[Anonymous]

NINJA Question –

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

A.

the objective of a review is to assist management in presenting financial information in the form of financial statements.

B.

we are not required to perform any procedures to verify the accuracy or completeness of the information.

C.

the accountant does express an opinion or any other form of assurance on the financial statements.

Incorrect D.

the accountant did not obtain an understanding of the entity’s internal control or assess control risk.

The correct answer is B… however…

We have reviewed the accompanying balance sheet of Company XYZ as of December 31, 20X1, 20X2 and 20X0, and the related statements of operations, retained earnings, and cash flows for the years then ended. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

how is B correct when the review letter states that analytical procedures are preformed? It almost seems if this questions confused the word review with compilation…but even so, the the answer would be C….any thoughts? maybe i’m wrong

[Anonymous]

Analytical Procedures wouldn't “verify accuracy or completeness.” That's not really their purpose. They are very broad measures to obtain a basic understanding of the business environment and/or look for large irregularities.

If you apply AP and look at some ratios and relationships, that doesn't really tell you whether the information is accurate or complete. Maybe inventory turnover looks high, but if/when you investigate the matter you find that the reported information isn't inaccurate or incomplete.

[Anonymous]

Right…but in a review only inquiry and analytical procedures are used, not test of transactions…so in the letter it would state that those procedures were used, which I included a copy of a standard review report below the question… cant figure out why the answer is incorrect

[Anonymous]

Yes. My point was that AP's don't verify accuracy or completeness. Neither do inquiries. You said that B is incorrect because AP's are performed.

I don't see the wording of answer B in the review report you provided, but I don't see answer D in it either. Answer B would still be my choice.

[Anonymous]

B is incorrect because in a standard review report it explicitly states that procedures are used, answer B is to the total contrary

[Anonymous]

It says analytical procedures are used, it DOES NOT say any procedures are used to verify accuracy or completeness.

[Anonymous]

There may very well be a problem with this question, I don't disagree with you there. A and C are clearly wrong. But I can't find the wording of either B or D in any standard review report.

Perhaps this question is using SSARS 19, and hasn't been updated to SSARS 21.

[Anonymous]

Damn…I didn't read that well enough, lol, looks as if you'll beat my score when we both go for audit later this month

[Author]

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