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Chapter 20 - Additional Assurance Services: Other Information
Chapter 20 - Additional Assurance Services: Other Information
Chapter 20
Additional Assurance Services: Other Information
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
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
20-1
Chapter 20 - Additional Assurance Services: Other Information
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
A. Option A
B. Option B
C. Option C
D. Option D
20-2
Chapter 20 - Additional Assurance Services: Other Information
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.
D. Financial statement audit.
20-3
Chapter 20 - Additional Assurance Services: Other Information
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.
D. Acknowledgment that the sufficiency of the procedures is solely Arel's responsibility.
20-4
Chapter 20 - Additional Assurance Services: Other Information
19. Assurance services performed for decision makers may address the:
A. Option A
B. Option B
C. Option C
D. Option D
A. Option A
B. Option B
C. Option C
D. Option D
20-5
Chapter 20 - Additional Assurance Services: Other Information
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.
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
20-6
Chapter 20 - Additional Assurance Services: Other Information
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.
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.
20-7
Chapter 20 - Additional Assurance Services: Other Information
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.
A. Option A
B. Option B
C. Option C
D. Option D
20-8
Chapter 20 - Additional Assurance Services: Other Information
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.
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.
20-9
Chapter 20 - Additional Assurance Services: Other Information
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.
20-10
Chapter 20 - Additional Assurance Services: Other Information
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.
20-11
Chapter 20 - Additional Assurance Services: Other Information
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.
20-12
Chapter 20 - Additional Assurance Services: Other Information
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.
20-13
Chapter 20 - Additional Assurance Services: Other Information
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
20-14
Chapter 20 - Additional Assurance Services: Other Information
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
20-15
Chapter 20 - Additional Assurance Services: Other Information
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
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
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
20-16
Chapter 20 - Additional Assurance Services: Other Information
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
20-17
Chapter 20 - Additional Assurance Services: Other Information
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
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
20-18
Chapter 20 - Additional Assurance Services: Other Information
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
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: Apply
Difficulty: Hard
Learning Objective: 20-02 Explain the applicability of the attestation standards.
Topic: Attestation Standards
20-19
Chapter 20 - Additional Assurance Services: Other Information
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
20-20
Chapter 20 - Additional Assurance Services: Other Information
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
20-21
Chapter 20 - Additional Assurance Services: Other Information
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
20-22
Chapter 20 - Additional Assurance Services: Other Information
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
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
20-23
Chapter 20 - Additional Assurance Services: Other Information
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
20-24
Chapter 20 - Additional Assurance Services: Other Information
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
20-25
Chapter 20 - Additional Assurance Services: Other Information
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
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
20-26
Chapter 20 - Additional Assurance Services: Other Information
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
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
20-27
Chapter 20 - Additional Assurance Services: Other Information
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
20-28
Chapter 20 - Additional Assurance Services: Other Information
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
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
20-29
Chapter 20 - Additional Assurance Services: Other Information
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
20-30
Chapter 20 - Additional Assurance Services: Other Information
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.
Topic: Attestation Standards
20-31
Chapter 20 - Additional Assurance Services: Other Information
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
20-32
Chapter 20 - Additional Assurance Services: Other Information
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
Topic: Attestation Standards—Examples
20-33
Chapter 20 - Additional Assurance Services: Other Information
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
Topic: Attestation Standards—Examples
20-34
Chapter 20 - Additional Assurance Services: Other Information
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
Topic: Attestation Standards—Examples
20-35
Chapter 20 - Additional Assurance Services: Other Information
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
Topic: Attestation Standards—Examples
20-36
Chapter 20 - Additional Assurance Services: Other Information
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.
20-37
Chapter 20 - Additional Assurance Services: Other Information
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. 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
20-38