CORRECT ANSWERS ONLY. I WILL RATE DISLIKE TO THOSE WHO WILL GIVE WRONG ANSWER.

Review of Historical Financial Statements

1. The objective of a review engagement

a. Is to enable the auditor to express an opinion whether the financial statements are prepared in all material respects, in accordance with an identified financial reporting framework

b. Is to enable the practitioner 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 practitioner's attention that causes the practitioner to believe that the financial statements are not prepared in all material respects, in accordance with an identified financial reporting framework.

c. Is to carry out those 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.

d. Is to use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial information.

2. A review engagement differs in scope as compared to an audit due to:

a. the subject matter of the service

b. the quantity and type of evidence obtained

c. ethical requirements with respect to independence

d. the users of the financial statements

3. Which of the following is least likely to be a procedure included in an accountant's review of interim financial information of a public entity?

a. Compare disaggregated revenue data by month to that of the previous interim period.

b. Read available minutes of meetings of stockholders.

c. Observe counting of physical inventory.

d. Inquire of management concerning significant journal entries and other adjustments.

4. The Review Report include the following:

a. b. c. d.

Reference to PSRE Yes No Yes No

A statement that a review is limited to inquiries and analytical procedures

Yes

Yes

Yes

No

Specific description of procedures that have been performed by the auditor

No

Yes

Yes

Yes

A statement that an audit has not been performed

Yes

Yes

Yes

Yes

5. In a review engagement, if there has been a material scope limitation, the auditor should describe the limitation in the review report and either

a. Express a qualification of the negative assurance or not provide any assurance.

b. Express a qualification of the negative assurance provided or issue an adverse statement that the financial statement are not presented fairly.

c. Express an adverse statement that the financial statements are not presented fairly or the auditor not issue any assurance.

d. Not modify the negative assurance or not issue an assurance.

6. A modification of the CPA's report on a review of the interim financial statements of a publicly held company would be necessitated by which of the following?

a. An uncertainty.

b. Lack of consistency.

c. Reference to another accountant.

d. Inadequate disclosure.

Examination of Prospective Financial Information

7. Financial information based on assumptions about events that may occur in the future and possible actions by an entity.

a. Historical financial information

b. Prospective financial information

c. Pro forma financial information

d. Budgeted financial information

8. What is meant by a financial forecast?

a. A prospective financial statement that predicts an entity's expected financial position, results of operations, and cash flows

b. A prospective financial statement that presents an entity's expected financial position, results of operations, and cash flows

c. A prospective financial statement that predicts an entity's expected financial position, results of operations, and cash flows based on one or more hypothetical assumptions

d. A prospective financial statement that presents an entity's expected financial position, results of operations, and cash flows based on one or more hypothetical assumptions

9. Given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, an entity's expected financial position, results of operations, and cash flows. Such prospective financial statements are known as

a. Pro forma financial statements

b. Financial projections

c. Partial presentations

d. Financial forecasts

10. A financial forecast consists of prospective financial statements that present an entity's expected financial position, results of operations, and cash flows. A forecast

a. Is based on the most conservative estimates.

b. Presents estimates given one or more hypothetical assumptions.

c. Unlike a projection, may contain a range.

d. Is based on assumptions reflecting conditions expected to exist and courses of action expected to be taken.