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CPA exam questionsWhich of the following procedures is ordinarily performed by an accountant in a
compilation engagement of a nonissuer?
Reading the financial statements to consider whether they are free of obvious mistakes
in the application of accounting principles.
Obtaining written representations from management indicating that the compiled
financial statements will not be used to obtain credit.
Making inquiries of management concerning actions taken at meetings of the
stockholders and the board of directors.
Applying analytical procedures designed to corroborate management's assertions that
are embodied in the financial statement components. - answerA
. When performing a review of interim financial information, an accountant would
typically do each of the following, except:
Consider the results from the latest audit.
Test controls related to the preparation of annual financial information.
Perform analytical procedures.
Make inquiries of management. - answerB
If requested to perform a compilation engagement for a nonissuer in which an
accountant has an immaterial direct financial interest, the accountant is:
Independent because the financial interest in the nonissuer is immaterial.
Not independent and, therefore, may not be associated with the financial statements.
Not independent and, therefore, may not issue a compilation report.
, Not independent and, therefore, may issue a compilation report, but may not issue a
review report. - answerD
Which of the following should a practitioner perform as part of an engagement for
agreed-upon procedures in accordance with Statements on Standards for Attestation
Engagements?
Issue a report on findings based on specified procedures performed.
Assess whether the procedures meet the needs of the parties.
Express negative assurance on findings of work performed.
Report the differences between agreed-upon and audit procedures - answerA
5. Which of the following conditions or events most likely would cause an auditor to
have substantial doubt about an entity's ability to continue as a going concern?
Significant related party transactions are pervasive.
Usual trade credit from suppliers is denied.
Arrearages in preferred stock dividends are paid.
Restrictions on the disposal of principal assets are present. - answerB
Green, CPA, concludes that there is substantial doubt about JKL Co.'s ability to
continue as a going concern. If JKL's financial statements adequately disclose its
financial difficulties, Green's auditor's report under U.S. auditing standards should: -
answerInclude an emphasis -of-matterparagraphfollowing theopinionparagraph
Specificallyuse thewords "goingconcern"
Specificallyuse thewords"substantialdoubt"
Which of the following statements extracted from a client's lawyer's letter concerning
litigation, claims, and assessments most likely would cause the auditor to request
clarification?
"We believe that the possible liability to the company is nominal in amount."
"We believe that the action can be settled for less than the damages claimed."
"We believe that the plaintiff's case against the company is without merit."
"We believe that the company will be able to defend this action successfully." - answerB
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