Comptronix Corporation Case Study

A439 right Auditing Accounting and come off serve Take Home Quiz February 6, 2008Instructions1. 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 woodworking plane on the due date.4. Open book, open none, online searches atomic number 18 all allowed.5. NOT allowed using opposite students, mess or CPA exam check books. Suggestion If you plan to take the Auditing portion of the CPA trial soon, take 10 15 minutes to study 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, exclusively keep track of the original answers so you can pass judgment your knowledge level for this topic.Questions1. Which of the following recitals is correct regarding a review engagement of a nonpublic teleph binglers fiscal accounts performed in accordance with the Statements on Standards for Accounting an d Review Services (SSARs)? a. An lineant mustiness establish an understanding with the invitee in an engagement letter. b. An restrainer must obtain an understanding of the thickenings inside tame when performing a review. . A review provides an controller with a bottom for expressing express assurance on the pecuniary program lines. d. A review cut across contains an comptrollers ruling of the financial call forthments taken as a whole.2. Which of the following procedures does a CPA normally perform send-off in a review engagement in accordance 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 between related parties and management d. Inquiry of the clients passkey advisors including bankers, insurance agents, and consultants.3. due no rth Co. , a privately held entity, asked its tax accountant, pansy, a CPA in public practice, to let Norths interim financial subjectments on Kings personal computer when King brisk Norths quarterly tax return. King should not submit these financial statements to North un little, 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 compulsory to be filed by public companies with the SEC. . Processing financial data for clients of other be firms. d. Compiling an individuals personal financial statement to be us ed 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 onward 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 genius and limitations of the services to be performed. b. Description of the fib the accountant expects to foreshorten. 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 enquire not be drawed.7. Statements on Standards for Accounting and Review Services (SSARSs) require an accountant to report when the accountant has a. Typed client-prepared financial statements, without modification, as an accommodation to the client. b. Provided a client with a financial statement format that does not include dollar 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-prepared financial statements. d. Prepared, through the use of computer software, financial statements to be used by third parties.8. When an accountant performs more than one level of service (for example, a compiling and a review, or a digest and an audit) concerning the financial statements of a nonpublic 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 engagement.9. An accountant should no t submit unaudited financial statements to the management of a nonpublic company unless, at a minimum, the accountant a. Assists in adjusting the books of account and preparing the trial 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 engaged to compile the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entitys accounting principles and practices. This requirement most likely will include obtaining a general understanding of the a. Stated qualifications of the entitys accounting personnel. b. Design of the entitys internal controls that have been implemented. c. run a risk factors relating to misstatements arising from illegal acts. d. Internal control awareness of the entitys senior management.11. When compiling a nonpublic entitys financial statements, an accountant is le ast likely to a. Perform analytical procedures designed to identify relationships that appear to be unusual. b. Read the compiled financial statements and consider whether they appear to include adequate disclosure. c. Omit substantially all of the disclosures required by generally accepted accounting principles. . Issue a compilation report on one or more, but not all, of the basic financial statements.12. Which of the following should not be included 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 that the accountant does not express an sagacity b ut provides only 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 omit 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 form with a comprehensive priming coat of accounting other than GAAP. c. Not compiled in accordance with Statements on Standards for Accounting and Review Services. d. Special-purpose financial statements that are not parallel to those of prior 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 independent with respect to the entity. b. The financial statements have not been audited. c. A compilation consists principally 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 can of accounting. If Webs financial statements do not disclose the basis of accounting used, Miller should a. break down the basis of accounting in the accountants compilation report. b. Clearly label each foliate Distribution Restricted poppycock Modifications Required. c. Issue a special report describing the effect of in the unelaborated presentation. d. Withdraw from the engagement and provide no furt her services to Web.17. Which of the following should be the first quantity in reviewing the financial statements of a nonpublic entity? a. Comparing the financial statements with statements for comparable prior periods and with anticipated results. . complementary a series 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 modify 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 follow ing procedures should an accountant perform during an engagement to review the financial statements of a nonpublic entity? a. Communicating control deficiencies discovered during the assessment of control risk. b. Obtaining a client representation letter from members of management. c. Sending bank check-out procedure letters to the entitys financial institutions. . Examining cash disbursements in the subsequent period for unrecorded liabilities.20. Which of the following procedures is ordinarily performed by the accountant in a review engagement of a nonpublic entity? a. Sending a letter of inquiry to the entitys lawyer. b. Comparing the financial statements with statements for comparable prior periods. c. Confirming a epoch-making percentage of receivables by direct communication with debtors. d. Communicating control deficiencies discovered during the consideration of internal control.21. playacting inquiry and analytical procedures is the primary basis for an accountant to is sue a a. Report on compliancy with requirements governing major federal assistance programs in accordance with the single Audit Act. b. Review report on prospective financial statements that present an entitys expected financial position, given one or more hypothetical assumptions. c. Management advisory 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 trading 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 moderately 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 utilize to financial data. d. Does not contemplate obtaining corroborating evidential matter or a pplying 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 made to the financial statements for them to conform with GAAP. c. Obtained rational assurance about whether the financial statements are free of material misstatement. d. Examined evidence, on a test basis, funding the amounts and disclosures in the f inancial statements.25. bread maker, CPA, was engaged to review the financial statements of lobby Company, a nonpublic entity. Evidence came to bread makers 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 auditor reports on financial statements prepared on an entitys income tax basis, the auditors report should a. Disclaim an opinion on whether the statements were examined in accordance with generall y 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 explanation of how the results of operations differ 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 separate explanatory 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 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 with generally accept ed accounting principles.28. Delta Life Insurance co. prepares its financial statements on an accounting basis insurance 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 all the way disclaims any opinion. d. Explain in the notes to the financial statements the terminology used.