Question

CPAs become involved in a variety of types of engagements. For each of the following statements, indicate whether it relates to an examination (E), review (R), or agreed-upon procedures (A) engagement. If the statement does not relate to examinations, reviews, or agreed-upon procedures, reply N.
Statement

Type of Engagement

a. When financial statements are involved, this is referred to as an audit.

b. The term "We are not aware of any material modifications that should be made" is often included in the report.

c. The report issued provides a summary of procedures followed and findings.

d. The report issued provides "reasonable assurance."

e. The procedures involved are generally limited to inquiry and analytical procedures.

f. The report issued provides "absolute assurance."

g. The report issued provides "limited assurance."

h. The procedures followed are agreed upon with the specified user or users.

i. This type of engagement provides more assurance than a review.

j. The CPA need not be independent to perform this service.

Answer 1

Answer:

a. Examination

b. Review

c. Agreed upon procedures

d. Examination

e. Reviews

f. None

g. Reviews

h. Agreed upon procedures

i. Examination

j. None

Explanation:

Examinations are meant to provide higher level of assurance in audits, in order to provide detailed view and opinion on the audit area.

Reviews are meant to provide the certificate of approval that financial reporting framework is followed or not, or whether their is no material change in the financial statements etc:

Under agreed upon procedures the CPA is to report on some specific areas agreed with the management to report upon rather than complete financial statements.

Remaining explanation:

In f. absolute assurance can never be provided as even in examination there are certain limitations which are inherent in the procedure.

In j the statement provides no independence which is not available condition in any engagement.