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3 4 . This question consists of 1 3 items pertaining to possible deficiencies in an accountant s review report. Indicate whether each statement about
This question consists of items pertaining to possible deficiencies in an accountants review report. Indicate whether each statement about a possible deficiency is correct C or incorrect I in the space provided.
Jordan & Stone, CPAs, audited the financial statements of Tech Company, a nonpublic entity, for the year ended December and expressed an unmodified opinion. For the year ended December Tech issued comparative financial statements, and Kent, an assistant on the engagement, drafted the following accountants review report. Land, the engagement supervisor, decided not to reissue the prior years auditors report but instructed Kent to include a separate paragraph in the current years review report describing the responsibility assumed for the prior years audited financial statements. This is an appropriate reporting procedure.
Land reviewed Kents draft and indicated in the supervisors review notes shown following the accountants review report that there were several deficiencies in Kents draft.
Accountants Review Report
We have reviewed the accompanying balance sheet of Tech Company as of December and and the related statements of income, retained earnings, and cash flows for the year then ended. A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.
Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements. Because of the inherent limitations of a review engagement, this report is intended for the information of management and should not be used for any other purpose.
The financial statements for the year ended December were audited by us and our report was dated March We have no responsibility for updating that report for events and circumstances occurring after that date.
Required:
Items through represent deficiencies noted by Land. For each deficiency, indicate whether Land is correct C or incorrect I in the criticism of Kents draft.
AICPA adapted
Supervisors Review Notes
There should be no reference to the prior years audited financial statements in the first introductory paragraph.
All the currentyear basis financial statements are not properly identified in the first introductory paragraph.
There should be no reference to the American Institute of Certified Public Accountants in the third accountant responsibility paragraph.
There should be no mention of managements responsibility for internal control in the second management responsibility paragraph.
There should be no comparison of the scope of a review to an audit in the first introductory paragraph.
Negative assurances should be expressed on the current years financial statements in the third accountant responsibility paragraph.
There should be a statement that no opinion us expressed on the current years financial statements in the first introductory paragraph.
There should be a reference to conformity with generally accepted accounting principles in the fourth paragraph.
There should be no restriction on the distribution of the accountants review report in the fourth paragraph.
There should be no reference to material modifications in the fourth paragraph.
There should be an indication of the type of opinion expressed on the prior years audited financial statements in the fifth separate paragraph.
There should be an indication that no auditing procedures were performed after the date of the report on the prior years financial statements in the fifth separate paragraph.
There should be no reference to updating the prior years auditors report for events and circumstances occurring after that date in the fifth separate paragraph.
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