Module 6: Accounting and Review Services

Question 1

Compilation Standard Report

Answer 1

We have compiled the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. We have not audited or reviewed the accompanying financial statements and, accordingly do not express an opinion or any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America.

Mangement is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles general accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain any assurance that there are no material modifications that should be made to the financial statements.

Question 2

Unconditional Requirement

Answer 2

accountant is required to comply. SSARS uses the word “must” or “is required”.

Question 3

Presumptively Mandatory Requirement

Answer 3

accountant is required to comply unless the accountant justifies the departure and explains how alternative procedures were sufficient to achieve the objectives of the presumptively mandatory requirement. SSARS uses the word “should” to indicate a presumptively mandatory requirement.

Question 4

Analytical Procedures should include

Answer 4

1) Developing expectations by identifying plausible relationships that are expected to exist based on the accountant’s understanding of entity and industry.
2) Comparing recommended amounts, or ratios, to expectations
a) In a review the accountant is ordinarily not required to corroborate management’s responses, although the accountant should consider these responses for reasonableness and consistency with other information.

Question 5

Standard Review Report - independent Accountants Review Report

Answer 5

We have reviewed the accompanying balance sheet of XYZ Company as December 31. 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted int he United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

Question 6

Special Purpose Financial Reporting Framework

Answer 6

a) cash basis
b) tax basis
c) regulatory basis; and
d) contractual basis