PLEASE CORRECT ANSWERS ONLY

Special Purpose Financial Statements

1. Special purpose financial statements refer to financial statements prepared in accordance with a special purpose framework. Special purpose framework is a financial reporting framework designed to meet the financial information needs of specific users. Examples of special purpose frameworks include

a. b. c. d.

Tax basis of accounting for financial statements accompanying a tax return.

Yes

Yes

Yes

No

Cash basis of accounting for cash flow information that an entity may be requested to prepare for creditors.

Yes

Yes

Yes

Yes

Financial reporting provisions established by a regulator to meet the requirements of that regulator.

Yes

Yes

No

Yes

Financial reporting provisions of a contract, such as a bond or a project grant.

Yes

Yes

No

No

Generally accepted accounting principles for financial statements filed with SEC.

Yes

No

Yes

Yes

2. In the case of an auditor's report on special purpose financial statements, the auditor's report shall

a. Describe the purpose of the financial statements and, if necessary, the intended users, or refer to a note in the financial statements.

b. Refer to management's responsibility for determining whether the applicable financial reporting framework is acceptable, if management chooses the financial reporting framework.

c. Include an Emphasis of Matter paragraph alerting users of the auditor's report that the financial statements are prepared in accordance with a special purpose framework and that, as a result, the financial statements may not be suitable for another purpose.

d. All of the above.

3. Which of the following opinions would be most appropriate if an audited entity uses a basis of accounting other than GAAP to comply with regulatory requirements, and this basis of accounting is fully disclosed in the footnotes to the financial statements?

a. Unqualified opinion using standard audit report wording

b. Unqualified opinion using modified audit report wording

c. Unqualified opinion but "subject to" the use of the different accounting basis

d. Qualified opinion because the financial statements are not in accordance with GAAP

Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement

4. A CPA is permitted to accept a separate engagement (not in conjunction with an audit of financial statements) to audit an entity's schedule of

Accounts receivable Royalties

a. Yes Yes

b. Yes No

c. No Yes

d. No No

5. In the audit of a single financial statement or of a specific element of financial statements but the auditor is not also engaged to audit the entity's complete set of financial statements, the auditor shall

a. Not accept the engagement.

b. Accept the engagement.

c. Determine whether it is practicable to accept the engagement.

d. Propose another type of engagement.

6. An auditor is engaged to report on selected financial data that are included in a client-prepared document containing audited financial statements. Under these circumstances, the report on the selected data should

a. Be limited to data derived from the audited financial statements.

b. Be distributed only to senior management and the board of directors.

c. State that the presentation is a comprehensive basis of accounting other than GAAP.

d. Indicate that the data are not fairly stated in all material respects.

7. If the auditor undertakes an engagement to report on a single financial statement or on a specific element of a financial statement in conjunction with an engagement to audit the entity's complete set of financial statements, the auditor shall

a. Express a single opinion for both engagements.

b. Express a separate opinion for each engagement.

c. Express an opinion on the complete set of financial statements only.

d. Any of the above.

8. The following statements relate to the requirements of PSA 805. Which is false?

a. The audited single financial statement or the audited specific element of a financial statement may be published together with the entity's audited complete set of financial statements.

b. If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity's complete set of financial statements as a whole, PSA 705 (Revised) does not permit the auditor to include in the same auditor's report an unmodified opinion on a single financial statement that forms part of those financial statements or on a specific element of those financial statements.

c. If the auditor concludes that it is necessary to express an adverse opinion or disclaim an opinion on the entity's complete set of financial statements as a whole but, in the context of a separate audit of a specific element of those financial statements, the auditor nevertheless considers it appropriate to express an unmodified opinion on that element, if certain conditions are met.

d. The auditor shall not express an unmodified opinion on a single financial statement of a complete set of financial statements if the auditor has expressed an adverse opinion or disclaimed an opinion on the complete set of financial statements as a whole, except when the auditor's report on the single financial statement is not published together with the auditor's report containing the adverse opinion or disclaimer of opinion.

Summary Financial Statements

9. An auditor may report on condensed financial statements that are derived from complete financial statements if the

a. Condensed financial statements are distributed to stockholders along with the complete financial statements.

b. Auditor described the additional procedures performed on the condensed financial statements.

c. Auditor indicates whether the information in the condensed financial statements is fairly stated in all material respects in relation to the complete financial statements from which it has been derived.

d. Condensed financial statements are presented in comparative form with the prior year's condensed financial statements.

10. Hardy, CPA, is asked to express an opinion on Gold, Inc. summarized financial information. Hardy may accept this engagement only if

a. Hardy also audits Gold's complete financial statements.

b. Gold's financial statements are prepared in conformity with GAAP.

c. Hardy's report is available for distribution to Gold's other employees.

d. Field owns controlling interest in Gold.