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Audit > Chapter 18 -- SSARS > Flashcards

Chapter 18 -- SSARS Flashcards

1
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

What type of performance is done under SSARs?

A

“CPR”
Compliation
Performance
Reporting

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2
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

What standards apply to SSARs engagements?

A
  • SSARs applies to the preparation for a nonissuer of other hsitorical or prospective financial information.
  • An exampled of a preparation under SSARs would be pro forma financial statements.
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3
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

What is included when performing preparation in accordance with SSARs?

A
  • Preparation is a service to prepare financial statements without attaching a report or determining whether the accountant is independent.
  • A preparation of financial statements include preparation of Personal Financial Statements for presentation with a financial plan. (i.e. completing a personal financial statement to obtain a mortgage).
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4
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

What is included in a compilation in accordance with SSARs?

A
  • A compilation is a service to assist management in presenting financial statements in the form of financial statements without undertaking to provide any assurance.
  • The auditor will include a report
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5
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

When may SSARSs may be applied to other historical or prospective financial information?

A
  • The other historical or prospective financial information is adapted as necessary in the circumstances
  • Prospective financial statements may be prepared and compiled, but not reviewed
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6
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

What is included in a review in accordance with SSARs?

A
  • In a review, the CPA obtains sufficient appropriate review evidence to form a conclusion that no material modifications need to be made to the statements for them to be in accordance with the applicable reporting framework.
  • The auditor provides limited assurance.
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7
Q

Section 18.1: General Principles for SSARSs Engagements (AR-C 60)

When may SSARSs may be applied to other historical or prospective financial information?

A
  • The other historical or prospective financial information is adapted as necessary in the circumstances
  • Prospective financial statements may be prepared and compiled, but not reviewed
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8
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What is not included in preparing financial statements under SSARs?

A
  • Notes to the financial statement
  • An accountant’s report
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9
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

Where should a disclosure be presenting if it needs to be made when preparing financial statements under SSARs?

A

A disclosure would be placed on the face of the financial statements.

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10
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What is included in an accountant’s documentation in a preparation engagement?

A
  • The engagement letter
  • A copy of the financial statements that the accountant prepared
  • Significant judgements or consultations made during the engagement by the auditor
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11
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What is the purpose of a preparation service under SSARs?

A
  • A preparation service allows the accountant to generate financial statements and release them to the client or third parties without a report.
  • Each page should stated that the prepare provides no assurance.
  • Independence is not required, and does not need to be reported to management
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12
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What are the options for the preparer if they are not allowed by management to indicate no assurance was provided?

A
  • The accountant may issue a disclaimer
  • The accoutant may perform a compliation
  • The accountant may withdraw from the engagement
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13
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

How does the accountant prepare financial statements if all disclosures required are omitted?

A
  • The statements should include a heading such as “Selected Information–Substantially All Disclosures Required by [the applicable financial reporting framework] Are Not Included.”
  • Disclosures may be omitted, as long as the omission is not misleading to users.
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14
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What is management’s responsibility in the engagement letter as it relates to the preparation of financial statements?

A
  • Management’s agreement about certain matters
  • It acknowledges and understands its responsibilities
  • Accuracy and completeness of records
  • Significant judgments it provides for the preparation of the financial statements
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15
Q

Section 18.2: Preparation of Financial Statements (AR-C 70)

What are the accountant’s responsibilities when engaged to prepare financial statements?

A
  • A statement on each page that no assurance is provided
  • The agreed-upon terms of the engagement should include identification of the applicable financial framework to be used
  • The engagement documentation should include the engagement letter and a copy of the prepared financial statements
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16
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

When should an auditor withdraw from a compilation engagement?

A
  • Management is unwilling to revise financial statements due to misapplications of accounting principles and unreasonable accounting estimates.
  • Management failed to provide information that is necessary to complete the engagement.
17
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

What does the guidance of a compilation apply to?

A
  • Prospective financial information
  • Proforma financial information
  • Other historical financial information
18
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

What understanding should an auditor have when conducting a compilation?

A
  • The applicable financial reporting framework
  • The significant accounting policies that are used by management
19
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

Can an auditor who is on a compliance engagement perform other duties that may be part of an audit?

A
  • An auditor can perform other accounting services while performing a compilation, preparation or review engagement.
  • The additional work may be part of the compiliation, preparation or review, or they may be separate.
20
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

What is the objective of a compilation?

A

The objective of a compilation is to apply accounting and financial reporting to assist management in the presentation of financial statements without having to obtain or provide an assurance on them.

21
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

When should an auditor propose appropriate revisions to management during a compilation engagement?

A
  • The statements do not adequately refer to or describe the applicable financial reporting framework
  • Revisions of the statements are required for them to be in accordance with the framework
  • The statements are misleading
22
Q

Section 18.3: Compilation of Financial Statements (AR-C 80)

What type of compilation report is issued if the accountant is not independent?

A

A compiliation report with special wording that notes the accountant’s lack of independence

23
Q

Section 18.4: Review of Financial Statements (SSARS)

What are the first steps an accountant performs in reviewing a nonissuers financial statements?

A

Obtain a general understanding of:
* The entity’s organization
* The entity’s operating characteristics
* The nature of assets, liabilities, revenues and expenses, including related party transactions

24
Q

Section 18.4: Review of Financial Statements (SSARS)

What should be performed during a review of a nonissuers financial statements?

A
  • The accountant must be independent
  • Obtain a client representation letter from management
  • Perform inquiries of management that may have an effect on the financial statements
  • Applying analytical procedures
25
Q

Section 18.4: Review of Financial Statements (SSARS)

What type of analytical procedures are performed in an nonissuers review of financial statements?

A
  • Read the financial statements to confirm that they conform with GAAP
  • Reconcile the financial statements with the accounting records
  • Obtain written representation from management
  • Comparison of current and prior year account balances
  • Compare current year budget to forecast
  • Industry benchmarks
26
Q

Section 18.4: Review of Financial Statements (SSARS)

What is included in the review report of a nonissuers financial statements?

A
  • For a review, an accountant expresses a conclusion, not an opinion. An opinion is issued for audits.
  • The accountant expresses limited assurance on the financial statements
  • A review is substantially less in scope than an audit
  • “…not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.”
27
Q

Section 18.4: Review of Financial Statements (SSARS)

How are materially misstated discoveries reported in a nonissuer review?

A
  • The accountant would express a modified conclusion.
  • On the review report, the accountant would create a heading titled “Qualified Conclusion or Adverse Conclusion”
  • The accountant would describe the matter causing the conclusion under the paragraph, before the conclusion paragraph, titled “Basis for Qualified Conclusion” or “Basis for Adverse Conclusion”
28
Q

Section 18.4: Review of Financial Statements (SSARS)

How is a going concern reported in a review of a nonissuers financial statements?

A
  • The accountant should issue a modified review report.
  • The report should have a separate section titled “Substantial Doubt about the Entity’s Ability to Continue as a Going Concern”
29
Q

Section 18.4: Review of Financial Statements (SSARS)

When should an accountant withdraw from an engagement to review a nonissuers financial statements?

A
  • If they determine that there is not enought sufficient or appropriate evidence to form a conclusion.
  • If the accountant believes that modification of the report is not adequate because of fraud.
30
Q

Section 18.4: Review of Financial Statements (SSARS)

When should an accountant not accept a nonissuers review engagement?

A

The client will not allow the accountant to communicate with legal counsel as required by GAAS.

31
Q

Section 18.4: Review of Financial Statements (SSARS)

How does an accountant report a review of nonissuers comparative financial statements when the review also includes a prior year’s audited financial statements?

A

If the prior-period report is not reissued, a separate paragraph is added to the review report indicating:
* The prior-period statements were audited
* The date of the previous report
* The opinion expressed
* The substantive reasons if the opinion was not unmodified
* No audit procedures were performed after the date of the previous report

32
Q

Section 18.4: Review of Financial Statements (SSARS)

When is an Other-Matter paragraph included in a review report of a nonissuers financial statements?

A

An other-matter paragraph is included in the report
* If required by SSARSs
* At the accountant’s discretion.
* It refers to a matter other than those presented or disclosed in the statements that is relevant to users’ understanding of the review, the accountant’s responsibilities, or the report.

33
Q

Section 18.4: Review of Financial Statements (SSARS)

What should be included in the accountant’s working papers when performing a review of nonissuers financial statements?

A

The nature, timing, and extent of the procedures performed to comply with SSARSs
The results of the procedures performed and the evidence obtained
Significant findings or issues arising during the review, the conclusions reached, and significant professional judgments made in reaching those conclusions.

34
Q

Section 18.5: Compilation of Pro Forma Financial Information (PFFI)

What are examples of PFFI transactions and events?

A
  • Business combination
  • Change in capitalization
  • Disposition of a signficant portion of a business
  • Change the form of a business
  • Proposed sale of securities and the application of the proceeds
35
Q

Section 18.5: Compilation of Pro Forma Financial Information (PFFI)

What is the accountant’s objective when performing a PFFI?

A
  • The accountant’s objective is to assist management to present the pro forma financial information and to report it in writing withouth provide any assurances.
  • The PFFI may be compiled only if it is contained in a document that includes the financial statements on which they are based.
  • The statements must have been reviewed, compiled or audited in order to be included in the document.
36
Q

Section 18.5: Compilation of Pro Forma Financial Information (PFFI)

How are significant assumptions reported in a PFFI?

A

The accountant must include a summary any significant assumptions with the PFFI, in addition to the complete financial statements that were used to compile the PFFI and the accountant’s report.

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