Additional Assurance Services: Other Information
True / False Questions
1. Assurance services improve the quality of information or its context for decision makers. True False
2. Attestation services are similar, but go beyond assurance services in scope of procedures and reporting.
True False
3. Independence is required for the performance of all assurance services. True False
4. Practitioners may report on either an assertion about the subject matter, or on the subject matter for most attestation engagements.
True False
5. Attestation risk, like audit risk consists of three components--inherent risk, control risk, and substantiation risk.
True False
6. The attestation standards prohibit the examination of prospective financial statements. True False
8. Trust Services assure consumers that they will be satisfied with their purchases. True False
9. Trust Services are a part of the AICPA's vision that increased trust in annual historical financial statements is necessary.
True False
10. SysTrust engagements relate only to database systems. True False
Multiple Choice Questions
11. Which of the following is least likely to be included in an agreed-upon procedures attestation engagement report?
A. The specified party takes responsibility for the sufficiency of procedures. B. Use of the report is restricted.
C. Limited assurance on the information presented. D. A summary of procedures performed.
12. In an engagement relating to a nonpublic company, conditions exist that result in a material deviation from the criteria against which the subject matter was evaluated during an examination performed following the attestation standards. The CPA's conclusion may be on:
A. Option A
B. Option B C. Option C D. Option D
13. Suitable criteria in an attestation engagement may be available: A. Option A B. Option B C. Option C D. Option D
14. When performing an attestation examination engagement, the standards do not require which of the following?
A. Assertion.
B. Practitioner independence. C. Subject matter.
D. Suitable criteria.
15. Which of the following engagements is most likely to consider security, availability, processing integrity, confidentiality, and privacy relating to a system?
A. Internal control over financial reporting. B. Trust Services.
C. Website Associate.
16. Which of the following are Trust Services principles? A. Option A B. Option B C. Option C D. Option D
17. Which of the following is the least likely to be considered subject matter of an attestation engagement?
A. Assertion. B. Behavior. C. Historical event. D. Systems and processes.
18. Arel, CPA, was engaged by a group of royalty recipients to apply agreed-upon procedures to financial data supplied by Modit Co. regarding Modit's written assertion about its
compliance with contractual requirements to pay royalties. Arel's report on these agreed-upon procedures should contain a(n):
A. Disclaimer of opinion about the fair presentation of Modit's financial statements. B. List of the procedures performed (or reference thereto) and Arel's findings.
C. Opinion about the effectiveness of Modit's internal control activities concerning royalty payments.
19. Assurance services performed for decision makers may address the: A. Option A B. Option B C. Option C D. Option D
20. Which of the following is least likely to be structured as an attest engagement? A. An elder care engagement.
B. A SysTrust engagement.
C. An examination of internal control over financial reporting for a nonpublic company. D. A review of management's discussion and analysis.
21. Which of the following are required on all attestation engagements?
A. Option A
B. Option B C. Option C D. Option D
22. Which of the following is not currently an acceptable form of association with prospective financial statements? A. Compilation. B. Review. C. Agreed-upon procedures. D. Examination.
23. When a practitioner examines projected financial statements, the practitioner's report should include a separate paragraph that:
A. Describes the limitations on the usefulness of the presentation.
B. Provides an explanation of the differences between an examination and a review. C. States that the accountant is responsible for events and circumstances for a period not exceeding one year after the report's date.
D. Disclaims an opinion on whether the assumptions provide a reasonable basis for the projection.
24. Which of the following is correct relating to an engagement to apply agreed-upon procedures to prospective financial statements?
A. Use of the report is restricted to the specified users.
B. Such engagements are permissible for forecasts but not for projections.
C. Responsibility for the adequacy of the procedures performed is taken by the practitioner. D. Such engagements are not permissible under the professional standards.
25. When a financial forecast fails to disclose a significant assumption used to prepare that forecast, which of the following reports become appropriate?
A. Option A
B. Option B C. Option C D. Option D
26. When reporting upon a review engagements on an entity's management discussion and analysis, the report is ordinarily:
A. A general use report. B. A restricted use report.
C. Required to include a disclaimer of opinion.
D. Included with the entity's report on internal control over financial reporting.
27. A Type 2 service auditor's report addresses:
A. Only management's description and design of its controls.
B. Management's description and design of its controls and control operating effectiveness. C. Only control operating effectiveness.
D. Control operating effectiveness and primary assertion reliability.
28. A CPA service relating elderly clients is referred to as: A. ElderAssure.
B. PrimePlus/ElderCare Services. C. Elder Care Plus.
D. Prime of Life Care.
29. An international information format designed specifically for business information: A. ERP.
B. XML.
C. Integrated Systems Format. D. XBRL.
30. Providing assurance using a series of reports provided simultaneously or shortly after the related information is released is referred to as:
A. Continuous auditing. B. Serial auditing.
C. Systems reliability auditing. D. Simultaneity auditing.
31. The organization that was established to identify, develop and communicate new assurance service opportunities is the:
A. Assurance Services Executive Committee. B. Attestation Standards Board.
C. Auditing Standards Board. D. Counsel of Executives.
32. Many new assurance services are performed in accordance with Statements on: A. Standards for Attestation Services.
B. Generally Accepted Assurance Standards. C. Auditing Standards.
D. Accounting for other Assurance Services.
33. Independence is required when performing:
A. Option A
B. Option B C. Option C D. Option D
34. A practitioner's unqualified (unmodified) opinion based upon an examination may ordinarily be on: A. Option A B. Option B C. Option C D. Option D
35. Which attest engagement aligns most directly with a financial statement audit in terms of assurance provided?
A. Agreed-upon procedures. B. Evaluation.
C. Examination. D. Review.
36. The WebTrust engagement relates most directly to: A. Financial statements maintained on the Internet. B. Health care facilities.
C. Risk assurance procedures. D. Electronic commerce systems.
37. Under the attestation standards, in which of the following circumstances is a review report
least likely to be issued?
A. Criteria are agreed-upon or only available to specified users. B. Established criteria exist, but other criteria are used.
C. The subject matter departs from the criteria.
38. To accept an engagement to examine a client's MD&A for annual financial statements, the practitioners ordinarily must have:
A. Audited the most recent financial statement period to which the MD&A applies. B. Determined that the client reports to the Securities and Exchange Commission. C. Performed a detailed analysis of the client's controls over decision making. D. Reviewed the quarterly MD&A information.
39. Which of the following is correct concerning service auditor and SysTrust reports? A. They both result in restricted use reports.
B. A client must engage the CPA to perform both services as neither may be selected independently of the other.
C. They both address system reliability.
D. They represent different names for the same service.
40. The five principles of a reliable system considered in a Trust Services engagement include security, availability, processing integrity, privacy, and:
A. Control.
B. Confidentiality. C. Relevance. D. Reliability.
41. When a CPA is associated with a forecast, all of the following should be disclosed except the:
A. Sources of information.
B. Character of the work performed by the CPA.
C. Major assumptions in the preparation of the forecast. D. Probability of achieving estimates.
42. Which of the following is a prospective financial statement for general use upon which a practitioner may appropriately report?
A. Financial projection. B. Partial presentation.
C. Pro forma financial statement. D. Financial forecast.
43. The party responsible for assumptions identified in the preparation of prospective financial statements is usually:
A. A third-party lending institution. B. The client's management.
C. The reporting accountant. D. The client's independent auditor.
44. Given one or more hypothetical assumptions, a responsible party may prepare an entity's expected financial position, results of operations, and changes in financial position. Such prospective financial statements are known as:
A. Pro forma financial statements. B. Financial projections.
C. Partial Presentation. D. Financial forecasts.
45. Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:
A. All employees who work for the entity.
B. Potential stockholders who request a prospectus or a registration statement. C. A bank with which the entity is negotiating for a loan.
D. All stockholders of record as of the report date.
46. When an accountant compiles a financial forecast, the accountant's report should include a(n):
A. Explanation of the differences between a financial forecast and a financial projection. B. Caveat that the prospective results of the financial forecast may not be achieved. C. Statement that the accountant's responsibility to update the report is limited to one year. D. Disclaimer of opinion on the reliability of the entity's internal controls.
Essay Questions
47. Following are a set of statements. For each statement indicate with an "X" whether it is correct with respect to an examination, a review, and an agreed-upon procedures engagement. Each statement may relate to none, one or more services.
48. The Warren Corporation wants to enhance the market value of its stock by including in its annual report a financial forecast for the next year. They also would like to have their auditors examine the forecast.
a. Define a financial forecast.
b. Is an examination of a financial forecast similar in scope to a review of financial statements? Explain.
Chapter 20 Additional Assurance Services: Other Information
Answer Key
True / False Questions
1. Assurance services improve the quality of information or its context for decision makers.
TRUE AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Remember Difficulty: Easy
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
2. Attestation services are similar, but go beyond assurance services in scope of procedures and reporting.
FALSE
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
3. Independence is required for the performance of all assurance services. TRUE AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
4. Practitioners may report on either an assertion about the subject matter, or on the subject matter for most attestation engagements.
TRUE AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
5. Attestation risk, like audit risk consists of three components--inherent risk, control risk, and substantiation risk. FALSE AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
6. The attestation standards prohibit the examination of prospective financial statements.
FALSE
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
7. A practitioner may be engaged to perform a review of management's discussion and analysis for an annual or an interim period.
TRUE AACSB: Analytic AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-05 Describe the fundamental attributes of attestation services for management discussion and analysis. Topic: Attestation Standards—Examples
8. Trust Services assure consumers that they will be satisfied with their purchases. FALSE AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Remember Difficulty: Easy
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
9. Trust Services are a part of the AICPA's vision that increased trust in annual historical financial statements is necessary.
FALSE
AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
10. SysTrust engagements relate only to database systems. FALSE AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
Multiple Choice Questions
11. Which of the following is least likely to be included in an agreed-upon procedures attestation engagement report?
A. The specified party takes responsibility for the sufficiency of procedures. B. Use of the report is restricted.
C. Limited assurance on the information presented.
D. A summary of procedures performed.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-03 Describe the nature of attestation engagements; including examinations; reviews; and agreed-upon procedures engagements.
12. In an engagement relating to a nonpublic company, conditions exist that result in a material deviation from the criteria against which the subject matter was evaluated during an examination performed following the attestation standards. The CPA's conclusion may be on:
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
13. Suitable criteria in an attestation engagement may be available:
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry
14. When performing an attestation examination engagement, the standards do not require which of the following?
A. Assertion. B. Practitioner independence. C. Subject matter. D. Suitable criteria. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Apply Difficulty: Hard
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
15. Which of the following engagements is most likely to consider security, availability, processing integrity, confidentiality, and privacy relating to a system?
A. Internal control over financial reporting.
B. Trust Services.
C. Website Associate.
D. Financial statement audit.
AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
16. Which of the following are Trust Services principles? A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Apply Difficulty: Hard
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
17. Which of the following is the least likely to be considered subject matter of an attestation engagement?
A. Assertion.
B. Behavior. C. Historical event.
D. Systems and processes.
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
18. Arel, CPA, was engaged by a group of royalty recipients to apply agreed-upon procedures to financial data supplied by Modit Co. regarding Modit's written assertion about its
compliance with contractual requirements to pay royalties. Arel's report on these agreed-upon procedures should contain a(n):
A. Disclaimer of opinion about the fair presentation of Modit's financial statements.
B. List of the procedures performed (or reference thereto) and Arel's findings.
C. Opinion about the effectiveness of Modit's internal control activities concerning royalty payments.
D. Acknowledgment that the sufficiency of the procedures is solely Arel's responsibility.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-03 Describe the nature of attestation engagements; including examinations; reviews; and agreed-upon procedures engagements.
Topic: Attestation Standards
19. Assurance services performed for decision makers may address the:
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
20. Which of the following is least likely to be structured as an attest engagement?
A. An elder care engagement.
B. A SysTrust engagement.
C. An examination of internal control over financial reporting for a nonpublic company. D. A review of management's discussion and analysis.
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Apply Difficulty: Hard
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
21. Which of the following are required on all attestation engagements?
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
22. Which of the following is not currently an acceptable form of association with prospective financial statements? A. Compilation. B. Review. C. Agreed-upon procedures. D. Examination. AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Topic: Attestation Standards—Examples
23. When a practitioner examines projected financial statements, the practitioner's report should include a separate paragraph that:
A. Describes the limitations on the usefulness of the presentation.
B. Provides an explanation of the differences between an examination and a review. C. States that the accountant is responsible for events and circumstances for a period not exceeding one year after the report's date.
D. Disclaims an opinion on whether the assumptions provide a reasonable basis for the projection. AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Apply Difficulty: Hard
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Topic: Attestation Standards—Examples
24. Which of the following is correct relating to an engagement to apply agreed-upon procedures to prospective financial statements?
A. Use of the report is restricted to the specified users.
B. Such engagements are permissible for forecasts but not for projections.
C. Responsibility for the adequacy of the procedures performed is taken by the practitioner. D. Such engagements are not permissible under the professional standards.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Topic: Attestation Standards—Examples
25. When a financial forecast fails to disclose a significant assumption used to prepare that forecast, which of the following reports become appropriate?
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Apply Difficulty: Hard
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Topic: Attestation Standards—Examples
26. When reporting upon a review engagements on an entity's management discussion and analysis, the report is ordinarily:
A. A general use report.
B. A restricted use report.
C. Required to include a disclaimer of opinion.
D. Included with the entity's report on internal control over financial reporting.
AACSB: Analytic AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-05 Describe the fundamental attributes of attestation services for management discussion and analysis. Topic: Attestation Standards—Examples
27. A Type 2 service auditor's report addresses:
A. Only management's description and design of its controls.
B. Management's description and design of its controls and control operating effectiveness.
C. Only control operating effectiveness.
D. Control operating effectiveness and primary assertion reliability.
AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
28. A CPA service relating elderly clients is referred to as: A. ElderAssure.
B. PrimePlus/ElderCare Services.
C. Elder Care Plus. D. Prime of Life Care.
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Remember Difficulty: Easy
Learning Objective: 20-07 Describe the nature of PrimePlus/ElderCare services. Topic: Attestation Standards—Examples
29. An international information format designed specifically for business information: A. ERP.
B. XML.
C. Integrated Systems Format.
D. XBRL.
AACSB: Analytic AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement Bloom's: Remember Difficulty: Easy
Learning Objective: 20-08 List several developing assurance services. Topic: Attestation Standards—Examples
30. Providing assurance using a series of reports provided simultaneously or shortly after the related information is released is referred to as:
A. Continuous auditing.
B. Serial auditing.
C. Systems reliability auditing. D. Simultaneity auditing.
AACSB: Analytic AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement Bloom's: Remember Difficulty: Easy
Learning Objective: 20-08 List several developing assurance services. Topic: Attestation Standards—Examples
31. The organization that was established to identify, develop and communicate new assurance service opportunities is the:
A. Assurance Services Executive Committee.
B. Attestation Standards Board. C. Auditing Standards Board. D. Counsel of Executives. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
32. Many new assurance services are performed in accordance with Statements on:
A. Standards for Attestation Services.
B. Generally Accepted Assurance Standards. C. Auditing Standards.
D. Accounting for other Assurance Services.
AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
33. Independence is required when performing:
A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Bloom's: Understand Difficulty: Medium
Learning Objective: 20-01 Describe the differences among assurance services; attestation services; and audits. Topic: Assurance Services
34. A practitioner's unqualified (unmodified) opinion based upon an examination may ordinarily be on: A. Option A B. Option B C. Option C D. Option D AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
35. Which attest engagement aligns most directly with a financial statement audit in terms of assurance provided? A. Agreed-upon procedures. B. Evaluation. C. Examination. D. Review. AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement AICPA FN: Risk Analysis Bloom's: Remember Difficulty: Easy
Learning Objective: 20-02 Explain the applicability of the attestation standards. Topic: Attestation Standards
36. The WebTrust engagement relates most directly to: A. Financial statements maintained on the Internet. B. Health care facilities.
C. Risk assurance procedures.
D. Electronic commerce systems.
AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Remember Difficulty: Easy
Learning Objective: 20-06 Describe the nature of Trust Services. Source: AICPA
Topic: Attestation Standards—Examples
37. Under the attestation standards, in which of the following circumstances is a review report
least likely to be issued?
A. Criteria are agreed-upon or only available to specified users. B. Established criteria exist, but other criteria are used.
C. The subject matter departs from the criteria.
D. A significant limitation on the scope of the engagement has occurred.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Apply Difficulty: Hard
Learning Objective: 20-03 Describe the nature of attestation engagements; including examinations; reviews; and agreed-upon procedures engagements.
38. To accept an engagement to examine a client's MD&A for annual financial statements, the practitioners ordinarily must have:
A. Audited the most recent financial statement period to which the MD&A applies.
B. Determined that the client reports to the Securities and Exchange Commission. C. Performed a detailed analysis of the client's controls over decision making. D. Reviewed the quarterly MD&A information.
AACSB: Analytic AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement Bloom's: Apply Difficulty: Hard
Learning Objective: 20-05 Describe the fundamental attributes of attestation services for management discussion and analysis. Topic: Attestation Standards—Examples
39. Which of the following is correct concerning service auditor and SysTrust reports? A. They both result in restricted use reports.
B. A client must engage the CPA to perform both services as neither may be selected independently of the other.
C. They both address system reliability.
D. They represent different names for the same service.
AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
40. The five principles of a reliable system considered in a Trust Services engagement include security, availability, processing integrity, privacy, and:
A. Control. B. Confidentiality. C. Relevance. D. Reliability. AACSB: Analytic AACSB: Communication AACSB: Technology AICPA BB: Industry
AICPA BB: Leveraging Technology AICPA FN: Leveraging Technology AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-06 Describe the nature of Trust Services. Topic: Attestation Standards—Examples
41. When a CPA is associated with a forecast, all of the following should be disclosed except the:
A. Sources of information.
B. Character of the work performed by the CPA.
C. Major assumptions in the preparation of the forecast.
D. Probability of achieving estimates.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
42. Which of the following is a prospective financial statement for general use upon which a practitioner may appropriately report?
A. Financial projection. B. Partial presentation.
C. Pro forma financial statement.
D. Financial forecast. AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
Topic: Attestation Standards—Examples
43. The party responsible for assumptions identified in the preparation of prospective financial statements is usually:
A. A third-party lending institution.
B. The client's management.
C. The reporting accountant. D. The client's independent auditor.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Remember Difficulty: Easy
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
44. Given one or more hypothetical assumptions, a responsible party may prepare an entity's expected financial position, results of operations, and changes in financial position. Such prospective financial statements are known as:
A. Pro forma financial statements.
B. Financial projections. C. Partial Presentation. D. Financial forecasts. AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
Topic: Attestation Standards—Examples
45. Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:
A. All employees who work for the entity.
B. Potential stockholders who request a prospectus or a registration statement.
C. A bank with which the entity is negotiating for a loan.
D. All stockholders of record as of the report date.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Apply Difficulty: Hard
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
46. When an accountant compiles a financial forecast, the accountant's report should include a(n):
A. Explanation of the differences between a financial forecast and a financial projection.
B. Caveat that the prospective results of the financial forecast may not be achieved.
C. Statement that the accountant's responsibility to update the report is limited to one year. D. Disclaimer of opinion on the reliability of the entity's internal controls.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Source: AICPA
47. Following are a set of statements. For each statement indicate with an "X" whether it is correct with respect to an examination, a review, and an agreed-upon procedures engagement. Each statement may relate to none, one or more services.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting AICPA FN: Risk Analysis Bloom's: Understand Difficulty: Medium
Learning Objective: 20-03 Describe the nature of attestation engagements; including examinations; reviews; and agreed-upon procedures engagements.
Topic: Attestation Standards
48. The Warren Corporation wants to enhance the market value of its stock by including in its annual report a financial forecast for the next year. They also would like to have their auditors examine the forecast.
a. Define a financial forecast.
b. Is an examination of a financial forecast similar in scope to a review of financial statements? Explain.
a. A financial forecast is "an estimate of the most probable financial position, results of operations, and changes in financial position for one or more future periods."
b. No. An examination of a financial forecast involves an extensive examination of the assumptions underlying the forecast, to satisfy the CPAs that management has identified all key assumptions and that the assumptions are suitably supported.
AACSB: Analytic AACSB: Communication AICPA BB: Industry AICPA BB: Legal AICPA FN: Measurement AICPA FN: Reporting Bloom's: Understand Difficulty: Medium
Learning Objective: 20-04 Describe the fundamental attributes of attestation services for prospective financial statements. Topic: Attestation Standards—Examples
