A. This communication is required to occur before the auditor's report on the financial statements is issued. Answer: This communication should include management changes in the application of significant accounting policies. Which of the following statements is correct concerning an auditor's required communication with those charged with governance?
B. This communication should include management changes in the application of significant accounting policies.
C. Any significant matter communicated to
those charged with governance also should be communicated to management.
D. Significant audit adjustments proposed by the auditor and recorded by management need not be communicated to those charged with governance.
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Which of the following describes how the objective of a review of financial statements differs from the objective of a compilation engagement?
In a review engagement, accountants provide limited assurance, but a compilation expresses no assurance.
The primary objective of a review engagement is to test the completeness of the financial statements prepared, but a compilation tests for reasonableness.
The primary objective of a review engagement is to provide
positive assurance that the financial statements are fairly presented, but a compilation provides no such assurance.
In a review engagement, accountants provide reasonable or positive assurance that the financial statements are fairly presented, but a compilation provides limited assurance.
Which of the following statements is correct concerning an auditor’s required communication with those charged with governance?
A. This communication is required to occur before the auditor’s report on the financial statements is issued.
B. This communication should include
management changes in the application of significant accounting policies.
C. Any significant matter communicated to those charged with governance also should be communicated to management.
D. Significant audit adjustments proposed by the auditor and recorded by management need not be communicated to those charged with governance.
Last Updated on January 30, 2022 by Admin 3
- This communication is required to occur before the auditor’s report on the financial statements is issued.
- This communication should include management changes in the application of significant accounting policies.
- Any significant matter communicated to those charged with governance also should be communicated to management.
- Significant audit adjustments proposed by the auditor and recorded by management need not be communicated to those charged with governance.
Explanation:
Choice “B” is correct. The auditor should determine that those charged with governance are informed
about the initial selection of and changes in significant accounting policies or their application.
Choice “A” is incorrect. The communication is incidental to the audit; accordingly, it is not required to occur before the issuance of the auditor’s report as long as the communication occurs on a timely basis. (Note, however, that for audits of issuers, the communication must be made before the auditor’s report is filed with the SEC.)
Choice “C” is incorrect. Communication with
management is not required.
Choice “D” is incorrect. Unless all those charged with governance are also involved with managing the entity, the auditor should inform those charged with governance about adjustments that could, either individually or in the aggregate, have a significant effect on the entity’s financial reporting process, regardless of whether the adjustment was recorded.
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