During an Engagement to Review the Financial Statements of a Nonpublic

question 33

Multiple Choice

During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should

• A) Express negative assurance on the accounting principles that do not conform with GAAP.
• B) Disclose the departure from GAAP in a separate paragraph of the report.
• C) Issue an adverse or an "except for" qualified opinion, depending on materiality.
• D) Express positive assurance on the accounting principles that conform with GAAP.

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Definitions:

Ranges

In the context of appliances, refers to kitchen stoves that combine a cooktop with an oven; in broader use, can mean a variety of distances or scopes.

Forecasting Risk

The potential for actual outcomes to vary significantly from the predictions or expectations due to changes in variables or conditions.

Replacement

The act of substituting a new asset or item for an old or damaged one.

Internal Rate

Often referring to the internal rate of return (IRR), which is the rate of growth a project is expected to generate, calculated as the rate of discount that makes the net present value (NPV) of all cash flows from a particular project equal to zero.