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1

You own Wobble Inc., which manufactures wooden tables. You need to hire some accountants to prepare your monthly financial statements. The preparation of your financial statements is referred to as a(n):
A)Audit.
B)Compilation.
C)Review.
D)Special report.
2

A politician has asked an accounting firm to audit his personal financial statements with regard to his public disclosures. Which of the following is most likely to be a greater concern on this audit than on an audit of a corporation?
A)The basis of accounting used.
B)Completeness.
C)Presentation.
D)Rights and obligations.
3

A compilation report is not required when compiled financial statements are expected to be used by:
A)Management only.
B)Management and third parties.
C)Third parties only.
D)A compilation report is required whenever financial statements are compiled.
4

Which of the following statements should not be included in an accountant's standard report based on the compilation of a client's financial statements?
A)The compilation was performed in accordance with standards established by the AICPA.
B)The accountant has not audited or reviewed the financial statements.
C)The accountant expresses only limited assurance on the financial statements.
D)The compilation is limited to representing in the form of financial statements, information that is the representation of management.
5

Which of the following represents the highest to lowest level of assurance provided by auditors in the performance of the engagement?
A)An audit; a compilation; a review.
B)A compilation; a review; an audit.
C)A review; an audit; a compilation.
D)An audit; a review; a compilation.
6

The financial statements of XYZ Company, a US corporation, are prepared for inclusion in the consolidated financial statements of its German parent. These financial statements are prepared in conformity with accounting principles generally accepted in Germany (which differ significantly from US principles), and are for use only in Germany. How may XYZ's auditors report on XYZ's financial statements?
 US-style modified to report
on German principles
German style audit reportUnmodified US Report
Row 1NoYesYes
Row 2YesYesYes
Row 3YesNoYes
Row 4NoNoNo
A)Row 1
B)Row 2
C)Row 3
D)Row 4
7

What type of assurance is provided by an auditor in conjunction with a review?
A)Limited.
B)Neutral.
C)None.
D)Positive.
8

Which of the following is not a type of special report?
A)A report for a company that uses the cash basis of accounting.
B)A report on a financial presentation prepared in compliance with the terms of a debt agreement.
C)A report for the board of directors on the company's internal control.
D)A report with an opinion on whether a company's accounts receivable and cash follow GAAP.
9

Which of the following is a major difference between a review and audit of the financial statements?
A)The scope of the procedures performed and the assurance provided.
B)The level of knowledge of professional standards needed to perform the procedures.
C)The type of accounting used--reviews are typically on non-GAAP accounting, while audits are based upon GAAP accounting.
D)The type of company involved in reviews may only be publicly traded.
10

A client wants to include a set of condensed financial statements on a trifold card which is sent to all prospective customers who have requested information on its new, multi-featured $400 clock radio. The financial statements have been audited by X and Y CPAs who issued a standard unqualified report; X and Y believes that the condensed financial statements are fairly stated, in all material respects, in relation to the consolidated financial statements. If X and Y are asked to issue a report to accompany the condensed financial statements it is most likely that the report would:
A)Be identical to the report on the consolidated statements.
B)Include an adverse opinion.
C)Be issued in accordance with the specified elements reporting requirements.
D)State whether the condensed financial statements are fairly presented, in all material respects, in relation to the consolidated financial statements.
11

A comfort letter is typically sent to whom and for what reason?
A)Banks when a company is applying for a loan.
B)The Board of Directors of a company on the internal control.
C)The underwriters of a company's securities to assist them in their reasonable investigation of a registration statement.
D)Company management indication the types of procedures performed during the audit and general findings.
12

In examination of a governmental agency, which is required to use fund accounting, the auditors find that the accounting substantially deviates from fund accounting and instead uses FASB principles normally used by not for profit organizations. These principles result in a presentation that is substantially different from that which would have been developed using fund accounting. What type of audit report is most likely?
A)Adverse opinion.
B)Standard unqualified.
C)Unqualified with explanatory language.
D)Qualified due to scope limitations.







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