When compiled financial statements are accompanied by an accountant’s report, that

report should state that?

A compilation includes assessing the accounting principles used and significant

management estimates, as well as evaluating the overall financial statement presentation

The accountant compiled the financial statements in accordance with PSRSs

A compilation is substantially less in scope than an audit in accordance with PSAs, the
objective of which is the expression of an opinion

he accountant is not aware of any material modifications that should be made to the
financial statements to conform with GAAP
Ans.
The accountant compiled the financial statements in accordance with PSRSs

Which of the following should not be included in an accountant’s report based upon the
compilation of an entity’s financial statements?

A statement that a compilation of the company’s financial statements was made in accordance
with the Philippine Standard on Related Services applicable to compilation engagements.

A statement that management is responsible for the financial statements.

A statement that the accountant has not audited or reviewed the statements.

A statement that the accountant does not express an opinion but provides only negative assurance
on the statements.
Ans.
A statement that the accountant does not express an opinion but provides only negative assurance
on the statements.

Which of the following statements is correct concerning both an engagement to compile

and an engagement to review a nonpublic entity’s financial statements?

The accountant does not contemplate obtaining an understanding of internal control

The accountant must be independent in fact and appearance.
The accountant expresses no assurance on the financial statements
The accountant should obtain a written management representation letter
Ans.
The accountant does not contemplate obtaining an understanding of internal control

Compilations can be performed for

Public companies Non-public companies
Yes Yes
 No No
No Yes
Yes No
Ans.
Yes No

Level of assurance in a compilation engagement

High
Reasonable
Limited
None
Ans.
None

The statement that nothing came to our attention which would indicate that these statements are
not fairly presented expresses which of the following?

disclaimer of opinion
negative assurance
negative confirmation
adverse report
Ans.
negative assurance

Which of the following is incorrect about a compilation engagement?

The CPA uses his auditing expertise to collect, classify and summarize financial information

The engagement ordinarily entails reducing detailed data to a manageable and understandable
form

The CPA should exercise due care

The procedures performed do not enable the accountant to express any form of assurance
Ans.
The CPA uses his auditing expertise to collect, classify and summarize financial information

Prior to commencing the compilation of financial statements of an entity, the accountant

should?

Perform analytical procedures sufficient to determine whether fluctuation among account

balances appear reasonable.

Complete the preliminary phase of the consideration of the entity’s internal control.
Verify that the financial information supplied by the entity agrees with the books of
original entry.

Acquire knowledge of any specialized accounting principles and practices used in the
entity’s industry.
Ans.
Acquire knowledge of any specialized accounting principles and practices used in the entity’s
industry.

Each page (or front page) of the financial information compiled by the accountant should include
the following reference, except

Limited Assurance Provided”

“Compiled without Audit or Review”
“Unaudited”
“Refer to Compilation Report”
Ans.
Limited Assurance Provided”

What level of assurance does an accountant give on a compilation report?

None
Moderate
Low
High
Ans.
None

Main standards to govern compilation engagements

PSAs
PSREs
PSRSs
PSAEs
Ans.
PSRSs

The procedures employed in doing compilation are:

Designed to enable the accountant to express a limited assurance

Designed to enable the accountant to express a negative assurance
Not designed to enable the accountant to express any form of assurance
Less extensive than review procedures but more extensive than agreed-upon procedures
Ans.
Not designed to enable the accountant to express any form of assurance
When compiling the financial statements of an entity, an accountant should

Review agreements with financial institutions for restrictions on cash balances.

Understand the accounting principles and practices of the entity’s industry.
Inquire of key personnel concerning related parties and subsequent events.
Perform ratio analyses of the financial data of comparable prior periods.
Ans.
Understand the accounting principles and practices of the entity’s industry.

During the course of an audit of financial statements, the client informs the professional CPA that
he may not correspond with the client’s legal counsel. Under these circumstances, the
professional CPA

May issue the standard review report with no mention of a scope limitation
Should refuse to issue a review report but not ordinarily refuse to issue a compilation
report Should ordinarily refuse to issue either a review of compilation report
Should mention the scope limitation in the review report
Ans.
Should ordinarily refuse to issue either a review of compilation report

Negative assurance may be expressed when an accountant is requested to report

agreed-upon procedures to specified
1) Elements of a Financial Statement
2) Accounts of a Financial Statement

1) Yes 2) Yes
1) Yes 2) No
1) No 2) No
1) No 2) Yes
Ans.
1) No 2) No

Ethical principles governing compilation of financial statements include

1) Independence
2) Competence
3) Professional behaviors

1) Yes 2) Yes 3) Yes

1) Yes 2) Yes 3) No
1) Yes 2) No 3) No
1) No 2) Yes 3) Yes
Ans.

1) No 2) Yes 3) Yes
When the CPA is not independent with respect to a compilation client, the CPA must

Not acceptable the engagement

Include a separate paragraph in the report stating the lack of independence.
Change the engagement to a review engagement.
Issue a disclaimer
Ans.
Include a separate paragraph in the report stating the lack of independence.

When performing a compilation engagement, the accountant is required to

Assess internal controls.

Make inquiries of management to assess the reliability and completeness of the

information provided.

Verify matters and explanations.

Obtain a general knowledge of the business and operations of the entity.

Ans.
Obtain a general knowledge of the business and operations of the entity.

Philippine Standards on Related Services establish standards and procedures for which of the
following engagements?

Assisting in adjusting the books of account for a partnership.

Reviewing interim financial data required to be filed with the SEC.
Processing financial data for clients of other accounting firms.
Compiling an individual’s personal financial statement to be used to obtain a mortgage.
Ans.
Compiling an individual’s personal financial statement to be used to obtain a mortgage.

Which of the following procedures does an accountant in a compilation engagement of

a nonpublic entity ordinarily perform?

Reading the financial statements to consider whether they are free of obvious mistakes in the
application of accounting principles

Obtaining written representations from management indicating that the compiled financial
statements will not be used to obtain credit

Making inquiries of management concerning actions taken at meetings of the stockholders and
the board of directors
Applying analytical procedures designed to corroborate management's assertions that are
embodied in the financial statement components
Ans.
Reading the financial statements to consider whether they are free of obvious mistakes in the
application of accounting principles

Which of the following representations does an accountant make implicitly when issuing the
standard report for the compilation of a nonpublic entity’s financial statements?

The accountant is independent with respect to the entity

The financial statements have not been audited
A compilation consists principally of inquiries and analytical procedures
The accountant does not express any assurance on the financial statements
Ans.
The accountant is independent with respect to the entity

A CPA who is not independent may issue a?

Review report
Special report
Report expressing a qualified opinion
Compilation report
Ans.
Compilation report

During a compilation of a non-public entity's financial statements, an accountant would be least

likely to?

Omit substantially all of the disclosures required by generally accepted accounting principles.

Issue a compilation report on one or more, but not all, of the basic financial statements.

Perform analytical procedures designed to identify relationships that appear to be unusual

Read the compiled financial statements and consider whether they appear to include adequate
disclosure.
Ans.
Perform analytical procedures designed to identify relationships that appear to be unusual

When a professional CPA is not independent of a client and is requested to perform a compilation of its
financial statements, the professional CPA

Is precluded from accepting the engagement

May accept the engagement and need not disclose the lack of independence

May accept the engagement and should disclose the lack of independence, but not the reason for the lack
of independence
Ans.
May accept the engagement and should disclose the lack of independence, but not the reason for the lack
of independence

Which of the following statement is not true about the reports provided by a CPA?

In the audit engagement, the auditor provides high level of assurance that the financial
information is free of material misstatement

In a review engagement, the CPA’s moderate assurance is expressed in the form of negative
assurance For agreed-upon procedures, the CPA provides a report on factual findings and no
assurance is expressed.

In a compilation engagement, no assurance is expressed and the users of financial information do

not derive any benefit from the CPA’s involvement
Ans.
In a compilation engagement, no assurance is expressed and the users of financial information do
not derive any benefit from the CPA’s involvement

Which of the following is not a primary category of attestation report?

Compilation report

Review report

Audit report

Special audit report based on a basis of accounting other than generally accepted accounting
principles
Ans.
Compilation report

In which of the following reports should an accountant not express negative or limited
assurance?

A standard review report on financial statements of a nonpublic entity

A standard compilation report on financial statements of a nonpublic entity

A standard comfort letter on financial information included in a registration statement of a public

entity

A standard review report on interim financial statements of a public entity

Ans.
A standard compilation report on financial statements of a nonpublic entity

Which of the following services, if any, may a practitioner who is not independent provide?
Compilations but not reviews.
Reviews but not compilations.
Reviews but not financial statement audits.
Agreed-upon procedures but not compilations.
Ans.
Compilations but not reviews.

A professional CPA’s compilation report should be dated as of the date of

Completion of field work

Completion of the compilation
Transmittal of the compilation report
The latest subsequent event referred to in the notes to the financial statements
Ans.
Completion of the compilation

Which of the following procedures is ordinarily performed by an accountant in a compilation

engagement of a nonpublic entity?

Reading the financial statements to consider whether they are free of obvious mistakes in the
application of accounting principles.

Obtaining written representations from management indicating that the compiled financial
statements will not be used to obtain credit.

Making inquiries of management concerning actions taken at meetings of the stockholders and
the board of directors.

Applying analytical procedures designed to corroborate management’s assertions that are

embodied in the financial statement components.
Ans.
Reading the financial statements to consider whether they are free of obvious mistakes in the
application of accounting principles.

An accountant’s compilation report should be dated as of the date of?

Completion of fieldwork
Completion of the compilation
Transmittal of the compilation report
The latest subsequent event referred to in the notes to the financial statements.
Ans.
Completion of the compilation

Incorrect regarding compilation engagement

The accountant needs to read the compiled financial information and consider obvious
misstatements

Though no audit is performed, users of the information derive some benefit out of the
report

Inquiries of management should be made to assess the reliability and completeness of the
information provided

The accountant needs to obtain a general knowledge of the business and operations of the
entity
Ans.
Inquiries of management should be made to assess the reliability and completeness of the
information provided

A report on factual findings is the end product of the auditor when performing

Examination
Audit
Review
Agreed-upon procedures
Ans.
Agreed-upon procedures

Independence is not a requirement for which of the following engagements?

1) Compilation
2) Review
3) Agreed-upon Procedures
1) No 2) Yes 3) No
1) No 2) No 3) No
1) Yes 2) No 3) Yes
1) Yes 2) Yes 3) Yes
Ans.
1) Yes 2) No 3) Yes

An accountant may accept an engagement to apply agreed-upon procedures to prospective

financial statements provided that

Use of the report is restricted to the specified parties

The prospective financial statements are also examined

Responsibility for the adequacy of the procedures performed is taken by the accountant
Negative assurance is expressed on the prospective financial statements taken as a whole
Ans.
Use of the report is restricted to the specified parties

Objective of an AUP engagement (PSRSs)

For the auditor to carry out procedures of an audit nature to which the auditor and the entity and
any appropriate third parties have agreed and to report on factual findings

To enable the auditor to express an opinion whether the financial statements are prepared, in all
material respects, in accordance with Philippine Financial Reporting Standards

To enable an auditor to state whether, on the basis of procedures which do not provide all the
evidence that would be required in an audit, anything has come to the auditor’s attention that
causes the auditor to believe that the financial statements are not prepared, in all material
respects, in accordance with Philippine Financial Reporting Standards

For the auditor to use accounting expertise, as opposed to auditing expertise, to collect, classify
and summarize financial information
Ans.
For the auditor to carry out procedures of an audit nature to which the auditor and the entity and
any appropriate third parties have agreed and to report on factual findings

The objective of an agreed upon- procedures engagement is for the auditor to.

Carry out procedures of an audit nature to which the auditor and the entity and any appropriate
third parties have agrees and to report on factual findings.

Carry out procedures of a review nature to which the auditor and the entity and any appropriate
third parties have agreed and to report on factual findings.

Carry out procedures of a review nature and to express limited assurance based on those agreed
procedures.

Carry out procedures of an audit nature and is express limited assurance.

Ans.
Carry out procedures of an audit nature to which the auditor and the entity and any appropriate
third parties have agrees and to report on factual findings.

Which of the following is incorrect about agreed-upon procedures engagement?

An engagement to perform agreed-upon procedures may involve the auditor in

performing certain procedures concerning individual items of financial data
Users of the agreed-upon procedures report assess for themselves the procedures and
findings reported by the auditor and draw their conclusion from the auditor's work

The auditor should be independent of the financial data or financial statements where
agreed procedures have to be applied

The report is restricted to those parties that have agreed to the procedures to be performed
Ans.
The auditor should be independent of the financial data or financial statements where agreed
procedures have to be applied

A CPA's report on agreed-upon procedures related to management's assertion about an

entity's compliance with specified requirements should contain:

A statement of limitations on the use of the report

An opinion about whether management's assertion is fairly stated
Negative assurance that control risk has not been assessed
An acknowledgment of responsibility for the sufficiency of the procedures
Ans.
A statement of limitations on the use of the report

An accountant may accept an engagement to apply agreed-upon procedures that are not sufficient
to express an opinion on one or more specified accounts or items of a financial statement
provided that

The accountant’s report does not enumerate the procedures performed.

The financial statements are prepared in accordance with a comprehensive basis of accounting
other than generally accepted accounting principles.

Distribution of the accountant’s report is restricted.

The accountant is also the entity’s continuing auditor.

Ans.
Distribution of the accountant’s report is restricted.

A CPA may accept an engagement to apply agreed-upon procedures on specified element

of financial statements provided

An audit of the financial statements taken as a whole is also performed

The CPA will issue an opinion on the specified element
An examination of the specified element is also conducted
The client takes full responsibility for the procedures to be performed
Ans.
The client takes full responsibility for the procedures to be performed

Level of assurance in an AUP engagement

High
Reasonable
Limited
None
Ans.
None

Engagement to apply agreed-upon procedures on certain accounts within a financial

statement may be accepted provided

The CPA has expressed opinion on the financial statements taken as a whole

The CPA takes full responsibility for the adequacy of the procedures to be performed

The CPA provides only a limited assurance about the reliability of the financial
statements

The distribution of the report is limited only to specified parties involved

Ans.
The distribution of the report is limited only to specified parties involved

Matters to be agreed in an agreed-upon procedures engagement include the following,

except:

Stated purpose of the engagement

Limitations on distribution of the report of factual findings
Anticipated form of the report and the level of assurance to be provided
Nature, timing and extent of the specific procedures to be applied
Ans.
Anticipated form of the report and the level of assurance to be provided

What level of assurance does an auditor provide an engagement to perform agreed-upon

procedures?

High but not absolute assurance

Limited assurance
Moderate assurance
No assurance
Ans.
No assurance
Matters to be agreed in agreed in an agreed- upon procedures engagement include the following,
except:

Stated purpose of the engagement

Limitations on distribution of the report of factual findings.
Anticipated form of the report and the level of assurance to be provided.
Nature, timing and extent of the specific procedures to be applied.
Ans.
Anticipated form of the report and the level of assurance to be provided.

Which of the following is not a distinction between a compilation and a review?

The CPA must be independent as a prerequisite to performing a review engagement, but need not
be independent to perform a compilation

In conducting a review, the CPA must obtain an understanding of the client's internal control
system; but this is not necessary for a compilation engagement

Analytical procedures are applied in a review engagement, but are not required in a compilation.

A compilation offers no assurance, whereas a review provides limited assurance.

Ans.
In conducting a review, the CPA must obtain an understanding of the client's internal control
system; but this is not necessary for a compilation engagement

Incorrect regarding an AUP engagement

The auditor carries out procedures of an audit nature and the procedures have been agreed-upon
by the auditor, the entity and any appropriate third party

A written report is required and the distribution of the report is limited/restricted only to the
parties who have agreed upon the procedures to be performed

The auditor provides no assurance on the report on factual findings

Professional competence, due care and independence are required in the execution of the
procedures
Ans.
Professional competence, due care and independence are required in the execution of the
procedures