Accounting and Review Services Take Home Quiz
February 6, 2008
1. On the Scantrom form in box labeled “Test No.” print “Review Services.” 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 note, online searches are all allowed.
5. NOT allowed – using other students, people or CPA exam review books.
Suggestion: If you plan to take the Auditing portion of the CPA Exam “soon,” take 10 – 15 minutes to review your notes and text, and then take the quiz without notes, etc. After that if you want to do research and change answers do so, but keep track of the original answers so you can assess your knowledge level for this topic.
1. Which of the following statements is correct regarding a review engagement of a nonpublic company’s financial statements performed in accordance with the Statements on Standards for Accounting and Review Services (SSARs)? a. An accountant must establish an understanding with the client in an engagement letter.
b. An accountant must obtain an understanding of the client’s internal control when performing a review.
c. A review provides an accountant with a basis for expressing limited assurance on the financial statements.
d. A review report contains an accountant’s opinion of the financial statements taken as a whole.
2. Which of the following procedures does a CPA normally perform first in a review engagement in accordance with Statements on Standards for Accounting and Review Services (SSARS)?
a. Inquiry regarding the client’s principles and practices and the method of applying them
b. Inquiry concerning the effectiveness of the client’s system of internal control c. Inquiry to identify transactions between related parties and management d. Inquiry of the client’s professional advisors including bankers, insurance agents, and consultants.
3. North Co., a privately held entity, asked its tax accountant, King, a CPA in public practice, to generate North’s interim financial statements on King’s personal computer when King prepared North’s 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 Unaudited 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 standards 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.
c. Processing financial data for clients of other accounting firms. d. Compiling an individual’s personal financial statement to be used to obtain a mortgage.
5. May an accountant accept an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles but plans to obtain the required level of knowledge before compiling or reviewing the financial statements?
6. 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 report 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 accountant’s attention need not be reported.
7. Statements on Standards for...