Chapter 21 - Chapter 21 - Assurance, Attestation, and...

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Chapter 21 - Assurance, Attestation, and Internal Auditing Services 21-1 CHAPTER 21 ASSURANCE, ATTESTATION, AND INTERNAL AUDITING SERVICES Answers to Multiple-Choice Questions 21-15 d 21-23 d 21-16 b 21-24 c 21-17 d 21-25 a 21-18 c 21-26 c 21-19 b 21-27 b 21-20 a 21-28 c 21-21 c 21-29 d 21-22 b Solutions to Problems 21-30 A compilation is defined as presenting, in the form of financial statements, information that is the representation of management or owners without undertaking to express any assurance on the statements. A review is defined as the performance of inquiry and analytical procedures to provide the accountant with a reasonable basis for expressing limited assurance that no material modifications should be made to the statements in order for them to conform to GAAP or another comprehensive basis of accounting. An audit is defined as a process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria. An audit provides the most assurance, followed by a review, and finally a compilation. 21-31 a. A compilation of prospective financial statements involves: Assembling, to the extent necessary, the prospective financial statements based on the responsible party's assumptions. Performing the required compilation procedures, which include reading the prospective financial statements with their summaries of significant assumptions and accounting policies and considering whether they appear to be (1) presented in conformity with the guidelines shown in Table 21-3 in the text and (2) not obviously inappropriate. Issuing a compilation report. b. Independent Accountant's Report Board of Directors Cheaney Rental Properties We have compiled the accompanying forecasted balance sheet, statements of
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Chapter 21 - Assurance, Attestation, and Internal Auditing Services 21-2 income, retained earnings, and cash flows of Cheaney Rental Properties as of December 31, 2009, and for the year then ending, in accordance with standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting, in the form of a forecast, information that is the representation of management and does not include evaluation of the support for the assumptions underlying the forecast. We have not examined the forecast and, accordingly, do not express an opinion or any other form of assurance on the accompanying statements or assumptions. Furthermore, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date
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This note was uploaded on 10/16/2011 for the course AIM 6334 taught by Professor Chrits during the Spring '11 term at University of Texas.

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Chapter 21 - Chapter 21 - Assurance, Attestation, and...

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