Becker Final Review /Outline Flashcards
(5 cards)
Guidance provided by the Statement on Auditing Standards is the most authoritative level of auditing guidance for nonissuers.
The AICPA Code of Professional Conduct-The Code of Professional Conduct governs any service that a member of the AICPA performs,
including audits, special reports, compilations, reviews, services performed on financial
forecasts/projections, and attestation engagements
The following principles provide the framework that is the basis for the code of conduct:
* Responsibilities
* Public interest
* Integrity
* Objectivity and independence
* Due care
* Scope and nature of services
Preparation considerations - If requested by the client, an accountant may prepare financial statements that omit substantially all
disclosures required by the applicable financial reporting framework (but are otherwise in conformity
with the financial reporting framework), provided that the omissions are disclosed and not intended to
mislead financial statement users
Documentation in a Preparation Engagement
Documentation in a preparation engagement should include an engagement letter, a copy of the
financial statements prepared by the accountant, and any significant findings or issues.
SSARS
- Preparations
- Compilations
- Reviews
Compilation of Financial Statements
In a compilation engagement, the accountant assists management in the presentation of financial
statements without expressing any assurance.
Independence is not required, but a lack of independence must be disclosed in the last paragraph of
the compilation report. The auditor is permitted, but not required, to disclose the reason(s) for the
independence impairment.
REVIEW = Inquiry + Analytical procedures , ULIARCPA
Review of Financial Statements
In a review engagement, an accountant uses inquiry and analytical procedures as a basis for
expressing limited assurance on the financial statements. Note that a review is a higher level of
service than a compilation, which expresses no assurance.
The accountant must be independent in order to perform a review.
Materiality must be determined and applied when designing review procedures and evaluating
the results.
REVIEW REPORTS
Reports on Review Engagements
An accountant must be independent of the client to issue a review report, and a statement
regarding independence must be included in the accountant’s review report.
The introductory paragraph of the review report should state the financial statements that
were reviewed and include a statement that indicates a review is substantially less in scope
than an audit.
The accountant must consider the financial statements as a whole to determine if any
modification to the conclusion in the auditor’s report is necessary. Conclusions may be
unmodified, qualified (matter is material), or adverse (matter is material and pervasive).
Reporting on Comparative Financial Statements
Know the requirements when reporting on comparative financial statements in which there are
different levels of service (e.g., one period audited, another period reviewed or compiled).
INTERIM REVIEWS
This module applies to interim reviews when the annual financial statements are audited. Guidance
for this engagement is provided in SAS (for nonissuers) or PCAOB standards (for issuers).
Procedures
The accountant must perform the following procedures for interim engagements where SAS and
PCAOB standards apply:
* Understanding with the client should be established (use an engagement letter).
* Learn and/or obtain sufficient knowledge of the entity and its environment, including the
applicable financial reporting framework and the system of internal control.
* Inquiries should be addressed to appropriate individuals.
* Analytical procedures should be performed.
* Review—Other procedures should be performed.
* Client representation letter should be obtained from management.
Professional judgment should be used to evaluate results.
* Auditor (CPA) should communicate results to management and those charged with corporate
governance (when necessary).
The Sarbanes-Oxley Act of 2002
Sarbanes Oxley (SOX) is a federal law that was enacted with the intent of improving the accuracy
and reliability of financial information disclosed by public companies.
Impact of SOX on Audit Responsibilities
SOX Title I
provides for the Public Company Accounting Oversight Board (PCAOB), whichconsists of five members (two must be CPAs and three cannot be CPAs), requires firms that audit
issuers to register with the PCAOB and outlines certain auditing standards that must be followed
by registered firms.
SOX Title II outlines auditor independence rules, including prohibited services, audit partner rotation,
and audit committee preapproval and reporting
SOX Title III outlines corporate responsibility for establishing an audit committee and representations
made by key corporate officers (CEO and CFO). SOX Title III also prohibits improper influence on the
audit by corporate officers.
SOX Title IV relates to enhanced financial disclosures associated with issuer reports.
SOX Title VIII relates to penalties and accountability for corporate and criminal fraud.
SOX Title IX relates to enhancements to punishments for white-collar crimes.
SOX Title XI relates to corporate fraud accountability related to tampering with evidence or impeding
an official proceeding.
