Compilation and Review of Financial Statements Flashcards
What are the 2 levels of service that CPAs can perform with respect to unaudited financial statements of a nonissuer?
Compilation and review
What type of assurance does a compilation give?
No assurance
What type of assurance does a review give?
Limited(negative) assurance
When an accountant performs more than one service, the accountant generally should issue the report for which service?
Highest level of service rendered
Who does the Statements on Standards for Accounting and Review Services pertain to?
Nonissuers
What does SSARS provide standards with respect to?
Compilation and reviews of nonissuers
Who does SAS apply to?
Issuers(Public companies)
What are the 5 levels of compilation and review engagements?
3 party relationship, financial reporting framework, financial statements or financial information, sufficient appropriate evidence(review only), and written communication or report
What is management responsible for?
Identification of an applicable financial reporting framework, preparation and fair presentation of the financial statements, and design, implementation, and maintenace of internal control
How does the accountant determine the materiality?
Professional judgment
How does an accountant establish an understanding with the client?
Engagement letter which is presumptively mandatory
Is independence required for a compilation letter?
No
What are the compilation requirements?
Knowledge of industry accounting principles and practices, understanding of client’s business, and reading the financial statements
If the client refuses to provide such information due to financial statements being inaccurate or incomplete, the accountant should?
Withdraw from the compilation engagement
Documentation in a compilation engagement should include?
engagement letter, any significant findings or issues, and oral or written communications with management regarding fraud or illegal acts
What should the accountant’s report in a compilation engagement include?
Title, addressee, introductory paragraph, management’s responsibility paragraph, accountant’s responsibility paragraph, signature of accountant, and date of the accountant’s report
What should the introductory paragraph state?
State that the financial statements have been compiled and state that the accountant has not reviewed or audited the financial statements
What should the accountant’s responsibility paragraph include?
SSARS issued by the AICPA and objective of a compilation is to assist management
What are the 2 things that can be done when there are departures from the applicable financial reporting framework?
Disclose or withdraw
When reporting when not independent what should the accountant do?
Disclose the lack of independence
When financial statements are not expected to be used by 3rd parties, what should the accountant do?
Include a reference on each page of the financial statements restricting their use
The performance requirements applicable to a review are?
Understanding, Learn, Inquires, Analytical procedures, Review, Client rep letter, Professional judgment, and Accountant should communicate results
What is the accounting not required to do in a review engagement?
Test internal control, Perform audit tests, Assess fraud risk, and Communicate with the predecessor accountant
If a review is incomplete, will it prevent the issuance of a review report?
Yes
