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  • 1. Chapter 20 - Additional Assurance Services: Other Information Chapter 20 Additional Assurance Services: Other InformationTrue / False Questions1. Assurance services improve the quality of information or its context for decision makers.True False2. Attestation services are similar, but go beyond assurance services in scope of proceduresand reporting.True False3. Independence is required for the performance of all assurance services.True False4. Practitioners may report on either an assertion about the subject matter, or on the subjectmatter for most attestation engagements.True False5. Attestation risk, like audit risk consists of three components--inherent risk, control risk, andsubstantiation risk.True False6. The attestation standards prohibit the examination of prospective financial statements.True False7. A practitioner may be engaged to perform a review of managements discussion andanalysis for an annual or an interim period.True False 20-1
  • 2. Chapter 20 - Additional Assurance Services: Other Information8. A WebTrust seal assures consumers that they will be satisfied with their purchases.True False9. Trust Services are a part of the AICPAs vision that increased trust in annual historicalfinancial statements is necessary.True False10. SysTrust engagements relate only to database systems.True FalseMultiple Choice Questions11. Which of the following is least likely to be included in an agreed-upon proceduresattestation 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. Conditions exist that result in a material deviation from the criteria against which thesubject matter was evaluated during an examination performed following the attestationstandards. The CPAs conclusion may be on:A. Option AB. Option BC. Option CD. Option D 20-2
  • 3. Chapter 20 - Additional Assurance Services: Other Information13. Suitable criteria in an attestation engagement may be available:A. Option AB. Option BC. Option CD. Option D14. When performing an attestation examination engagement, which of the following is notalways required?A. Assertion.B. Practitioner independence.C. Subject matter.D. Suitable criteria.15. Which of the following engagements is most likely to consider availability, security,integrity, and maintainability of a companys computer systems?A. Internal control over financial reporting.B. Trust Services.C. Website Asssociate.D. Financial statement audit.16. Which of the following are Trust Services principles?A. Option AB. Option BC. Option CD. Option D 20-3
  • 4. Chapter 20 - Additional Assurance Services: Other Information17. Which of the following is the least likely to be considered subject matter of an attestationengagement?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 proceduresto financial data supplied by Modit Co. regarding Modits written assertion about itscompliance with contractual requirements to pay royalties. Arels report on these agreed-uponprocedures should contain a (an).A. Disclaimer of opinion about the fair presentation of Modits financial statements.B. List of the procedures performed (or reference thereto) and Arels findings.C. Opinion about the effectiveness of Modits internal control activities concerning royaltypayments.D. Acknowledgment that the sufficiency of the procedures is solely Arels responsibility.19. Assurance services performed for decision makers may address the:A. Option AB. Option BC. Option CD. Option D20. Which of the following is not necessarily an attest engagement?A. An elder care engagement.B. A WebTrust engagement.C. An examination of internal control over financial reporting for a nonpublic company.D. A review of managements discussion and analysis. 20-4
  • 5. Chapter 20 - Additional Assurance Services: Other Information21. Which of the following are required on all attestation engagements?A. Option AB. Option BC. Option CD. Option D22. Which of the following is notcurrently an acceptable form of association with prospectivefinancial statements?A. Compilation.B. Review.C. Agreed-upon procedures.D. Examination.23. When a practitioner examines projected financial statements, the practitioners reportshould 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 notexceeding one year after the reports date.D. Disclaims an opinion on whether the assumptions provide a reasonable basis for theprojection.24. Which of the following is correct relating to an engagement to apply agreed-uponprocedures 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. 20-5
  • 6. Chapter 20 - Additional Assurance Services: Other Information25. When a financial forecast fails to disclose a significant assumption used to prepare thatforecast, which of the following reports become appropriate?A. Option AB. Option BC. Option CD. Option D26. When reporting upon a review engagements on an entitys management discussion andanalysis, 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 entitys report on internal control over financial reporting.27. When management presents a written assertion on internal control effectiveness, itevaluates the companys internal control using reasonable criteria for internal control, referredto as.A. Control environment criteria.B. Tone criteria.C. Control criteriaD. Integrated criteria.28. When compared to the consideration of internal control for purposes of an audit, anexamination of managements assertion about the effectiveness of an entitys internal controlfor a nonpublic company may be expected to require a(n):A. Increased scope of tests of balances.B. Increased scope of tests of controls.C. Greater reliance upon analytical procedures.D. Increased emphasis on fairness of future presentation. 20-6
  • 7. Chapter 20 - Additional Assurance Services: Other Information29. Which of the following is least likely to result in modification of an opinion onmanagements assertion about the effectiveness of an entitys internal control?A. Significant circumstance imposed scope limitations.B. Significant management imposed scope limitations.C. Reportable conditions that are not also material weaknesses in internal controlD. Material weaknesses in internal control.30. Providing assurance using a series of reports provided simultaneously or shortly after therelated information is released is referred to as:A. Continuous auditing.B. Serial auditing.C. Systems reliability auditing.D. Simultaneity auditing.31. The organization established to identify, develop and communicate new assurance serviceopportunities is the:A. Assurance Services Executive Committee.B. Attestation Standards board.C. Auditing Standards Board.D. Counsel of Executives.32. Many new services assurance services are performed in accordance with Statements onA. Standards for Attestation Services.B. Generally Accepted Assurance Standards.C. Auditing Standards.D. Accounting for other Assurance Services. 20-7
  • 8. Chapter 20 - Additional Assurance Services: Other Information33. Independence is required when performing:A. Option AB. Option BC. Option CD. Option D34. A practitioners unqualified opinion based upon an examination may ordinarily be on:A. Option AB. Option BC. Option CD. Option D35. Which attest engagement aligns most directly with a financial statement audit in terms ofassurance provided?A. Agreed-upon procedures.B. Evaluation.C. Examination.D. Review.36. The WebTrust engagement relates most directly toA. Financial statements maintained on the Internet.B. Health care facilities.C. Risk assurance procedures.D. Electronic commerce systems. 20-8
  • 9. Chapter 20 - Additional Assurance Services: Other Information37. Under the attestation standards, in which of the following circumstances is a review reportleast 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.38. To accept an engagement to examine a clients MD&A for annual financial statements, thepractitioners 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 clients controls over decision making.D. Reviewed the quarterly MD&A information.39. A CPA who wishes to perform a WebTrust engagement need not:A. Agree to adhere to the WebTrust professional standards.B. Participate in a quality assurance program.C. Pass an examination on WebTrust principles and criteria.D. Take continuing education courses on the WebTrust program.40. The five principles of a reliable system considered in a Trust Services engagementinclude, availability, security, processing integrity, online privacy, and:A. ControlB. Confidentiality.C. Relevance.D. Reliability.41. When a CPA is associated with a forecast, all of the following should be disclosed exceptthe: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. 20-9
  • 10. Chapter 20 - Additional Assurance Services: Other Information42. Which of the following is a prospective financial statement for general use upon which apractitioner 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 prospectivefinancial statements is usually:A. A third-party lending institution.B. The clients management.C. The reporting accountant.D. The clients independent auditor.44. Given one or more hypothetical assumptions, a responsible party may prepare an entitysexpected financial position, results of operations, and changes in financial position. Suchprospective 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 entitys financial projection most likely would beappropriate 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 accountants report should includea(an)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 accountants responsibility to update the report is limited to one year.D. Disclaimer of opinion on the reliability of the entitys internal controls. 20-10
  • 11. Chapter 20 - Additional Assurance Services: Other InformationEssay Questions47. The Warren Corporation wants to enhance the market value of its stock by including in itsannual report a financial forecast for the next year. They also would like to have their auditorsexamine the forecast.a. Define a financial forecast.b. Is an examination of a financial forecast similar in scope to a review of financialstatements? Explain.48. Practitioners may be engaged to attest to an entitys internal control over financialreporting.a. Comment on the accuracy of this statement: Accountants may be engaged to examine,review, or perform agreed-upon procedures on an entitys internal control over financialreporting.b. Describe the nature of the four paragraphs included in an accountants examination reporton internal control over financial reporting.c. Describe two circumstances in which practitioners would issue an examination report thatis other than the unqualified standards report on internal control. 20-11
  • 12. Chapter 20 - Additional Assurance Services: Other InformationChapter 20 Additional Assurance Services: Other Information Answer KeyTrue / False Questions1. Assurance services improve the quality of information or its context for decision makers.TRUEDifficulty: Easy2. Attestation services are similar, but go beyond assurance services in scope of proceduresand reporting.FALSEDifficulty: Medium3. Independence is required for the performance of all assurance services.TRUEDifficulty: Medium4. Practitioners may report on either an assertion about the subject matter, or on the subjectmatter for most attestation engagements.TRUEDifficulty: Medium5. Attestation risk, like audit risk consists of three components--inherent risk, control risk, andsubstantiation risk.FALSEDifficulty: Medium 20-12
  • 13. Chapter 20 - Additional Assurance Services: Other Information6. The attestation standards prohibit the examination of prospective financial statements.FALSEDifficulty: Medium7. A practitioner may be engaged to perform a review of managements discussion andanalysis for an annual or an interim period.TRUEDifficulty: Medium8. A WebTrust seal assures consumers that they will be satisfied with their purchases.FALSEDifficulty: Easy9. Trust Services are a part of the AICPAs vision that increased trust in annual historicalfinancial statements is necessary.FALSEDifficulty: Medium10. SysTrust engagements relate only to database systems.FALSEDifficulty: MediumMultiple Choice Questions 20-13
  • 14. Chapter 20 - Additional Assurance Services: Other Information11. Which of the following is least likely to be included in an agreed-upon proceduresattestation 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.Difficulty: Medium12. Conditions exist that result in a material deviation from the criteria against which thesubject matter was evaluated during an examination performed following the attestationstandards. The CPAs conclusion may be on:A. Option AB. Option BC. Option CD. Option DDifficulty: Medium13. Suitable criteria in an attestation engagement may be available:A. Option AB. Option BC. Option CD. Option DDifficulty: Hard 20-14
  • 15. Chapter 20 - Additional Assurance Services: Other Information14. When performing an attestation examination engagement, which of the following is notalways required?A. Assertion.B. Practitioner independence.C. Subject matter.D. Suitable criteria.Difficulty: Hard15. Which of the following engagements is most likely to consider availability, security,integrity, and maintainability of a companys computer systems?A. Internal control over financial reporting.B. Trust Services.C. Website Asssociate.D. Financial statement audit.Difficulty: Medium16. Which of the following are Trust Services principles?A. Option AB. Option BC. Option CD. Option DDifficulty: Hard 20-15
  • 16. Chapter 20 - Additional Assurance Services: Other Information17. Which of the following is the least likely to be considered subject matter of an attestationengagement?A. Assertion.B. Behavior.C. Historical event.D. Systems and processes.Difficulty: Medium18. Arel, CPA, was engaged by a group of royalty recipients to apply agreed-upon proceduresto financial data supplied by Modit Co. regarding Modits written assertion about itscompliance with contractual requirements to pay royalties. Arels report on these agreed-uponprocedures should contain a (an).A. Disclaimer of opinion about the fair presentation of Modits financial statements.B. List of the procedures performed (or reference thereto) and Arels findings.C. Opinion about the effectiveness of Modits internal control activities concerning royaltypayments.D. Acknowledgment that the sufficiency of the procedures is solely Arels responsibility.Difficulty: Medium19. Assurance services performed for decision makers may address the:A. Option AB. Option BC. Option CD. Option DDifficulty: Medium 20-16
  • 17. Chapter 20 - Additional Assurance Services: Other Information20. Which of the following is not necessarily an attest engagement?A. An elder care engagement.B. A WebTrust engagement.C. An examination of internal control over financial reporting for a nonpublic company.D. A review of managements discussion and analysis.Difficulty: Hard21. Which of the following are required on all attestation engagements?A. Option AB. Option BC. Option CD. Option DDifficulty: Medium22. Which of the following is notcurrently an acceptable form of association with prospectivefinancial statements?A. Compilation.B. Review.C. Agreed-upon procedures.D. Examination.Difficulty: Medium 20-17
  • 18. Chapter 20 - Additional Assurance Services: Other Information23. When a practitioner examines projected financial statements, the practitioners reportshould 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 notexceeding one year after the reports date.D. Disclaims an opinion on whether the assumptions provide a reasonable basis for theprojection.Difficulty: Hard24. Which of the following is correct relating to an engagement to apply agreed-uponprocedures 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.Difficulty: Medium25. When a financial forecast fails to disclose a significant assumption used to prepare thatforecast, which of the following reports become appropriate?A. Option AB. Option BC. Option CD. Option DDifficulty: Hard 20-18
  • 19. Chapter 20 - Additional Assurance Services: Other Information26. When reporting upon a review engagements on an entitys management discussion andanalysis, 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 entitys report on internal control over financial reporting.Difficulty: Medium27. When management presents a written assertion on internal control effectiveness, itevaluates the companys internal control using reasonable criteria for internal control, referredto as.A. Control environment criteria.B. Tone criteria.C. Control criteriaD. Integrated criteria.Difficulty: Easy28. When compared to the consideration of internal control for purposes of an audit, anexamination of managements assertion about the effectiveness of an entitys internal controlfor a nonpublic company may be expected to require a(n):A. Increased scope of tests of balances.B. Increased scope of tests of controls.C. Greater reliance upon analytical procedures.D. Increased emphasis on fairness of future presentation.Difficulty: Hard29. Which of the following is least likely to result in modification of an opinion onmanagements assertion about the effectiveness of an entitys internal control?A. Significant circumstance imposed scope limitations.B. Significant management imposed scope limitations.C. Reportable conditions that are not also material weaknesses in internal controlD. Material weaknesses in internal control.Difficulty: Hard 20-19
  • 20. Chapter 20 - Additional Assurance Services: Other Information30. Providing assurance using a series of reports provided simultaneously or shortly after therelated information is released is referred to as:A. Continuous auditing.B. Serial auditing.C. Systems reliability auditing.D. Simultaneity auditing.Difficulty: Easy31. The organization established to identify, develop and communicate new assurance serviceopportunities is the:A. Assurance Services Executive Committee.B. Attestation Standards board.C. Auditing Standards Board.D. Counsel of Executives.Difficulty: Medium32. Many new services assurance services are performed in accordance with Statements onA. Standards for Attestation Services.B. Generally Accepted Assurance Standards.C. Auditing Standards.D. Accounting for other Assurance Services.Difficulty: Medium 20-20
  • 21. Chapter 20 - Additional Assurance Services: Other Information33. Independence is required when performing:A. Option AB. Option BC. Option CD. Option DDifficulty: Medium34. A practitioners unqualified opinion based upon an examination may ordinarily be on:A. Option AB. Option BC. Option CD. Option DDifficulty: Medium35. Which attest engagement aligns most directly with a financial statement audit in terms ofassurance provided?A. Agreed-upon procedures.B. Evaluation.C. Examination.D. Review.Difficulty: Easy 20-21
  • 22. Chapter 20 - Additional Assurance Services: Other Information36. The WebTrust engagement relates most directly toA. Financial statements maintained on the Internet.B. Health care facilities.C. Risk assurance procedures.D. Electronic commerce systems.Difficulty: EasySource: AICPA37. Under the attestation standards, in which of the following circumstances is a review reportleast 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.Difficulty: Hard38. To accept an engagement to examine a clients MD&A for annual financial statements, thepractitioners 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 clients controls over decision making.D. Reviewed the quarterly MD&A information.Difficulty: Hard39. A CPA who wishes to perform a WebTrust engagement need not:A. Agree to adhere to the WebTrust professional standards.B. Participate in a quality assurance program.C. Pass an examination on WebTrust principles and criteria.D. Take continuing education courses on the WebTrust program.Difficulty: Medium 20-22
  • 23. Chapter 20 - Additional Assurance Services: Other Information40. The five principles of a reliable system considered in a Trust Services engagementinclude, availability, security, processing integrity, online privacy, and:A. ControlB. Confidentiality.C. Relevance.D. Reliability.Difficulty: Medium41. When a CPA is associated with a forecast, all of the following should be disclosed exceptthe: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.Difficulty: MediumSource: AICPA42. Which of the following is a prospective financial statement for general use upon which apractitioner may appropriately report?A. Financial projection.B. Partial presentation.C. Pro forma financial statement.D. Financial forecast.Difficulty: MediumSource: AICPA43. The party responsible for assumptions identified in the preparation of prospectivefinancial statements is usually:A. A third-party lending institution.B. The clients management.C. The reporting accountant.D. The clients independent auditor.Difficulty: EasySource: AICPA 20-23
  • 24. Chapter 20 - Additional Assurance Services: Other Information44. Given one or more hypothetical assumptions, a responsible party may prepare an entitysexpected financial position, results of operations, and changes in financial position. Suchprospective financial statements are known as:A. Pro forma financial statements.B. Financial projections.C. Partial Presentation.D. Financial forecasts.Difficulty: MediumSource: AICPA45. Accepting an engagement to examine an entitys financial projection most likely would beappropriate 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.Difficulty: HardSource: AICPA46. When an accountant compiles a financial forecast, the accountants report should includea(an)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 accountants responsibility to update the report is limited to one year.D. Disclaimer of opinion on the reliability of the entitys internal controls.Difficulty: MediumSource: AICPA 20-24
  • 25. Chapter 20 - Additional Assurance Services: Other InformationEssay Questions47. The Warren Corporation wants to enhance the market value of its stock by including in itsannual report a financial forecast for the next year. They also would like to have their auditorsexamine the forecast.a. Define a financial forecast.b. Is an examination of a financial forecast similar in scope to a review of financialstatements? Explain.a. A financial forecast is "an estimate of the most probable financial position, results ofoperations, and changes in financial position for one or more future periods."b. No. An examination of a financial forecast involves an extensive examination of theassumptions underlying the forecast, to satisfy the CPAs that management has identified allkey assumptions and that the assumptions are suitably supported.Difficulty: Medium 20-25
  • 26. Chapter 20 - Additional Assurance Services: Other Information48. Practitioners may be engaged to attest to an entitys internal control over financialreporting.a. Comment on the accuracy of this statement: Accountants may be engaged to examine,review, or perform agreed-upon procedures on an entitys internal control over financialreporting.b. Describe the nature of the four paragraphs included in an accountants examination reporton internal control over financial reporting.c. Describe two circumstances in which practitioners would issue an examination report thatis other than the unqualified standards report on internal control.a. A CPA may examine or perform agreed-upon procedures on an entitys internal controlover financial reporting, but a review of this information is not allowed.b. A CPAs report on internal control contained the following four paragraphs:• The first paragraph is an introductory paragraph that describes the assertion being examined.• The second paragraph is a scope paragraph that describes the nature of an examination of anentitys internal control over financial reporting.• The third paragraph describes the inherent limitations of internal control.• The fourth paragraph expresses the CPAs opinion on managements assertion about internalcontrol.c. Internal control reports are modified for the following reasons (only two required):• A qualified report is issued when the scope of the accountants procedures has beenrestricted.• A disclaimer of opinion is issued when the scope of the accountants procedures has beenrestricted by the client, or severely limited by the circumstances.• An adverse report is issued when the accountants become aware of a material weakness thatis not acknowledged in managements report.• A modified report is issued when the accountants become aware of a material weakness thatis acknowledged in managements report.Difficulty: Medium 20-26