AU1_Q2 - 1 Question(TCO E(CPA-06366.B When an accountant is...

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1. Question : (TCO E) (CPA-06366.B) When an accountant is not independent with respect to an entity, which of the following types of compilation reports may be issued? Student Answer: The standard compilation report may be issued, regardless of independence. A compilation report with negative assurance may be issued. A compilation report with special wording that notes the accountant's lack of independence may be issued. A compilation report may be issued if the engagement is upgraded to a review. Instructor Explanation: Choice "c" is correct. An accountant who is not independent with respect to an entity may compile financial statements for such an entity and issue a report. However, the last paragraph of the report should disclose this lack of independence. The accountant is permitted, but not required, to disclose the reason(s) for the lack of independence. Question 2. Question : (TCO E) (CPA-05719.B) A CPA is engaged to examine an entity's financial forecast. The CPA believes that several significant assumptions do not provide a reasonable basis for the forecast. Under these circumstances, the CPA should issue a(an): Student Answer: Adverse opinion. Pro forma opinion. Qualified opinion. Unmodified opinion with an explanatory paragraph. Instructor Explanation: Choice "a" is correct. If one or more of the significant assumptions do not provide a reasonable basis for the financial statements, an adverse opinion would be issued.
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Question 3. Question : (TCO E) (CPA-05745.B) A practitioner has been engaged to apply agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements (SSAE) to prospective financial statements. Which of the following conditions must be met for the practitioner to perform the engagement? Student Answer: The prospective financial statement includes a summary of significant accounting policies.
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