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– The NINJAs are giving away a NINJA MCQ section of the winner’s choice.
– To enter the drawing, simply post an answer to each question (you don’t have to get them correct to be picked).
– Three (3) winners will be randomly selected from this thread
– You can gift your winning section to someone else (i.e. people who already passed can participate)
– Deadline to answer/enter: Friday – 4pm Eastern
Update: This giveaway is closed.
1. An accountant who accepts an engagement to compile a financial projection most likely would make the client aware that the:
A. projection may not be included in a document with audited historical financial statements.
B. accountant’s responsibility to update the projection for future events and circumstances is limited to one year.
C. projection omits all hypothetical assumptions and presents the most likely future financial position.
D. engagement does not include an evaluation of the support for the assumptions underlying the projection.
Answer: D
The practitioner’s standard report on a compilation of prospective financial statements should include a statement that a compilation is limited in scope and does not enable the practitioner to express an opinion or any other form of assurance on the prospective financial statements or the assumptions.
The projection may be included in a document with audited historical financial statements. The practitioner does not have a responsibility to update the projection for future events and circumstances limited to one year. A financial forecast, not a projection, omits all hypothetical assumptions and presents the most likely future financial position.
2. Which of the following statements regarding the going concern assumption is correct?
A. Continuation of an entity as a going concern is assumed in financial reporting in the absence of significant information to the contrary.
B. The going concern concept reflects the entity’s inability to meet its obligations.
C. The auditor is responsible for predicting future conditions or events in assessing the likelihood that the entity will continue as a going concern.
D. The auditor must apply audit procedures designed solely to identify conditions and events that indicate there could be substantial doubt about the entity’s ability to continue as a going concern.
Answer: A
The statement “Continuation of an entity as a going concern is assumed in financial reporting in the absence of significant information to the contrary” is correct (AU-C 570.02). The auditor makes a decision based on relevant conditions and events that exist at, or have occurred prior to, the auditor’s report.
3. Which of the following factors would least likely affect the extent of the auditor’s consideration of the client’s internal controls?
A. The amount of time budgeted to complete the engagement
B. The size and complexity of the client
C. The nature of specific relevant controls
D. The auditor’s prior experience with client operations
Answer: A
In assessing the risk of material misstatement, the auditor must gain an understanding of the entity and its environment overall, which includes the:
• industry, regulatory, and other external factors,
• nature of the entity (size and complexity of the client),
• objectives and strategies and related business risks,
• measurement and review of the entity’s financial performance, and
• internal control.
The auditor examines the five interrelated components of internal control:
1. Control environment
2. Entity’s risk assessment
3. Information and communication systems
4. Control activities (the nature of specific relevant controls)
5. Monitoring
The auditor would also take into account prior experience with client operations to guide current-year assessments of risk.
The amount of time budgeted to complete the engagement should have no bearing on the consideration of the client’s internal controls.
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