AICPA AICPA Certifications CPA-TEST Questions & Answers

• Question 1091:

  Which of the following is a professional engagement that a CPA may perform to provide assurance on a system's reliability?

  A. MAS AssurAbility.

  B. CPA WebMaster.

  C. MAS AttestSure.

  D. CPA SysTrust.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. A SysTrust engagement is an attest engagement that provides assurance on the

  reliability of any defined electronic system.

  Choice "a" is incorrect. There is no professional engagement by this name.

  Choice "b" is incorrect. There is no professional engagement by this name.

  Choice "c" is incorrect. There is no professional engagement by this name.

• Question 1092:

  When an accountant compiles a financial forecast, the accountant's report should include a(an):

  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.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. Whenever an accountant reports on prospective financial statements, the report

  should include a caveat that prospective results may not be achieved.

  Choice "a" is incorrect. A compilation report on a financial forecast does not include an Explanation: of the

  differences between a forecast and a projection.

  Choice "c" is incorrect. Whenever an accountant reports on prospective financial statements, the report

  should include a statement that the accountant assumes no responsibility to update the report for events

  and circumstances occurring after the date of the report.

  Choice "d" is incorrect. A compilation report on a financial forecast does not include a disclaimer of opinion

  on the reliability of the entity's internal controls.

• Question 1093:

  Which of the following professional services would be considered an attestation engagement?

  A. Advocating on behalf of a client about trust tax matters under review by the Internal Revenue Service.

  B. Providing financial analysis, planning, and capital acquisition services as a part-time, in-house controller.

  C. Advising management in the selection of a computer system to meet business needs.

  D. Preparing the income statement and balance sheet for one year in the future based on client expectations and predictions.

  Correct Answer: D

  Explanation: Choice "d" is correct. Preparing future financial statements constitutes a compilation of prospective financial statements, which is considered to be an attestation service. Choices "a" and "c" are incorrect. Attestation engagements specifically exclude advocacy services and consulting services. Choice "b" is incorrect. Attest engagements include those in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of another party, as well as engagements related to prospective financial statements. Performing the role of in-house controller part-time does not fit into any of these categories.

• Question 1094:

  Which of the following activities would most likely be considered an attestation engagement?

  A. Consulting with management representatives of a firm to provide advice.

  B. Issuing a report about a firm's compliance with laws and regulations.

  C. Advocating a client's position on tax matters that are being reviewed by the IRS.

  D. Preparing a client's tax returns.

  Correct Answer: B

  Explanation:

  Choice "b" is correct. Attest engagements may result in reports related to compliance with laws and

  regulations.

  Choices "a", "c", and "d" are incorrect. Attestation engagements specifically exclude consulting services,

  advocacy services, and return preparation.

• Question 1095:

  Prospective financial information presented in the format of historical financial statements that omit either gross profit or net income is deemed to be a:

  A. Partial presentation.

  B. Projected balance sheet.

  C. Financial forecast.

  D. Financial projection.

  Correct Answer: A

  Explanation: Choice "a" is correct. "Partial presentations" are presentations of prospective financial information which would not ordinarily be appropriate for general use because they omit one or more of these essential elements: (a) sales or gross revenue, (b) gross profit or cost of sales, (c) unusual or infrequently occurring items, (d) provision for income taxes, (e) discontinued operations or extraordinary items, (f) income from continuing operations, (g) net income, (h) earnings per share, and (i) significant changes in financial position. Choices "b", "c", and "d" are incorrect. Projected balance sheets, financial forecasts and financial projections are forms of prospective financial statements.

• Question 1096:

  When an accountant examines a financial forecast that fails to disclose several significant assumptions used to prepare the forecast, the accountant should describe the assumptions in the accountant's report and issue a (an):

  A. "Except for" qualified opinion.

  B. "Subject to" qualified opinion.

  C. Unqualified opinion with a separate explanatory paragraph.

  D. Adverse opinion.

  Correct Answer: D

  Explanation:

  Choice "d" is correct. When an accountant examines a financial forecast that fails to disclose significant

  assumptions used to prepare the forecast, the accountant should issue an adverse opinion.

  Choice "a" is incorrect. A qualified opinion might be appropriate when AICPA presentation guidelines are

  not followed, but would not be used when "several significant assumptions used to prepare the forecast"

  are not disclosed.

  Choice "b" is incorrect. "Subject to" is not acceptable wording for an accountant's report.

  Choice "c" is incorrect. An unqualified opinion is not acceptable when significant assumptions are not

  disclosed.

• Question 1097:

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

  A. Compilation of prospective financial statements.

  B. Compliance with the provisions of the Foreign Corrupt Practices Act.

  C. Results of performing a review of management's assertion.

  D. Audit of historical financial statements.

  Correct Answer: C

  Explanation: Choice "c" is correct. Negative assurance may be expressed when an accountant is requested to report on the results of performing a review of management's assertion. Choice "a" is incorrect. No assurance is provided in a compilation of prospective financial statements. Choice "b" is incorrect. Whether an entity is in compliance with the provisions of the Foreign Corrupt Practices Act is a legal determination. An accountant may perform an examination or an agreed-upon procedures engagement with respect to such compliance but may not perform a review, and therefore would not express negative assurance. Choice "d" is incorrect. When reporting on an audit of historical financial statements, negative assurance is not an appropriate reporting option. The auditor must either express an opinion (positive assurance) or disclaim an opinion (no assurance).

• Question 1098:

  Which of the following statements concerning prospective financial statements is correct?

  A. Only a financial forecast would normally be appropriate for limited use.

  B. Only a financial projection would normally be appropriate for general use.

  C. Any type of prospective financial statements would normally be appropriate for limited use.

  D. Any type of prospective financial statements would normally be appropriate for general use.

  Correct Answer: C

  Explanation:

  Choice "c" is correct. Any type of prospective financial statements (financial forecasts and financial

  projections) would normally be appropriate for limited use.

  Choice "a" is incorrect. Both financial forecasts and financial projections are appropriate for limited use.

  Choice "b" is incorrect. Financial projections are appropriate for limited use only - not for general use.

  Choice "d" is incorrect. Normally financial projections are not appropriate for general use, but financial

  forecasts are.

• Question 1099:

  Which of the following professional services would be considered an attest engagement?

  A. A management consulting engagement to provide EDP advice to a client.

  B. An engagement to report on management's discussion and analysis (MDandA).

  C. An income tax engagement to prepare federal and state tax returns.

  D. The compilation of financial statements from a client's accounting records.

  Correct Answer: B

  Explanation: Choice "b" is correct. An engagement to report on management's discussion and analysis (MDandA) would be considered an attest engagement, because the accountant is issuing an examination, review, or agreed-upon procedures report on another party's assertion. Choice "a" is incorrect. A management consulting engagement to provide EDP advice to a client is not considered to be an attest engagement, because the accountant is not issuing an examination, review, or agreed-upon procedures report on another party's assertion. Choice "c" is incorrect. An income tax engagement to prepare federal and state tax returns is not considered to be an attest engagement. Choice "d" is incorrect. The compilation of financial statements from a client's accounting records (a compilation engagement) is not considered to be an attest engagement. (Note that although a compilation of prospective financial statements is covered under Statements on Standards for Attestation Engagements, the question does not indicate that prospective financial statements are involved).

• Question 1100:

  An attest engagement is one in which a CPA is engaged to:

  A. Issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of another party.

  B. Provide tax advice or prepare a tax return based on financial information the CPA has not audited or reviewed.

  C. Testify as an expert witness in accounting, auditing, or tax matters, given certain stipulated facts.

  D. Assemble the financial statements of a nonissuer based on the assumptions of the entity's management without expressing any assurance.

  Correct Answer: A

  Explanation:

  Choice "a" is correct. An attest engagement is one in which a CPA is engaged to issue an examination, a

  review, or an agreed-upon procedures report on subject matter, or on an assertion about subject matter,

  that is the responsibility of another party.

  Choice "b" is incorrect. Providing tax advice or preparing a tax return based upon financial information, the

  CPA has not audited or reviewed does not require the CPA to "attest" to anything.

  Choice "c" is incorrect. Testifying as an expert witness in accounting, auditing, or tax matters given certain

  stipulated facts is not considered to be an attestation engagement.

  Choice "d" is incorrect. Assembling the financial statements of a nonissuer based on the assumptions of

  the entity's management without expressing any assurance is a compilation engagement that falls under

  SSARS and no attestation is provided.