Chapter 2 Section 1: Other Engagements, Reports, and Accounting Services

Question 1

Is GAAP required for other engagements?

Answer 1

No

Question 2

Give four examples of special purpose frameworks

What are they commonly referred to as?

Answer 2

Cash basis
Tax basis
Regulatory basis
Contractual basis

OCBOA

Question 3

What three things does the auditor need to gain an understanding of when auditing financials in accordance with OCBOA?

Answer 3

Purpose
Intended users
Steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances

Question 4

What are the additional requirements of the auditor when auditing financials in accordance with OCBOA?

Answer 4

Understand purpose, intended users, and steps management took to make sure it was good
Make sure management understands its responsibility
Understand interpretations of the contract management made in preparing the financials

Question 5

What is important about the titles of financials prepared in accordance with OCBOA?

Answer 5

They need non-GAAP titles

Question 6

What is management’s additional responsibility when preparing financials in accordance with OCBOA?

Answer 6

They need to make sure that the standard used is appropriate

Question 7

What is the emphasis of matter paragraph used for in OCBOA audits?
When is it used?

Answer 7

It indicates that they’re prepared in accordance with whatever framework, it refers to the note in the financials that describes the framework, and it states that it’s a basis other than GAAP
It’s used all the time, except for when it’s regulatory basis intended for general use

Question 8

What is the other matter paragraph used for in OCBOA audits?

When is it used?

Answer 8

It restricts the use to specified parties

Contractual or regulatory (regulatory with limited use)

Question 9

What is required when the framework is regulatory intended for general use?

Answer 9

Express an opinion about whether the financials are fairly presented in accordance with GAAP and prepared in accordance with OCBOA.
No emphasis of matter or other matter

Question 10

Are MR DIM and REPPORTS CRAME used for auditing a complete set of financials prepared in accordance with OCBOA?

Answer 10

Yes

Question 11

When auditing a single financial statement, how can it be presented?

Answer 11

As a separate engagement or in conjunction with an audit of their complete financials

Question 12

Give three examples of common elements that are audited separately

Answer 12

A/R and related accounts (includes bad debts and inv)
Disbursements schedule for leased property
Profit participation schedule

Question 13

When auditing a specific element, do you inspect related elements?

Answer 13

Yes, as necessary

Question 14

How is materiality determined when auditing a specific element or statement?

Answer 14

In relation to that element or statement, not the aggregate of the complete financials

Question 15

How is your opinion expressed and dated when including your report on a specific element in conjunction with the audit of the complete financials?

Answer 15

Express a separate opinion for each engagement

In an other-matter paragraph, indicate the date of the other engagement on the report of the primary

Question 16

How does having a modified opinion on the complete set of financials impact your opinion on a specific element?

Answer 16

If it’s relevant to the specific statement, express adverse on the specific element if it’s a GAAP issue and disclaimer if it’s GAAS

Question 17

What is required if you want to express an unmodified opinion on a specific element when the complete financials have a modified opinion?

Answer 17

The opinions are reported separately

The specific element isn’t a big part of the complete set and it’s not based on stockholders equity or net income

Question 18

What if the complete set has an other matter or emphasis of matter that is relevant to the single element?

Answer 18

Include a similar paragraph in the report on the specific element

Question 19

Are MR DIM and REPPORTS CRAME used for the audit of a single statement or element?

Answer 19

Yes - it’s still an audit

Question 20

What are the conditions when reporting on compliance?

Answer 20

You have to have audited the client’s financials
You can only issue negative assurance (because you’re not a lawyer)
Use must be restricted

Question 21

What do you do if you do see areas of noncompliance?

Answer 21

You identify them in your report

Question 22

How does having an adverse or disclaimer of opinion impact a report on compliance?

Answer 22

You can only issue a report if you have specific instances of noncompliance. No negative assurance

Question 23

How can a report on compliance be expressed?

Answer 23

As a separate report or as an other-matter paragraph in your regular audit report

Question 24

How does the restricted use of a compliance report impact the use of the financials when reported as a separate report?
An other-matter paragraph?

Answer 24

It doesn’t

It also restricts the use of the financials

Question 25

Are you allowed to report on summary financials?

Answer 25

Only if you audited the complete financials from which the summary is derived

Question 26

What are the procedures for reporting on summary financials?

Answer 26

Evaluate whether they disclose their summarized nature and identify the audited statements
If not accompanied by the audited statements, evaluate if it says where to get them and if they are readily available

Question 27

What opinions can you express on summary financials?

Answer 27

Only unmodified or adverse. No qualified.

Question 28

How does an adverse or disclaimer of opinion on the audited financials impact reporting on the summarized ones?

Answer 28

You should withdraw from the summary engagement

Question 29

Are MR DIM and REPPORTS CRAME used for reporting on summary statements?

Answer 29

No

Question 30

What is significant about the dating of summarized statements?

Answer 30

It’s dated later than the audited ones