Correct Answer: B

Explanation:

Choice "b" is correct. Attest engagements may result in reports related to compliance with laws and

regulations.

Choices "a", "c", and "d" are incorrect. Attestation engagements specifically exclude consulting services,

advocacy services, and return preparation.

Correct Answer: C

Explanation:

Choice "c" is correct. The average number of days to collect accounts receivable is calculated by dividing

365 days by the accounts receivable turnover. Accounts receivable turnover is net credit sales divided by

the average accounts receivable:

Choice "a" is incorrect. The denominator should be net credit sales ($7,200) divided by average

receivables $1,000), or 7.2, not 12.

Choice "b" is incorrect. The average receivable balance is $1,000, not $800. The right-hand column shows

the increase over 20X1, so the 20X1 receivable balance was $1,200 − $400, or $800. Since the 20X2

receivable balance was given as $1,200, the average receivable balance is $1,000.

Choice "d" is incorrect. Average inventory ($1,000), not ending inventory ($1,200), should be used.

Correct Answer: D

Explanation: Choice "d" is correct. When using microcomputers in an auditing task, audit documentation may not contain readily observable details of calculations (e.g., present value calculations). In order to review assistants' work, a supervisor may have to examine the formulas used on the microcomputer rather than simply examining the audit documentation. Choice "a" is incorrect. The standards of fieldwork, specifically planning and supervision, would not change with the use of microcomputers on the audit. Choice "b" is incorrect. Consulting service personnel should not be necessary to document the supervisory review. Choice "c" is incorrect. The familiarity of supervisory personnel with the capabilities and limitations of microcomputers would not have an effect on the review process.

Correct Answer: C

Explanation: Choice "c" is correct. Financial reporting, and especially financial statements, usually cannot and do not separate management performance from enterprise performance. Financial reporting provides information about an enterprise during a period when it was under the direction of a particular management but does not directly provide information about that management's performance. SFAC 1 para. 53

Correct Answer: A

Explanation: Rule: The cumulative effect of a change in accounting principle equals the difference between retained earnings at the beginning of period of the change and what retained earnings would have been if the change was applied to all affected prior periods. Choice "a" is correct. As of January 1, 1992, the beginning of the year. This assumes that the company is not presenting comparative financial statements. If comparative financial statements are presented, then the adjustment is made to the beginning retained earnings of the earliest year presented. Choice "b" is incorrect. The cumulative effect of the change is not determined as of the date the decision is made. Choices "c" and "d" are incorrect. The cumulative effect of the change is not determined by a weighted average.