Discuss AICPA CPA-Auditing Exam Topic 3 Question 116

Moore, CPA, has been asked to issue a review report on the balance sheet of Dover Co., a nonissuer.

Moore will not be reporting on Dover's statements of income, retained earnings, and cash flows. Moore may issue the review report provided the:

ABalance sheet is presented in a prescribed form of an industry trade association.

BScope of the inquiry and analytical procedures has not been restricted.

CBalance sheet is not to be used to obtain credit or distributed to creditors.

DSpecialized accounting principles and practices of Dover's industry are disclosed.

Suggested Answer: B

Choice 'b' is correct. An accountant may issue a review report on one financial statement, such as a balance sheet, and not on other related financial statements, if the scope of the accountant's inquiry and analytical procedures has not been restricted.

Choice 'a' is incorrect. The balance sheet need not be presented in a prescribed form of an industry trade association.

Choice 'c' is incorrect. There is no limitation on the use of a reviewed financial statement.

Choice 'd' is incorrect. Specialized accounting principles should be considered by the accountant when performing the review, but need not be disclosed.

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18 comments · newest first

Casey 10 months ago

Not sure about that, seems risky if creditors can't see the full picture.

Reita 10 months ago

I agree, the scope can't be restricted either!

Frank 10 months ago

Wait, can a balance sheet really be used without income statements?

India 10 months ago

I think it’s option B that matters most here.

Rebeca 11 months ago

The balance sheet needs to follow industry standards for a review report.

Dorethea 11 months ago

I’m leaning towards the option about specialized accounting principles being disclosed, but I’m not completely confident that’s the right requirement for a review report.

Shannon 11 months ago

I feel like the answer might relate to whether the balance sheet is used for credit purposes. I think that was mentioned in one of our case studies.

Devorah 11 months ago

I think we had a practice question about the requirements for review reports, and I recall that the balance sheet needs to be in a certain format, but I can't remember which one.

Dante 12 months ago

I remember we discussed that a review report can be issued as long as the scope of the inquiry isn't restricted, but I'm not entirely sure if that applies here.

Broderick 12 months ago

I'm a bit confused by this question. The options seem similar, and I'm not sure I fully understand the nuances between them. I'll need to re-read the question carefully and try to break down the requirements to determine the right answer.

Martin 12 months ago

Okay, I've got this. The key is that the scope of the inquiry and analytical procedures cannot be restricted, so option B is the correct answer. I feel confident in this choice since it directly addresses the conditions for Moore to issue the review report as described in the question.

Nina 1 year ago

Hmm, this is a tricky one. I'm not entirely sure about the requirements for issuing a review report on a nonissuer's balance sheet. I'll need to think through the key details and make sure I understand the differences between the options before selecting an answer.

Talia 1 year ago

This question seems straightforward - I just need to identify the condition that allows Moore to issue a review report on Dover's balance sheet without reporting on the other financial statements. I'll carefully read through the options and select the one that best matches the information provided.

Rolland 1 year ago

I see your point, Silvana. But I still think B is the best answer because it directly relates to the scope of the inquiry.

Lawana 1 year ago

B) Scope of the inquiry and analytical procedures has not been restricted. This seems like the most logical choice to me. If the scope is limited, the review report would not be appropriate.

Silvana 1 year ago

But what about option D? Shouldn't specialized accounting principles be disclosed for a review report?

Verda 1 year ago

I agree with Rolland, because if the scope is restricted, Moore cannot issue the review report.

Rolland 1 year ago

I think the answer is B.

AICPA CPA-Auditing Exam - Topic 3 Question 116 Discussion