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Flashcards in Audit 2 Deck (40):
1

Elements of Quality Control Standards

H-uman Resources
E-ngagement/Client acceptance and continuance
L-eadership responsibilities
P-erformance of the engagement

M-onitoring
E-thical Requirements

2

Levels of Service

1. More than 1 service(Report on highest level of service)
2. Review(Limited Assurance)
-
3. Compilation(No assurance)

3

Compilation and review engagements include the following 5 elements

1. R-elationship 3 party
a. A-ccountant in the practice of public accounting
b. I-ntended users
c. M-anagement
2. F-ramework of financial reporting
3. F-/S of Financial information
4. E-vidence is sufficient and appropriate(Reviews only)
5. W-ritten communication or report

4

Compilation requirements

R-eading the Financial Statements
U-nderstanding the clients business
I-ndustry knowledge including accounting principles and practices

5

Omitting disclosures must include the following

1. Omission of disclosures in 4th paragraph
2. State” if the disclosures were included they might affect the users conclusions
3. State” report is not intended for those uninformed”
4. Not intended to mislead users of F/S
5. Otherwise in conformity with GAAP
6. Restricted use not required

6

Understanding of Client’s Business

S-taff qualifications
T-ransactions types and frequency
A-ccounting basis used to prepare the financial statements
F-orm of the accounting records
F-inancial statements’ form and content

7

Compilation Contents

1. Introductory Paragraph
2. Management’s Responsibility Paragraph
3. Accountant’s Responsibility Paragraph

8

Introductory Paragraph of Compillation

C-ompiled=Have been compiled
A-udited (has not)
R-eviewed (has not)

9

Management’s Responsibility Paragraph of Compilation

M-anagement’s
R-esponsibility

D-esigning
I-mplementing
M-aintaining

10

Accountant’s Responsibility Paragraph of Compilation

A-ccountant’s
R-esponsibility
S-SARS issued by the AICPA
O-bjective
M-anagement

11

Other notes of Compilation

R-estrict use
E-ngagement letter required
D-eparture from reporting framework= disclose or withdraw

12

Review Requirements (Same for issuers and nonissuers)

U-Understanding with client

L-earn and/or obtain sufficient knowledge of the entity’s business
I-nquiries should be made addressed to appropriate individuals
A-nalytical procedures should be performed
R-eview other procedures should be performed

C-lient representation letter should be obtained from management
P-rofessional judgment should be used to evaluate results
A-ccountant(CPA) should communicate results

13

Not done for Reviews

I-nternal control test
A-udit tests
F-raud risk
P-redecessor auditor communication

14

Rep letter required= if not withdraw

CONTENTS

INQUIRE (Inquiries responses)
OF
D-ate of the Completion of review procedure performed
R-esponsibility of management

I-nformation is complete
F-raud Acknowledgment/knowledge to prevent/detect fraud
R-epresentations additionally related to matters specific to the entities business and industry
S-ubsequent information on events

15

R-esponsibility of management for the:

P-reparation of the F/S
F-air presentation of the F/S
A-cknowledgment of responsibility for DIM

16

Understanding should include with regard to Reviews

L-imitation of the engagement
A-ccountant’s responsibility
M-anagement’s responsibilities
O-bjectives of the engagement

17

Review Contents(Negative Assurance)

1. Introductory Paragraph
2. Management’s Responsibility Paragraph
3. Accountant’s Responsibility Paragraph

18

Introductory Paragraph of Reviews

A-nalytical procedures= review includes
M- anagement’s financial data= review includes

I-nquiries of management

S-ubstantially less in scope
A-udit= less in scope than an audit
D-oes not express an opinion=disclaimer

19

Management’s Responsibility Paragraph for Review

M-anagement
R-esponsibility

F-inancial statements= fair presentation of the financial statements
I-nternal control= maintaining internal control relevant to Designing, implementing and maintaining internal control

20

Accountant’s Responsibility Paragraph for Reviews

R-esponsibility=Accountant’s responsibility
S-SARS= in accordance with SSARS issued by AICPA
A-ICPA= in accordance with SSARS issued by AICPA
L-imited assurance=we obtain limited assurance
A-ssurrance= we obtain limited assurance

21

Notes for Reviews

1. P-age marked= “See Independent Accountant’s report”
2. W-ithdraw:Do not issue Adverse or disclaimer instead Withdraw

22

Acceptable change to a compilation or review

M-isunderstanding of the nature of the services to be rendered
R-esponsibilities of client changes
S-cope limitations are reasonable

23

Unacceptable(consider withdrawing) change to a compilation or review

F-raud
L-ier: Client is attempting to create misleading or deceptive F/S
O
S-cope limitations are not reasonable
S-ignature Client refuses to sign rep letter

24

Reissued audit report (previous auditor should)

C-ompare last year’s statements with this year’s statements
O-btain a report stating that the new information does not affect last year’s report
R-ead the statements and report of the current period

25

Not Reissued audit report (New auditor should)

1. Make reference to the prior period audit report in the current report
OR
2. Perform that level of service themselves

26

Reporting when prior period is audited

1. Reissue prior period report
OR
2. Include additional paragraph describing the responsibility assumed

27

Comfort letter includes the following

C-onducted like a review engagement
A-ttorney’s opinion or representation letter required
R-estricted use
D-ue Diligence

28

Comfort letters Positive assurance

1. CPA’s Independence
2. Compliance with SEC rules and regulations

29

Comfort letters Negative Assurance

1. Changes in selected F/S
2. Unaudited F/S
3. Non-financial information applies to for in all material respect

30

Auditor should Not comment or provide assurance

1. Market risk sensitive instruments
2. Qualitative disclosures

31

The 11 attestation Standards

1. 5 general standards
2. 2 fieldwork standards
3. 4 reporting standards

32

5 general standards of Attestation

T-raining and proficiency
I-ndependence
P-erformance/due professional care in planning and performance
P-rofessional, adequate knowledge of subject matter
Y- our belief that the subject matter is capable of evaluation against criteria that are suitable and available to users

33

Suitable criteria of attestation must be

C-omplete
R-elevant
O-bject
M-easurable

34

2 fieldwork standards of attestation

a. P-lanning and supervision
b. A-ppropriate, sufficient evidence to provide a reasonable basis for the conclusion

35

4 reporting standards

S-ubject Matter
S-ignificant Reservations
E-xpress Conclusions
R-estricted Use

36

Restrict use in reporting standards When?

L-imited number of parties
A-ssertion(written) has not been provided
R-eporting on AUP’s

37

Attestation standard notes

a. May be on Assertion itself or Subject matter
b. Scope restrictions on examination or review
c. Examination= positive opinion=high level of assurance
d. AUP= No assurance

38

Agreed-Upon Procedures Engagements conditions (must exist)

I-ndependence of the Practioner

A-greement of the parties
M-easurability and Consistency

S-ufficiency of the Procedures
U-se of the Report is Restricted to the Specified Parties
R-esponsibility for the Subject Matter
E-ngagements to perform Agreed-Upon Procedures on Prospective Financial Statements

39

Notes for AUP's

1. Statement that the procedures performed were those agreed to by the specified parties identified in the report, and a description of any agreed-upon materiality limits
2. Restricted Use
3. Prospective Financial Information=Assumptions

40

Prospective F/S have3 levels

C-ompilation
E-xamination
A-UP