Audit 2 Flashcards
(20 cards)
What are the Requirements for a Review?
(ULIARCPA) Understanding with Client, Learn about Client, Inquiries (internal), Analytical Procedures, Review other procedures, Client Rep Letter, Professional Judgement, Accountant Communicates Results (AM I SAD MR FIRSALA?)
What are the Elements of a Review Report?
(AM I SAD MR FIRSALA?) Analytical procedures, Management financial data, Inquiries, Substantially less in scope than an, Audit, Does not express such an opinion, Management, Repsonsiblitiy, Financial Statements, Internal Control, accountant is Responsible for SSARS, AICPA, Limited Assurance.
When is SSARS applicable?
Statements on Standards sfor Accounting Review Services appply to compilations and review of non-issuers. If FS are SUBMITTED it means they are going to a 3rd party so SSARS applies.
What are the Requirements for a Compilation?
- Know the Industry 2. Understand the client business (STAFF) 3. Read the FS 4. No Fraud or Illegal acts
What are the element of a Compliation Report?
C AR MR ARSOM 1. Intro Paragraph: State that the FS are COMPILED State that they were not AUDITED or REVIEWED 2. MANAGEMENT RESPONSIBILITY Parag: dim 3. ACCOUNTANT RESPONSIBILITY Parag: SSARS issued by AICPA and OBJECTIVE is to assist MANAGEMENT In presenting FS.
What are the Acceptable Reasons for a change in Engagement from Audit to Review OR Compilation?
- Change in Audit Requirements 2. Misunderstanding the nature of the service needed
What if the clients requested change is considered reasonable?
Report should be completed according to the applicable standard AND NO reference should be made regarding the original engagement or audit procedures completed.
What is the authoritative body that sets standards for unaudited FS?
Accounting and Review Services Committee
The following audit procedures are generally not performed in a review engagement:
- Tests of Accounting Controls 2. Test of Management Assertions regarding going concern 3. Inquiries of entitys attorney concerning contingent liabilities
What is represented implicitly in the compilation of FS?
Accountant is Independent is implied. If not true it must be stated.
What should an auditor do when FS Compliation is NOT expected to be used by third parties?
Accountant can choose to issue a compilation report OR an engagement letter. For the latter, each page of FS should be restricted use.
What if management omitted all disclosures in the FS?
Accountant should indicate that the FS are not designed for those who are not informed about internal company matters.
An accountants complitation report on the unaudited FS of a non-issuer should:
Disclaim an opinion on the FS
What are the contents of the Rep Letter?
- Management is responsible for prep and fair presentation of FS 2. Management will design, implement, and maintain internal contol 3. Mngmt will be truthful in all inquiries 4. Mngmt represents that info is complete 5. No Subsequent Events that would change things 6. Mngmt is responsible to prevent/detect fraud and disclose
What if Compiling FS that have omitted substantially all disclosures?
The accountant may compile financial statements that omit substantially all disclosures provided that:
The accountants report clearly indicates the omission by including a fourth paragraph disclosing such omissions. This paragraph should state that if the disclosures were included, they might influence the users conclusions, and should indicate that the financial statements are not designed for those who are uninformed about the omitted disclosures; and
To the accountants knowledge, the omission is not intended to mislead any person who might be expected to use such financial statements.
What is a partial presentation?
presentations of prospective financial information which would not ordinarily be appropriate for general use because they omit one or more of these essential elements: (a) sales or gross revenue, (b) gross profit or cost of sales, (c) unusual or infrequently occurring items, (d) provision for income taxes, (e) discontinued operations or extraordinary items, (f) income from continuing operations, (g) net income, (h) earnings per share, and (i) significant changes in financial position.
An examination of a financial forecast is a professional service that involves:
Evaluating the preparation of the prospective financial statements,
Evaluating the support underlying the assumptions,
Evaluating the presentation of the prospective financial statements in conformity with AICPA guidelines, and
Issuing an examination report.
Which of the following items should be included in prospective financial statements issued in an attestation engagement performed in accordance withStatements on Standards for Attestation Engagements?
When performing an attestation engagement related to a client’s prospective financial statements, the accountant should ensure that the client discloses all significant assumptions that are used for the prospective financial statements.
Attestation Standards include:
(Five General Standards) TIPPY 1. Training and Proficiency 2. Independence 3. Performance/due professional care 4. Professional knowledge 5. Your belief that subject matter is capable of evaluation. PASSER (Fieldwork Standards) 1. Planning & Supervision 2. Appropriate evidence (Reporting standards) 1. Subject Matter 2. Significant Reservations 3. Express Conclusions 4. Restrict Use
Agreed up on Procedures Engagements:
I AM SURE: 1. Independence 2. Agreement of the Parties 3. Measurability and Consistency 4. Sufficiency of Procedures 5. Use is Restricted 6. Responsibility of the subject matter (client or third party?) 8. Engagements
