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Exam AUD topic 1 question 256 discussion

Actual exam question from AICPA's AUD
Question #: 256
Topic #: 1
[All AUD Questions]

The standard report issued by an accountant after reviewing the financial statements of a nonissuer should state that:

  • A. A review is limited to presenting in the form of financial statements information that is the representation of management.
  • B. A review consists of inquiries of company personnel and analytical procedures applied to financial data.
  • C. The accountant does not express an opinion or any other form of assurance on the financial statements.
  • D. The accountant did not obtain an understanding of the entity's internal control or assess control risk.
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Suggested Answer: B 🗳️
Choice "B" is correct. The standard report issued by an accountant after reviewing the financial statements of a nonissuer states that a review consists of inquiries of company personnel and analytical procedures applied to financial data.
Choice "A" is incorrect. A compilation report uses language similar to this, stating that a compilation is limited to presenting, in the form of financial statements, information that is the representation of management.
Choice "C" is incorrect. A compilation report uses language similar to this, stating that the accountant does not express an opinion or any other form of assurance on the financial statements. A review provides negative assurance.
Choice "D" is incorrect. While it is true that a review of the financial statements of a nonpublic entity does not require the accountant to obtain an understanding of the entity's internal control or assess control risk, the report does not explicitly state this.

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