In reviewing the financial statements of a nonissuer, an accountant is required to modify the standard review report for which of the following matters?

I. Inability to assess the risk of material misstatement due to fraud

II. Discovery of significant deficiencies in the design of the entity's internal control

a. No No

b. No Yes

c. Yes No

d. Yes Yes

Question

Business

Karson Berg

26 December, 22:54

In reviewing the financial statements of a nonissuer, an accountant is required to modify the standard review report for which of the following matters?

I. Inability to assess the risk of material misstatement due to fraud

II. Discovery of significant deficiencies in the design of the entity's internal control

a. No No

b. No Yes

c. Yes No

d. Yes Yes

+2

Answers (1)

Know the Answer?

Dominick Dudley · Answer 1

a. No No

Explanation:

Modifications are made to standard review reports only in instances when there is a departure from generally accepted accounting principles.

The two options i. e an inability to assess risk of material misstament due to fraund and discovery of significant deficiencies in the design of an entity's internal control do not comprise a departure from GAAP.

Therefore, neither would result in a modified review report.

It should be noted that risk assessment of material misstatements due to fraud is a requirement of an audit, not a review.

Also, there is no requirement to test control risk or test the operating effectiveness of controls in a review of financial statements for a non-issuer.