax basis, the hearers report should a. Disclaim an opinion on whether the statements were examined in accordance with genera lly accepted auditing standards. b. Not express an opinion on whether the statements are presented in conformity with the comprehensive basis of accounting used. c. Include an write up of how the results of operations resist from the cash receipts and disbursements basis of accounting. d. State that the basis of presentation is a comprehensive basis of accounting other than GAAP.27.An auditors special report on financial statements prepared in conformity with the cash basis of accounting should include a specialize instructive paragraph before the opinion paragraph that a. Justifies the reasons for departing from generally accepted accounting principles. b. States whether the financial statements are fairly presented in conformity with another(prenominal) comprehensive basis of accounting. c. Refers to the note to the financial statements that describes the basis of accounting. d. Explains how the results of operations differ from financial statements prepared in conformity wit h generally accepted accounting principles.28. Delta Life Insurance co. prepares its financial statements on an accounting basis redress companies use pursuant to the rules of a state insurance commission. If Wall, CPA, Deltas auditor, discovers that the statements are not suitably titled, Wall should a. Disclose any reservations in an explanatory paragraph and qualify the opinion. b. Apply to the state insurance commission for an advisory opinion. c. Issue a special statutory basis report that distinctly disclaims any opinion. d. Explain in the notes to the financial statements the terminology used.