A2: Other Reports Flashcards

(64 cards)

1
Q

Elements of Quality Control?

A
H – Human Resources
E – Engagement/client acceptance
L – Leadership responsibilities
P – Performance of the engagement
M – Monitoring 
E – Ethical requirements
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2
Q

Peer Review requirement?

A

Every 3 years, AICPA-member firm reviewed by another firm

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3
Q

Internal engagement review?

A

Required under SOX for issuer audits. Review of audit documentation by partner not associated with audit

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4
Q

Sarbanes-Oxley independence requirements?

A
  • auditor may not do most non-audit services for audit client
  • can do tax services for corporate client, get approval in writing
  • one-year cool-off period: auditor moving to client officer position
  • lead and reviewing partner rotate every 5 years
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5
Q

Considerations in determining quality control system?

A
  • firm size
  • organizational structure
  • cost-benefit considerations
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6
Q

Quality Control vs. Audit Standards/GAAS

A
  • GAAS concerns conduct of audit engagement, quality control relates to all firm professional activities
  • failed quality control ≠ failed GAAS
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7
Q

Audit of F/S prepared under Special Purpose Frameworks (tax/cash/regulatory/contractual)

A
  • obtain understanding of purpose of F/S, intended users, determination that framework is acceptable
  • management responsibility for all relevant disclosures
  • F/S should not use GAAP titles
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8
Q

Other Comprehensive Bases of Accounting

A

Cash, Tax, Regulatory

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9
Q

Report on Special Purpose Framework F/S

A
  • intro: description of framework
  • M/R: prep and fair presentation of F/S, determination that framework is acceptable
  • regulatory/contractual: describe purpose of F/S
  • opinion on special framework basis
  • other than regulatory basis for general use: emphasis paragraph referring to framework, noting difference from GAAP
  • contractual/regulatory: other matter paragraph restricting use
  • regulatory basis for general use: (typically adverse) opinion on GAAP, and opinion on special framework
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10
Q

Prescribed report form under law/regulation

A

If prescribed form unacceptable, reword or attach appropriately worded separate report

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11
Q

Audit of Single Statement/Element/Account

A

Either as: separate engagement or with audit of complete set of F/S

  • obtain understanding of purpose, users, determination that framework is acceptable
  • perform procedures on related items as needed
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12
Q

Report on Complete F/S and Single Statement/Element

A
  • separate reports and separate opinion for each engagement
  • report on statement/element includes date of report on full F/S and nature that opinion, includes any relevant emphasis or other matter paragraph from full F/S opinion
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13
Q

Modified Opinion on Complete F/S

A
  • modification relevant to single element: Adverse opinion when due to material misstatement, Disclaimer of opinion when due to scope limitation
  • if adverse/disclaimer on full F/S: unmodified opinion only if not published w/ or accompany report on complete F/S, and element not major portion of full F/S and not based on equity or net income
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14
Q

Report on Incomplete Presentation otherwise in accordance with GAAP

A

Include emphasis paragraph, state purpose for presentation and note presentation not intended to be complete presentation

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15
Q

Compliance with Contractual/Regulatory Requirements

A
  • must have audited F/S (no adverse opinion or disclaimer of opinion)
  • only negative assurance on compliance (no identified noncompliance), any identified noncompliance must be disclosed in report
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16
Q

Report on Contractual/Regulatory Compliance

A

-either separate report or other matter paragraph in audit report (negative assurance, report restricted – full audit report restricted if in audit report)

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17
Q

Report on Summary Financial Statements

A
  • must audit complete F/S
  • if summaries not accompanied by complete F/S, should describe where available and be readily available
  • may only issue unmodified or adverse opinion
  • if adverse/disclaimer on F/S, withdraw
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18
Q

Professional Standards for Compilations and Reviews

A
  • Statements on Standards for Accounting and Review Services (SSARS)
  • applies to the preparation/creation of unaudited F/S on nonissuers
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19
Q

Compilation Engagement

A
  • no need to be independent (disclose if not)
  • understanding with client (engagement letter presumptively required)
  • knowledge of industry accounting principles/practices
  • understanding of client’s business
  • read financial statements
  • no audit work
  • if discovery info wrong and client refuses additional/revised info, withdraw
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20
Q

Report on Compilation

A

C – f/s have been Compiled
A – not been Audited or
R – Reviewed
M – Management’s
R – Responsibility for preparation and fair presentation of f/s and d/i/m of internal controls
A – Accountant’s
R – Responsibility
S – in accordance with SSARS issued by AICPA
O – Objective of compilation is to assist
M – Management in presenting financial info

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21
Q

Compilation where statements omit all disclosures

A
  • okay if: statements otherwise in accordance w/ GAAP, omission not to deceive users, and report discloses the omission
  • restricted use not required
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22
Q

Compilation where departures from GAAP

A

-either: disclose in report or withdrawn

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23
Q

Compilation of Personal Financial Statements

A

-SSARS not required if statements not used to obtain credit

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24
Q

No Compilation Report

A

-report not required if not expected to be used by third parties, use engagement letter, note restriction of use on each page of statements

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25
Review Engagement
``` U – Understanding with client L – Learn about client’s business I – Inquiries A – Analytical Procedures R – Review – other procedures C – Client rep letter P – Professional judgment to evaluate results A – Accountant communicates results ```
26
Review Procedures
- no testing internal controls, no audit tests, no assessment of fraud risks - may (not required to) communicate w/ prior accountant - must make inquiries w/in client, analytical procedures, read F/S
27
Review – Client Rep Letter
- required, failure to receive results in incomplete review (can’t issue report) - management responsibility for preparation of statements and d/i/m of internal controls, truthful responses to all inquiries, reps about completeness of info, subsequent events, responsibility to prevent/detect fraud, any known or suspected fraud
28
Report on Review
``` A – primarily Analytical procedures to M – Management’s financial data and I – Inquiries of management S – Substantially less in scope that A – Audit D – Does not express an opinion M – Management’s R – Responsibility F – fair presentation of Financial statements I – d/i/m of Internal control R – accountant’s Responsibility S – SSARS issued by A - AICPA L – Limited A – Assurance -opinion: not aware of any material modifications ```
29
Compilation/Review – Departures from GAAP
- disclose in report or withdraw | - no qualified or adverse opinion, not an audit
30
Compilation/Review – Fraud/Criminal Acts
- report any such knowledge to management | - immaterial matters need not be reported
31
Compilation/Review – Subsequent Discovery of Facts Existing at Date of Report
- advise client to revise/update info or notify that statements can’t be relied upon - if client does not: disassociate report from statements, alert regulatory agencies, notify relying parties that report should not be relied upon
32
Compilation/Review – Supplemental Info
-report should indicate responsibility taken over supplemental info (none if no analysis, or limited assurance if inquiry/analytics performed on it in review)
33
Engagement Change – from Audit to Compilation or Review
- change must be justified - produce report for new engagement, don’t refer to original engagement/prior procedures/or scope limitations imposed - if not justified, consider withdrawing
34
Comparative F/S – Continuing Accountant
- service upgrade (compilation to review): prior compilation report updated and included as last paragraph in current review report - service downgrade (review to compilation): issue compilation report with paragraph about prior review (w/ date of prior report and no add’l review procedures after that date) OR reissue prior review report combined w/ (stating no add’l procedures after date of review report) or separate from current compilation report - f/s omitting substantially all required disclosures are not comparable to f/s w/ such disclosures
35
Comparative F/S – Different Accountants
- prior report reissued unchanged: old CPA reads new F/S and gets rep letter from new CPA on any info that might change prior F/S - prior report not reissued: new CPA should refer to old CPA’s report in new report, or perform that level of service themselves
36
Comparative F/S – One Period Audited
- unaudited F/S clearly marked as such, and old report should be reissued OR add’l paragraph in new report noting prior report and describing responsibility for prior F/S - if downgrade, note no auditing procedures since old report date - if upgrade, note service was less in scope than audit and no opinion was issued (if in SEC filed document, report should not refer to unaudited F/S)
37
Professional Standards for Review of Interim F/S
- issuers: PCAOB | - nonissuers: SAS
38
Interim Review Engagement
``` U – Understanding with client L – Learn about entity I – Inquiries of management A – Analytical procedures R – Review – other procedures C – Client rep letter P – Professional judgment to evaluate results A – Auditor communicates results ```
39
Interim Review Procedures
- client engagement letter: objective & scope of engagement, M/R for F/S and internal control, A/R for review report (SAS or PCAOB), limits of engagement (less that audit, no opinion, no assurance over internal control) - inquiries of management, not required of client’s lawyer - analytical procedures: trends, ratios, budgets, may not to compare to industry standard - other: read minutes, reports, etc. - required client rep letter: financial info, completeness of info, disclosures, subsequent events - if no rep letter or unable to do needed procedures: no review report/withdraw - if problems: go to management, then Board/ Audit Committee, withdraw if unresolved
40
Report on Review of Interim F/S
- F/S clearly marked unaudited - M/R for F/S and DIM of internal control - A/R: PCAOB (or SAS), Analytics and Inquiries, Substantially less in scope than Audit, No opinion expressed - Conclusion: not aware of any material modifications - if department from reporting framework: modify report or withdraw - no modification if F/S discloses going concern or consistency issue, may include emphasis paragraph
41
Interim Info Not Marked Unaudited in Audited F/S
Disclaim opinion on interim financial info
42
Interim Info in Registration Statement
Review report not “part” of the registration statement
43
Comfort Letter on Unaudited Interim F/S
- letter to underwriters from CPA - CPA must review interim F/S - restrict use to underwriters
44
Comfort Letter Assurances
Positive assurance on: CPA independence, audited F/S form compliance with SEC Act Negative assurance on: unaudited (but reviewed) F/S, changes in certain financial info since F/S included in registration statement (if recent audit or review) No comment/assurance on: market risk sensitive instruments, qualitative disclosures
45
Attestation Engagements
Auditing/examining something other than historical F/S
46
Professional Standards for Attestations
Statements on Standards for Attestation Engagements (SSAE) | -provide levels of assurance less than GAAS audit
47
11 Attestation Standards – 5 general standards
T – Training and proficiency I – Independence P – due care in Planning and Performance P – Professional knowledge of subject matter Y – Your belief that subject matter is evaluable against suitable criteria
48
11 Attestation Standards -2 fieldwork standards
P – Planning and supervision | A – Appropriate sufficient evidence
49
11 Attestation Standards -4 reporting standards
S – identify Subject matter or assertion being reported on and character of engagement S – disclose Significant reservations about engagement E – Express conclusions R – Restrict use of report if: criteria appropriate to limited parties, report on subject matter and no written assertion provided, or reporting on agreed upon procedures
50
Reporting on Assertion or Subject Matter
- may report on assertion or subject matter - material misstatements or deviations from criteria, report modified and conclusion on subject matter (or withdraw) - if report on assertion, if should accompany report or be clearly stated in report - if scope restriction: qualified opinion (examination), disclaimer (examination) or withdraw (examination or review) - restrict use if no written assertion obtained (constitutes scope limitation)
51
Examination
-positive opinion, high assurance, based on wide variety or procedures
52
Agreed Upon Procedures
I – Independence A –Agreement of parties on procedures M – Measurability and Consistency S – Sufficiency of procedures responsibility of client (not accountant) U – Use of report restricted R – Responsibility for subject matter (client or third party) E – Engagement on prospective financials (include summary of significant assumptions)
53
Report on Agreed Upon Procedures
- subject matter responsibility of specified parties - procedures were agreed by parties - sufficiency of procedures responsibility of client and not the accountant - list of procedures and findings - not an examination, disclaimer of opinion, additional procedures may have brought to light other matters - restrictions on report - assumptions in prospective financials
54
Forecasts and Projections
- forecast: expected outcome, general or limited use | - projection: hypothetical, what if situation; limited use only
55
Types of Prospective Financial Statement Engagements
-compilation, examination, agreed-upon procedures (no review)
56
Compilation of Prospective F/S
- proper assembly of info based on client’s assumptions - no assurance - client must disclose significant assumptions
57
Report on Compilation of Prospective F/S
- compiled in accordance w/ attestation standards - limited scope, no evaluation of support for assumptions - not an examination and no opinion/assurance on statements or assumptions - results may not be achieved - no responsibility to update for future events - no statement info in conformity with AICPA guidelines - restriction of use (if projection)
58
Examination of Prospective F/S
- opinion whether statement in accordance w/ AICPA guidelines and assumptions reasonable basis for statements - must be independent
59
Report on Examination of Prospective F/S
- examined in accordance w/ attestation standards - reasonable basis for opinion - opinion re accordance w/ guideline and reasonableness of assumptions - results may not be achieved - no responsibility to update for future events - restriction of use (if projection) -modifications: presentation guidelines not followed (qualified or adverse), assumption not disclosed or not a reasonable basis (adverse), scope limitation (disclaimer)
60
Agreed-Upon Procedures on Prospective F/S
- P/F/S include summary of assumptions | - report disclaims opinion on conformity w/ AICPA guidelines or reasonableness of assumptions
61
Partial Presentation Prospective F/S
-exclude essential elements: not appropriate for general use
62
Pro Forma Financial Statements
- effect of hypothetical event on historical financial info - examination or review (no evaluation of internal control, check accuracy of computations) - written reps from management - report refers to F/S info derived from and whether were audited or reviewed
63
Compliance Attestation
- report on compliance w/ laws/regulations/ contracts - agreed-upon procedure or examination (not a review) - agreed upon procedure: report notes done to assist parties in evaluating compliance - examination: report notes examination doesn’t provide legal determination on compliance
64
Management’s Discussion and Analysis (MD&A)
- required by SEC for issuers - examination or review - CPA must understand SEC requirements for MD&A