AICPA Exam CPA-Auditing Topic 2 Question 68 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 68
Topic #: 2

An accountant has been asked to issue a review report on the balance sheet of a nonissuer but not to report on the other basic financial statements. The accountant may not do so:

ABecause compliance with this request would result in a violation of the ethical standards of the profession.

BBecause compliance with this request would result in an incomplete review.

CIf the review of the balance sheet discloses material departures from GAAP.

DIf the scope of the inquiry and analytical procedures has been restricted.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. An auditor should obtain management's written assertion about the effectiveness of the entity's internal control.

Choice 'b' is incorrect. The accountant should disclaim (not qualify) an opinion on management's assertions that the cost of correcting weaknesses exceeds the benefits.

Choice 'c' is incorrect. The accountant has no responsibility to evaluate the effect of subsequent events. In fact, the report on an entity's internal control specifically states that projections of the internal control evaluation to future periods is inappropriate.

Choice 'd' is incorrect. The accountant does provide an opinion (and not a disclaimer) on the effective operation of internal control.

by Bernardine at Apr 03, 2023, 03:56 PM

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Teddy

2 months ago

Ha! Imagine the accountant trying to hide a material GAAP departure in the balance sheet. That's just asking for trouble.

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Josefa

9 days ago

C) If the review of the balance sheet discloses material departures from GAAP.

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Slyvia

14 days ago

B) Because compliance with this request would result in an incomplete review.

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Earleen

15 days ago

A) Because compliance with this request would result in a violation of the ethical standards of the profession.

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Gail

2 months ago

I'm not sure about this one. Couldn't the accountant just disclose the limitations in the report and still issue a review on the balance sheet?

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Evangelina

15 days ago

C) If the review of the balance sheet discloses material departures from GAAP.

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Bobbie

20 days ago

B) Because compliance with this request would result in an incomplete review.

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Joanne

25 days ago

A) Because compliance with this request would result in a violation of the ethical standards of the profession.

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Isadora

2 months ago

I agree with Linn. Reviewing only part of the financial statements is not enough to provide a proper review report.

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Shaun

2 months ago

But what if the review of the balance sheet shows material departures from GAAP? Shouldn't the accountant report that?

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Gerald

2 months ago

I agree with Charlene. It's important to uphold ethical standards in the profession.

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Linn

2 months ago

I think option B is the correct answer. Reviewing only the balance sheet and not the other financial statements would result in an incomplete review.

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Louvenia

26 days ago

B) Because compliance with this request would result in an incomplete review.

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Iola

30 days ago

A) Because compliance with this request would result in a violation of the ethical standards of the profession.

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Charlene

2 months ago

I think the accountant should not issue the review report if it would violate ethical standards.

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