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Audit > Chapter 19 -- SSAE > Flashcards

Chapter 19 -- SSAE Flashcards

1
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the purpose of SSAEs?

A
  • SSAEs are for issuers
  • They related to services that are beyond the financial statements.
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2
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What are the components of SSAE?

A

“EAR”
* Examinations
* Agreed-Upon Procedures
* Reviews

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3
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the criteria for an attestation engagement?

A

The criteria is:
* Relevant
* Objective
* Capable of reasonably consistent measurement
* Complete

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4
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What documentation is required for an Examination under SSAE?

A
  • A description of the nature, timing and extent of the procedures performed.
  • Specific items or matters tested are identified
  • Who performed the work
  • The date the work was completed
  • Who reviewed the work
  • The date and extent of the review
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5
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What are the preconditions for all attestation engagements?

A
  • Independence is required for all attestation engagements
  • Have unresticted access to information that the practitioner considers necessary
  • Determine that the subject matter is appropriate
  • Expect to prepare a written report
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6
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the difference between an engagement party and a responsible party?

A
  • Engagement party is the party who engages the practioner.
  • The responsible party is the party responsible for the subject matter.
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7
Q

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What action does the practitioner take when the responsible party, who is not the responsible party, refuses to provide a written assertion?

A
  • The practitioner will disclose the refusal in the report.
  • Restrict the use of the report to the engaging party
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8
Q

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What type of report is issued in an examination engagement under SSAE?

A

An opinion is created on whether the subject matter is presented in accordance with specified criteria.

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9
Q

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What is the objective of an examination engagement under SSAE?

A
  • Obtain reasonable assurance about whether the subject matter, as measured or evaluated by certain criteria, is free from material misstatement.
  • Expresses an opinion about whether the subject matter is accordance with certain criteria, or the responsible party’s assertion is fairly stated.
  • Communication is further required.
  • Independence is required for all attestation engagements
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10
Q

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What is the difference between a direct or assertion-based examination under SSAE?

A
  • For an assertion-based examination, the subject matter is based on responsible party’s assertion.
  • For a direct examination, the practitioner’s conclusion will evaluate directly, using suitable criteria, the subject matter for which the accountable party is responsible.
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11
Q

Section 19.3: Review Engagements Under SSAE (AT-C 210)

What is included in report for a review attestation engagement under SSAE?

A
  • Limited assurance about whether any material modifications were made to the subject matter to conform to specific criteria
  • Identification or description of the subject matter being reported on
  • The moment or period in time that relates to the measurement or evaluation of the subject matter
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12
Q

Section 19.3: Review Engagements Under SSAE (AT-C 210)

What should the responsible party provide to the practitioner in a attestation review engagement?

A

A written assertion about the measurement or evaluation of the underlying subject matter against the criteria.

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13
Q

Section 19.3: Review Engagements Under SSAE (AT-C 210)

In an attestation review engagement, which party is responsible for the representation letter?

A
  • The responsible party is responsible for the written letter of representations.
  • If the engaging party is not the responsible party, then the practitioner should obtain written representations from both parties.
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14
Q

Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)

What should be included in a practitioner’s report on Agreed-Upon Procedures?

A
  • The auditor is independent
  • A statement referring to the standards established by the AICPA
  • All findings based on specific procedures performed on subject matter.
  • The procedures performed were agreed to by the engaging party
  • A statement that the report may be not suitable for othe purposes
  • The subject matter is the responsibility of the responsible party.
  • Any exceptions identified based on the procedures performed.
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15
Q

Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)

When can a practitioner accept and engagement to apply agreed-upon procedures?

A
  • The engagement party agrees that the procedures performed.
  • The engagement party acknowledges that the procedures performed are appropriate before a report is issued.
  • The subject matter is reasonably consistent
  • Evidence is expected to exist in order to provide a reasonable basis for the findings.
  • Other conditions are met
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16
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What should be included in a practitioner’s report of projected financial statements?

A
  • The presentation conforms with the AICPA guidelines
  • The assumptions provide a reasonable basis for the presentation.
  • A separate paragraph should be included in the report that states:
  • The difference between forecasted and projected results
  • Actual results frequently occur
  • Events and circumstances are often not as expected
  • Differences may be material
17
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What may cause an adverse opinion when issuing an examination on forecasted presentation?

A
  • Several significant assumptions do not provide a reasonable basis for the forecast.
  • Significant assumptions, including the summary of assumptions, are not disclosed in the presentation.
  • A practitioner should not examine a presentation that omits all disclosures
18
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What parties can be given a report on prospective financial statements?

A

Projection
* The practitioner may perform an examination.
* The examination is for limited use by the enity and the party that is negotiating directly with the entity.

Financial Forecast
* General Use

19
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What is the difference between a financial projection and a financial forecast?

A
  • A financial projection is based on estimates of conditions that are be based on one or more hypothetical assumptions.
  • A financial forecast is based on assumptions based on conditions that are expected to exist and courses of action expected to be taken.
20
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What are the components used to prepare prospective financial statements?

A
  • Financial forecasts or projections.
  • Summaries of significant assumptions
  • Summaries of accounting policies
21
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What types of reports can be generated on prospective financial statements.

A
  • Examination
  • Agreed-upon procedures
22
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What consists of a partial presentation of prospective financial statements?

A

A presentation omits:
* Sales or gross revenues
* Gross profit or cost of sales
* Unusual or infrequently occurring items
* Provision for income taxes
* Discontinued Operations
* Income from continuing operations
* Net income
* Basis or diluted EPS
* Significant changes in financial position

23
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What are the conditions that a practitioner must meet to perform an engagement of agreed-upon procedures?

A
  • The practitioner determines that the procedures can be designed, performed and reported in accordance with the established guidelines.
  • The engaging party agrees to the procedures
  • The engaging party acknoweldges the appropriateness of the procedures.
  • The procedures are expected to result in reasonable findings
  • The practitioner agrees to the engaging party’s thresshold of exceptions.
24
Q

Section 19.5: Prospective Financial Information (AT-C 305)

What is included in an agreed-upon procedure report for financial projection and forecasts?

A
  • The report includes both a disclosure and a conclusion
  • Includes a statement that the report may suitable for an intended use and not for general use.
25
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What are the objectives of performing an examination or review of pro forma financial statements?

A
  • Whether management’s assumptions provide a reasonable basis for presenting significant effects directly attributable to the transaction or event being reported on.
  • Whether the pro forma adjustments are appropriate and properly applied to the historical amounts.
26
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What is the objective of pro forma financial information?

A

Pro Forma financial information uses historical financial information to show what might have been reported if the transaction or event occurred at an earlier date.

27
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What are examples of pro forma financial transactions?

A
  • Business combination
  • Disposal of a segment
  • Change in the status of an entity
  • Change in capitalization
28
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What is included in a review report of pro forma financial information?

A
  • Identification of pro forma information
  • Reference to the financial statements that were used
  • If the financial statements were audited or reviewed
  • That the review was made in accordance with AICPA standards
  • A review is substantially less in scope than an audit
  • No opinion is expressed
  • The objective of PFFI and its limitations
  • The practitioner’s conclusion providing limited assurance
29
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What are the conditions that must be met in regard to the historical financial statements when reporting on pro forma financial information?

A
  • For an examination, which is similar to an audit, the related historical financial statements must have been audited.
  • For a review, the related historical financial statements must have been either audited or reviewed.
30
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What is the objective of a compilation?

A

To apply accounting and financial expertise to assist management in the presentation of the financial statements without providing any assurance on the finanacial statements.

31
Q

Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)

What are the requirements of an accountant in a compilation?

A
  • Independence
  • Report on the financial statements
  • Disclaim any assurance
  • Disclose any lack of independence
  • Associate their name with the statements
32
Q

Section 19.7: Compliance Attestation (AT-C 315)

What is included in a compliance attestation engagement?

A
  • Compliance with specified requirements (i.e. laws, regulations, rules, contracts, grants, etc.)
  • In an compliance engagement for agreed-upon procedure, effective of internal control over compliance with specified requirements.
  • Performance of procedures to provide reasonable assurance of detecting material noncompliance.
33
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

What reports may be generated for attestation services on MD&A?

A
  • Examination
  • Agreed-upon Procedures
  • Reviews
34
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

How is the MD&A information presented?

A

MD&A may be presented in an annual report or other documents filed with the SEC.
MD&A explains the actions, activities and intentions of management

35
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

What is the completeness assertion with respect to MD&A?

A

Descriptions of transactions and events in order to understand the entity’s:
* Financial condition
* Changes to the transactions or events
* Results of operations
* Capital committments included in the MD&A

36
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

What is the consistency assertion releated to MD&A?

A
  • The MD&A is a written assertion that may be examined or reviewed by the practitioner.
  • Whether the historical financial statement amounts are accurately derived from statements and related records.
  • Reported transactions, events and explanations are consistent with the statements.
  • Nonfinancial data have been accurately derived from related records.
37
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

What are the assertions related to MD&A?

A
  • Occurrence
  • Consistency with the financial statements
  • Completeness
  • Presentation and disclosure
38
Q

Section 19.8: Management’s Discussion and Analysis (AT-C 395)

What is MD&A Control Risk?

A

In relation to MD&A, control risk is the risk that material misstatements may occur because the entity’s internal control did not detected the MD&A misstatement in a timely manner.

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