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Chapter 20 - Additional Assurance Services: Other Information

Chapter 20

Additional Assurance Services: Other Information

True / False Questions

1. Assurance services improve the quality of information or its contet for decision ma!ers.

"rue #alse

2. Attestation services are similar$ %ut &o %eyond assurance services in scope of procedures

and reportin&."rue #alse

'. Independence is required for the performance of all assurance services."rue #alse

(. )ractitioners may report on either an assertion a%out the su%*ect matter$ or on the su%*ect

matter for most attestation en&a&ements."rue #alse

+. Attestation ris!$ li!e audit ris! consists of three components--inherent ris!$ control ris!$ and

su%stantiation ris!."rue #alse

,. "he attestation standards prohi%it the eamination of prospective financial statements.

"rue #alse

. A practitioner may %e en&a&ed to perform a revie of mana&ement/s discussion and

analysis for an annual or an interim period."rue #alse

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. A e%"rust seal assures consumers that they ill %e satisfied ith their purchases.

"rue #alse

. "rust Services are a part of the AIC)A/s vision that increased trust in annual historical

financial statements is necessary.

"rue #alse

10. Sys"rust en&a&ements relate only to data%ase systems.

"rue #alse

Multiple Choice Questions

11. hich of the folloin& is leastli!ely to %e included in an a&reed-upon proceduresattestation en&a&ement report3

A. "he specified party ta!es responsi%ility for the sufficiency of procedures.

4. 5se of the report is restricted.

C. 6imited assurance on the information presented.7. A summary of procedures performed.

12. Conditions eist that result in a material deviation from the criteria a&ainst hich thesu%*ect matter as evaluated durin& an eamination performed folloin& the attestation

standards. "he C)A/s conclusion may %e on:

A. Option A

4. Option 4

C. Option C7. Option 7

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1'. Suita%le criteria in an attestation en&a&ement may %e availa%le:

A. Option A4. Option 4

C. Option C

7. Option 7

1(. hen performin& an attestation eamination en&a&ement$ hich of the folloin& is not

alays required3

A. Assertion.4. )ractitioner independence.

C. Su%*ect matter.

7. Suita%le criteria.

1+. hich of the folloin& en&a&ements is most li!ely to consider availa%ility$ security$

inte&rity$ and maintaina%ility of a company/s computer systems3

A. Internal control over financial reportin&.4. "rust Services.

C. e%site Asssociate.

7. #inancial statement audit.

1,. hich of the folloin& are "rust Services principles3

A. Option A

4. Option 4

C. Option C7. Option 7

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1. hich of the folloin& is the leastli!ely to %e considered su%*ect matter of an attestation

en&a&ement3A. Assertion.

4. 4ehavior.

C. 8istorical event.7. Systems and processes.

1. Arel$ C)A$ as en&a&ed %y a &roup of royalty recipients to apply a&reed-upon procedures

to financial data supplied %y 9odit Co. re&ardin& 9odit/s ritten assertion a%out its

compliance ith contractual requirements to pay royalties. Arel/s report on these a&reed-uponprocedures should contain a an;.

A. 7isclaimer of opinion a%out the fair presentation of 9odit/s financial statements.

4. 6ist of the procedures performed or reference thereto; and Arel/s findin&s.

C. Opinion a%out the effectiveness of 9odit/s internal control activities concernin& royaltypayments.

7. Ac!noled&ment that the sufficiency of the procedures is solely Arel/s responsi%ility.

1. Assurance services performed for decision ma!ers may address the:

A. Option A

4. Option 4

C. Option C

7. Option 7

20. hich of the folloin& is notnecessarily an attest en&a&ement3

A. An elder care en&a&ement.

4. A e%"rust en&a&ement.C. An eamination of internal control over financial reportin& for a nonpu%lic company.

7. A revie of mana&ement/s discussion and analysis.

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21. hich of the folloin& are required on all attestation en&a&ements3

A. Option A4. Option 4

C. Option C

7. Option 7

22. hich of the folloin& is notcurrently an accepta%le form of association ith prospective

financial statements3

A. Compilation.4.


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2+. hen a financial forecast fails to disclose a si&nificant assumption used to prepare that

forecast$ hich of the folloin& reports %ecome appropriate3

A. Option A

4. Option 4C. Option C

7. Option 7

2,. hen reportin& upon a revie en&a&ements on an entity/s mana&ement discussion andanalysis$ the report is ordinarily:

A. A &eneral use report.

4. A restricted use report.

C.


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2. hich of the folloin& is leastli!ely to result in modification of an opinion on

mana&ement/s assertion a%out the effectiveness of an entity/s internal control3A. Si&nificant circumstance imposed scope limitations.

4. Si&nificant mana&ement imposed scope limitations.

C.


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''. Independence is required hen performin&:

A. Option A


7. Option 7

'(. A practitioner/s unqualified opinion %ased upon an eamination may ordinarily %e on:

A. Option A


7. Option 7

'+. hich attest en&a&ement ali&ns most directly ith a financial statement audit in terms of

assurance provided3

A. A&reed-upon procedures.4. =valuation.

C. =amination.

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'. 5nder the attestation standards$ in hich of the folloin& circumstances is a revie reportleastli!ely to %e issued3A. Criteria are a&reed-upon or only availa%le to specified users.

4. =sta%lished criteria eist$ %ut other criteria are used.

C. "he su%*ect matter departs from the criteria.7. A si&nificant limitation on the scope of the en&a&ement has occurred.

'. "o accept an en&a&ement to eamine a client/s 97@A for annual financial statements$ the

practitioners ordinarily must have:

A. Audited the most recent financial statement period to hich the 97@A applies.4. 7etermined that the client reports to the Securities and =chan&e Commission.

C. )erformed a detailed analysis of the client/s controls over decision ma!in&.

7.


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(2. hich of the folloin& is a prospective financial statement for &eneral use upon hich a

practitioner may appropriately report3A. #inancial pro*ection.

4. )artial presentation.

C. )ro forma financial statement.7. #inancial forecast.

('. "he party responsi%le for assumptions identified in the preparation of prospective

financial statements is usually:

A. A third-party lendin& institution.4. "he client/s mana&ement.

C. "he reportin& accountant.

7. "he client/s independent auditor.

((. >iven one or more hypothetical assumptions$ a responsi%le party may prepare an entity/s

epected financial position$ results of operations$ and chan&es in financial position. Such

prospective financial statements are !non as:A. )ro forma financial statements.

4. #inancial pro*ections.

C. )artial )resentation.7. #inancial forecasts.

(+. Acceptin& an en&a&ement to eamine an entity/s financial pro*ection most li!ely ould %e

appropriate if the pro*ection ere to %e distri%uted to:A. All employees ho or! for the entity.

4. )otential stoc!holders ho request a prospectus or a re&istration statement.

C. A %an! ith hich the entity is ne&otiatin& for a loan.7. All stoc!holders of record as of the report date.

(,. hen an accountant compiles a financial forecast$ the accountant/s report should includeaan;A. =planation of the differences %eteen a financial forecast and a financial pro*ection.

4. Caveat that the prospective results of the financial forecast may not%e achieved.

C. Statement that the accountant/s responsi%ility to update the report is limited to one year.7. 7isclaimer of opinion on the relia%ility of the entity/s internal controls.

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ssa! Questions

(. "he arren Corporation ants to enhance the mar!et value of its stoc! %y includin& in its

annual report a financial forecast for the net year. "hey also ould li!e to have their auditorseamine the forecast.a. 7efine a financial forecast.

%. Is an eamination of a financial forecast similar in scope to a revie of financial

statements3 =plain.

(. )ractitioners may %e en&a&ed to attest to an entity/s internal control over financialreportin&.

a. Comment on the accuracy of this statement: Accountants may %e en&a&ed to eamine$

revie$ or perform a&reed-upon procedures on an entity/s internal control over financialreportin&.

%. 7escri%e the nature of the four para&raphs included in an accountant/s eamination report

on internal control over financial reportin&.

c. 7escri%e to circumstances in hich practitioners ould issue an eamination report thatis other than the unqualified standards report on internal control.

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Chapter 20 Additional Assurance Services: Other Information Anserey

True / False Questions

1. Assurance services improve the quality of information or its contet for decision ma!ers.

T"#

Difficulty: Easy

2. Attestation services are similar$ %ut &o %eyond assurance services in scope of proceduresand reportin&.

FA$S

Difficulty: Medium

'. Independence is required for the performance of all assurance services.

T"#

Difficulty: Medium

(. )ractitioners may report on either an assertion a%out the su%*ect matter$ or on the su%*ect

matter for most attestation en&a&ements.

T"#

Difficulty: Medium

+. Attestation ris!$ li!e audit ris! consists of three components--inherent ris!$ control ris!$ and

su%stantiation ris!.

FA$S

Difficulty: Medium

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,. "he attestation standards prohi%it the eamination of prospective financial statements.

FA$S

Difficulty: Medium

. A practitioner may %e en&a&ed to perform a revie of mana&ement/s discussion andanalysis for an annual or an interim period.

T"#

Difficulty: Medium

. A e%"rust seal assures consumers that they ill %e satisfied ith their purchases.FA$S

Difficulty: Easy

. "rust Services are a part of the AIC)A/s vision that increased trust in annual historicalfinancial statements is necessary.

FA$S

Difficulty: Medium

10. Sys"rust en&a&ements relate only to data%ase systems.

FA$S

Difficulty: Medium

Multiple Choice Questions

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11. hich of the folloin& is leastli!ely to %e included in an a&reed-upon procedures

attestation en&a&ement report3A."he specified party ta!es responsi%ility for the sufficiency of procedures.

4.5se of the report is restricted.

C%6imited assurance on the information presented.7.A summary of procedures performed.

Difficulty: Medium

12. Conditions eist that result in a material deviation from the criteria a&ainst hich the

su%*ect matter as evaluated durin& an eamination performed folloin& the attestation

standards. "he C)A/s conclusion may %e on:

A.Option A

&%Option 4C.Option C

7.Option 7

Difficulty: Medium

1'. Suita%le criteria in an attestation en&a&ement may %e availa%le:

A%Option A4.Option 4

C.Option C7.Option 7

Difficulty: Hard

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1(. hen performin& an attestation eamination en&a&ement$ hich of the folloin& is not

alays required3

A%Assertion.

4.)ractitioner independence.

C.Su%*ect matter.7.Suita%le criteria.

Difficulty: Hard

1+. hich of the folloin& en&a&ements is most li!ely to consider availa%ility$ security$

inte&rity$ and maintaina%ility of a company/s computer systems3

A.Internal control over financial reportin&.

&%"rust Services.

C.e%site Asssociate.7.#inancial statement audit.

Difficulty: Medium

1,. hich of the folloin& are "rust Services principles3

A%Option A4.Option 4

C.Option C

7.Option 7

Difficulty: Hard

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1. hich of the folloin& is the leastli!ely to %e considered su%*ect matter of an attestation

en&a&ement3

A%Assertion.

4.4ehavior.

C.8istorical event.7.Systems and processes.

Difficulty: Medium

1. Arel$ C)A$ as en&a&ed %y a &roup of royalty recipients to apply a&reed-upon procedures

to financial data supplied %y 9odit Co. re&ardin& 9odit/s ritten assertion a%out its

compliance ith contractual requirements to pay royalties. Arel/s report on these a&reed-upon

procedures should contain a an;.

A.7isclaimer of opinion a%out the fair presentation of 9odit/s financial statements.&%6ist of the procedures performed or reference thereto; and Arel/s findin&s.

C.Opinion a%out the effectiveness of 9odit/s internal control activities concernin& royaltypayments.

7.Ac!noled&ment that the sufficiency of the procedures is solely Arel/s responsi%ility.

Difficulty: Medium

1. Assurance services performed for decision ma!ers may address the:

A%Option A

4.Option 4


Difficulty: Medium

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20. hich of the folloin& is notnecessarily an attest en&a&ement3

A%An elder care en&a&ement.4.A e%"rust en&a&ement.

C.An eamination of internal control over financial reportin& for a nonpu%lic company.

7.A revie of mana&ement/s discussion and analysis.

Difficulty: Hard

21. hich of the folloin& are required on all attestation en&a&ements3

A%Option A

4.Option 4


Difficulty: Medium

22. hich of the folloin& is notcurrently an accepta%le form of association ith prospectivefinancial statements3

A.Compilation.

&%


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2'. hen a practitioner eamines pro*ected financial statements$ the practitioner/s report

should include a separate para&raph that:

A%7escri%es the limitations on the usefulness of the presentation.

4.)rovides an eplanation of the differences %eteen an eamination and a revie.

C.States that the accountant is responsi%le for events and circumstances for a period noteceedin& one year after the report/s date.7.7isclaims an opinion on hether the assumptions provide a reasona%le %asis for the

pro*ection.

Difficulty: Hard

2(. hich of the folloin& is correct relatin& to an en&a&ement to apply a&reed-upon

procedures to prospective financial statements3

A%5se of the report is restricted to the specified users.4.Such en&a&ements are permissi%le for forecasts %ut not for pro*ections.

C.


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2,. hen reportin& upon a revie en&a&ements on an entity/s mana&ement discussion and

analysis$ the report is ordinarily:A.A &eneral use report.

&%A restricted use report.

C.


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'0. )rovidin& assurance usin& a series of reports provided simultaneously or shortly after the

related information is released is referred to as:

A%Continuous auditin&.

4.Serial auditin&.

C.Systems relia%ility auditin&.7.Simultaneity auditin&.

Difficulty: Easy

'1. "he or&ani?ation esta%lished to identify$ develop and communicate ne assurance service

opportunities is the:

A%Assurance Services =ecutive Committee.

4.Attestation Standards %oard.

C.Auditin& Standards 4oard.7.Counsel of =ecutives.

Difficulty: Medium

'2. 9any ne services assurance services are performed in accordance ith Statements on

A%Standards for Attestation Services.4.>enerally Accepted Assurance Standards.

C.Auditin& Standards.

7.Accountin& for other Assurance Services.

Difficulty: Medium

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''. Independence is required hen performin&:

A%Option A

4.Option 4C.Option C

7.Option 7

Difficulty: Medium

'(. A practitioner/s unqualified opinion %ased upon an eamination may ordinarily %e on:

A%Option A

4.Option 4C.Option C

7.Option 7

Difficulty: Medium

'+. hich attest en&a&ement ali&ns most directly ith a financial statement audit in terms of

assurance provided3A.A&reed-upon procedures.

4.=valuation.

C%=amination.

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',. "he e%"rust en&a&ement relates most directly to

A.#inancial statements maintained on the Internet.4.8ealth care facilities.

C.


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(0. "he five principles of a relia%le system considered in a "rust Services en&a&ement

include$ availa%ility$ security$ processin& inte&rity$ online privacy$ and:A.Control

&%Confidentiality.

C.


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((. >iven one or more hypothetical assumptions$ a responsi%le party may prepare an entity/s

epected financial position$ results of operations$ and chan&es in financial position. Suchprospective financial statements are !non as:

A.)ro forma financial statements.

&%#inancial pro*ections.C.)artial )resentation.7.#inancial forecasts.

Difficulty: Medium

Source: AICPA

(+. Acceptin& an en&a&ement to eamine an entity/s financial pro*ection most li!ely ould %e

appropriate if the pro*ection ere to %e distri%uted to:

A.All employees ho or! for the entity.4.)otential stoc!holders ho request a prospectus or a re&istration statement.

C%A %an! ith hich the entity is ne&otiatin& for a loan.7.All stoc!holders of record as of the report date.

Difficulty: Hard

Source: AICPA

(,. hen an accountant compiles a financial forecast$ the accountant/s report should include

aan;

A.=planation of the differences %eteen a financial forecast and a financial pro*ection.&%Caveat that the prospective results of the financial forecast may not%e achieved.

C.Statement that the accountant/s responsi%ility to update the report is limited to one year.

7.7isclaimer of opinion on the relia%ility of the entity/s internal controls.

Difficulty: Medium

Source: AICPA

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ssa! Questions

(. "he arren Corporation ants to enhance the mar!et value of its stoc! %y includin& in itsannual report a financial forecast for the net year. "hey also ould li!e to have their auditors

eamine the forecast.

a. 7efine a financial forecast.%. Is an eamination of a financial forecast similar in scope to a revie of financial

statements3 =plain.

a. A financial forecast is Ban estimate of the most pro%a%le financial position$ results of

operations$ and chan&es in financial position for one or more future periods.B%. o. An eamination of a financial forecast involves an etensive eamination of the

assumptions underlyin& the forecast$ to satisfy the C)As that mana&ement has identified all

!ey assumptions and that the assumptions are suita%ly supported.

Difficulty: Medium

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(. )ractitioners may %e en&a&ed to attest to an entity/s internal control over financial

reportin&.a. Comment on the accuracy of this statement: Accountants may %e en&a&ed to eamine$

revie$ or perform a&reed-upon procedures on an entity/s internal control over financial

reportin&.%. 7escri%e the nature of the four para&raphs included in an accountant/s eamination reporton internal control over financial reportin&.

c. 7escri%e to circumstances in hich practitioners ould issue an eamination report that

is other than the unqualified standards report on internal control.

a. A C)A may eamine or perform a&reed-upon procedures on an entity/s internal controlover financial reportin&$ %ut a revie of this information is not alloed.

%. A C)A/s report on internal control contained the folloin& four para&raphs:

"he first para&raph is an introductory para&raph that descri%es the assertion %ein& eamined.

"he second para&raph is a scope para&raph that descri%es the nature of an eamination of an

entity/s internal control over financial reportin&."he third para&raph descri%es the inherent limitations of internal control.

"he fourth para&raph epresses the C)A/s opinion on mana&ement/s assertion a%out internal

control.c. Internal control reports are modified for the folloin& reasons only to required;:

A qualified report is issued hen the scope of the accountant/s procedures has %een

restricted.

A disclaimer of opinion is issued hen the scope of the accountant/s procedures has %een

restricted %y the client$ or severely limited %y the circumstances.

An adverse report is issued hen the accountants %ecome aare of a material ea!ness that

is not ac!noled&ed in mana&ement/s report.A modified report is issued hen the accountants %ecome aare of a material ea!ness that

is ac!noled&ed in mana&ement/s report.

Difficulty: Medium

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