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Unformatted text preview: Chapter 19 - Additional Assurance Services: Historical Financial Information CHAPTER 19 Additional Assurance Services: Historical Financial Information Review Questions 19-1 This statement is incorrect. An audit can be a significant expense to a small company. The audit fee must be justified by the benefits received from the audit. The needs of the users of the financial statements of many small nonpublic companies are satisfied by financial statements that have been reviewed or compiled by the CPAs. 19-2 The term auditor is most frequently used when discussing CPAs' role of attesting to the annual historical financial statements and when they are performing an operational audit. The term accountant refers to CPAs when they are performing other attestation services and accounting services. Thus, while auditors do perform the attestation service of audits, the statement that auditors perform attestation services and accountants perform accounting services is incomplete. 19-3 In communications with clients, CPAs should refer to themselves as auditors only when the service they are rendering is an audit performed in accordance with generally accepted auditing standards. When rendering other services, they should refer to themselves as "accountants," or as "CPAs." The purpose of this distinction is to avoid leading the client to believe that the CPAs are acting as auditors when they actually are rendering other attestation or accounting services. 19-4 Yes. Auditors may express opinions on financial statements that are presented in accordance with the cash basis or any other comprehensive basis of accounting. Such auditors' reports are a type of special report and must state that the financial statements are not presented in conformity with generally accepted accounting principles, as well as indicate the accounting basis used. 19-5 Neither. While the performance of an agreed-upon procedures engagement is considered an attestation service (as is an audit), the two attestation services differ. Because agreed-upon procedures engagements are attestation services they are not considered accounting services. 19-6 Engagements to perform agreed-upon procedures are restricted because the specified parties have agreed to the nature and extent of the procedures to be performed to meet their needs. The nature and extent may not be appropriate for other parties. 19- 1 Chapter 19 - Additional Assurance Services: Historical Financial Information 19-7 When a report is for use primarily outside the United States the auditors may issue (1) a U.S. report, modified as appropriate to reflect the principles of the other country, or (2) the report of the other country, if the auditors understand the related responsibilities....
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- Spring '11