Your client, EKB, Inc., prepared the following schedule for long-term debt for the audit of financial statements for the year ended December 31, 2019: Notes Payable Description Interest Rate Due Date 1/1/19 Beginning Balance Additions Payments 12/31/19 Ending Balance Mortgage Payable 6.25% 2025 $ 1,125,000 – $ 200,000 $ 925,000 Unsecured Notes Payable 6.00% 2027 […]
Nilsson, CPA, is conducting the audit of Ellison Waste Management Corporation. In addition, a supplemental negative assurance report is required for a major mortgage holder. The supplemental report concerns indenture agreements to keep the client from defaulting on the mortgage. Total assets are $14 million, and the mortgage is for $4 million. The major provisions […]
The following are miscellaneous questions about compilation and review services. Choose the best response. a. Which of the following best describes the responsibility of the CPA in performing compilation services for a company? (1) The CPA has to satisfy only himself or herself that the financial statements were prepared in conformity with accounting standards. (2) […]
What is meant by the term level of assurance? How does the level of as- surance differ for an audit of historical financial statements, a review, a compilation, and a preparation engagement? 25-2 (OBJECTIVE 25-1) What is negative assurance? Why is it used in a review engagement report? 25-3 (OBJECTIVE 25-1) What should auditors do […]
1. Distinguish among engagements to prepare, compile, and review financial statements. What is the level of assurance for each? 2. What procedures should the auditor use to obtain the information necessary to give the level of assurance required of reviews of financial statements?
As a part of the audit of Ren Gold Manufacturing Company, a nonpublic company, management requests basic financial statements and separately, the same basic financial statements accompanied by additional information. Management informs you that the intent is to use the basic financial statements for bankers, other creditors, and the two owners who are not involved […]
The following questions concern information accompanying basic financial statements. Choose the best response. a. The Form 10-K filed by management of a public company includes a section on management’s discussion and analysis (MD&A) in addition to the annual financial statements. Which of the following best describes the auditor’s responsibility for the MD&A information? (1) The […]
Explain the purpose of a client letter of representation. What types of information are normally included in the letter? How does an auditor evaluate the unadjusted misstatement schedule (also called summary of possible misstatements) at the end of the audit engagement to assess whether the financial statements are fairly presented?
The amount of subjectivity involved in establishing fair value estimates can be complex for management responsible for making the fair value measurements and disclosures contained in financial statements. This is particularly true for fair value measurements for which observable market prices are not available. Auditing standards require auditors to obtain sufficient appropriate audit evidence to […]
The following questions concern information accompanying basic financial statements. Choose the best response. a. The Form 10-K filed by management of a public company includes a section on management’s discussion and analysis (MD&A) in addition to the annual financial statements. Which of the following best describes the auditor’s responsibility for the MD&A information? (1) The […]
