TEST BANK principles of auditinchapter 20 additional assurance services other informations

Attestation services are similar, but go beyond assurance services in scope of procedures and reporting.. Which of the following is least likely to be included in an agreed-upon procedur

Chapter 20 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

7 A practitioner may be engaged to perform a review of management's discussion and

analysis for an annual or an interim period

True False

8 A WebTrust seal assures 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 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:

13 Suitable criteria in an attestation engagement may be available:

D Financial statement audit

16 Which of the following are Trust Services principles?

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 (an)

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

19 Assurance services performed for decision makers may address the:

20 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 management's discussion and analysis

21 Which of the following are required on all attestation engagements?

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 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 When management presents a written assertion on internal control effectiveness, it evaluates the company's internal control using reasonable criteria for internal control, referred

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

29 Which of the following is least likely to result in modification of an opinion on

management's assertion about the effectiveness of an entity's 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 control

D Material weaknesses in internal control

30 Providing assurance using a series of reports provided simultaneously or shortly after the related information is released is referred to as:

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 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:

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

D A significant limitation on the scope of the engagement has occurred

38 To accept an engagement to examine a client's 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 client's 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 engagement

include, availability, security, processing integrity, online privacy, and:

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

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(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 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 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 auditorsexamine the forecast

a Define a financial forecast

b Is an examination of a financial forecast similar in scope to a review of financial

b Describe the nature of the four paragraphs included in an accountant's examination report

on internal control over financial reporting

c Describe two circumstances in which practitioners would issue an examination report that

is other than the unqualified standards report on internal control

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

6 The attestation standards prohibit the examination of prospective financial statements

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

Difficulty: Medium

12 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:

14 When performing an attestation examination engagement, which of the following is not

17 Which of the following is the least likely to be considered subject matter of an attestation

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 (an)

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

20 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 management's discussion and analysis

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

Difficulty: Hard

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

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

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: Hard

29 Which of the following is least likely to result in modification of an opinion on

management's assertion about the effectiveness of an entity's 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 control

D Material weaknesses in internal control

30 Providing assurance using a series of reports provided simultaneously or shortly after the related information is released is referred to as:

A Assurance Services Executive Committee.

B Attestation Standards board

C Auditing Standards Board

D Counsel of Executives

Difficulty: Medium

32 Many new services 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

Difficulty: Medium

33 Independence is required when performing:

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.

Difficulty: Easy

Source: AICPA

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.

Difficulty: Hard

38 To accept an engagement to examine a client's 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 client's controls over decision making

D Reviewed the quarterly MD&A information

Difficulty: Hard

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

Difficulty: Medium

40 The five principles of a reliable system considered in a Trust Services engagement include, availability, security, processing integrity, online privacy, and:

B Character of the work performed by the CPA

C Major assumptions in the preparation of the forecast

D Probability of achieving estimates.

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

Difficulty: Easy