Which of the following factors most likely would cause a CPA to not accept a new audit engagement?
a.The CPA lacks an understanding of the prospective client's operations and industry.
b.The prospective client is unwilling to make all financial records available to the CPA.
c.The prospective client has already completed its physical inventory count.
d.The CPA makes oral inquiries (only) to the predecessor auditor regarding the prior year's audit.
Choice "b" is correct. An auditor must consider the availability and adequacy of the client's accounting records and the integrity of management in deciding whether or not to accept a new audit engagement. A prospective client that is unwilling to provide all financial records would give the auditor cause for concern about both of these issues.
Choice "c" is incorrect. The auditor may apply acceptable alternative procedures to audit inventory.
Choice "a" is incorrect. The auditor can accept the engagement and obtain an understanding of the client's operations and industry after acceptance.
Choice "d" is incorrect. The CPA is required to make oral or written inquiries of the predecessor auditor before accepting an engagement. Oral inquiries are sufficient here.
When an accountant compiles projected financial statements, the accountant's report should include a separate paragraph that:
a.Identifies the accounting principles used by management.
b.Describes the limitations on the projection's usefulness.
c.Describes the differences between a projection and a forecast.
d.Expresses limited assurance that the actual results may be within the projection's range.
Choice "b" is correct. The report on compiled projected financial statements should include a separate paragraph that describes the limitations on the usefulness of the presented statements.
Choice "c" is incorrect. The accountant's report on a compilation of a forecast or a projection does not describe the differences between them.
Choice "a" is incorrect. The report would not identify the accounting principles used by management.
Choice "d" is incorrect. A report on compiled projected financial statements does not express any assurance regarding the achievability of results.