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When a CPA examines a client's projected financial statements, the CPA's report should: Correct Answer: state that the CPA performed procedures to evaluate management's assumptions. Davi... s, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonpublic entity. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the: additional audit effort necessary to complete the audit. reason given for Tech's request. Correct Answer: Both I and II The GAO standards list several threats to independence. The threat of familiarity is defined as: Correct Answer: when, due to a long or close relationship with management or other personnel, the auditor will be too sympathetic or accepting of work. Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements? Correct Answer: The accountant is independent with respect to the entity. Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio? Correct Answer: Selling inventory on account According to the AICPA Code of Professional Conduct, what would a covered member most appropriately do upon learning that another member of an attest engagement team is considering employment with the client? Correct Answer: Notify an appropriate person in the firm. Which of the following factors most likely would assist an independent auditor in assessing the objectivity of the internal auditor? Correct Answer: The organizational status of the director of internal audit If the business environment is experiencing a recession, the auditor most likely would focus increased attention on which of the following accounts? Correct Answer: Allowance for doubtful accounts An auditor is reporting on condensed financial statements for an annual period that are derived from the audited financial statements of an issuer. The auditor's opinion should indicate whether the information in the condensed financial statements is fairly stated in all material respects: Correct Answer: in relation to the complete financial statements. An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertion of: Correct Answer: existence. North Co., a privately held entity, asked its tax accountant, King, a CPA in public practice, to review and generate North's interim financial statements on King's microcomputer when King prepared North's [Show More]

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