Exam CPA Auditing and Attestation topic 1 question 102 discussion

Actual exam question from Test Prep's CPA Auditing and Attestation

Question #: 102
Topic #: 1

[All CPA Auditing and Attestation Questions]

In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant's report should include a statement that:

A. Any difference in the facts, circumstances, or assumptions presented may change the report.
B. The engagement was performed in accordance with Statements on Standards for Consulting Services.
C. The guidance provided is for management use only and may not be communicated to the prior or continuing auditors.
D. Nothing came to the accountant's attention that caused the accountant to believe that the accounting principles violated GAAP.

Show Suggested Answer

Suggested Answer: A 🗳️
Choice "a" is correct. The accountant's report on the application of accounting principles should include a statement that should any facts or circumstances differ from those presented to the accountant, the accountant's conclusions may change.
Choice "b" is incorrect. The report should state that the engagement was performed in accordance with "AICPA Standards," not statements on Standards for
Consulting Services.
Choice "c" is incorrect. The report's use is restricted to "specified parties," which may include parties other than management (e.g., the board of directors). Also, the preparers of the financial statements and the reporting accountant should consult with the entity's continuing accountant.
Choice "d" is incorrect. The report does not provide negative assurance with respect to GAAP; rather, it may describe the appropriate accounting principles to be applied.

by gemazyni at April 5, 2025, 5:45 p.m.

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