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Flashcards in Compilation and Review of Financial Statements Deck (30):
1

What are the 2 levels of service that CPAs can perform with respect to unaudited financial statements of a nonissuer?

Compilation and review

2

What type of assurance does a compilation give?

No assurance

3

What type of assurance does a review give?

Limited(negative) assurance

4

When an accountant performs more than one service, the accountant generally should issue the report for which service?

Highest level of service rendered

5

Who does the Statements on Standards for Accounting and Review Services pertain to?

Nonissuers

6

What does SSARS provide standards with respect to?

Compilation and reviews of nonissuers

7

Who does SAS apply to?

Issuers(Public companies)

8

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

9

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

10

How does the accountant determine the materiality?

Professional judgment

11

How does an accountant establish an understanding with the client?

Engagement letter which is presumptively mandatory

12

Is independence required for a compilation letter?

No

13

What are the compilation requirements?

Knowledge of industry accounting principles and practices, understanding of client's business, and reading the financial statements

14

If the client refuses to provide such information due to financial statements being inaccurate or incomplete, the accountant should?

Withdraw from the compilation engagement

15

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

16

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

17

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

18

What should the accountant's responsibility paragraph include?

SSARS issued by the AICPA and objective of a compilation is to assist management

19

What are the 2 things that can be done when there are departures from the applicable financial reporting framework?

Disclose or withdraw

20

When reporting when not independent what should the accountant do?

Disclose the lack of independence

21

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

22

The performance requirements applicable to a review are?

Understanding, Learn, Inquires, Analytical procedures, Review, Client rep letter, Professional judgment, and Accountant should communicate results

23

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

24

If a review is incomplete, will it prevent the issuance of a review report?

Yes

25

The accountant's report in a review engagement should include?

Title, addressee, introductory paragraph, management's responsibility paragraph, accountant's responsibility paragraph, engagement results paragraph, signature of accountant, and date of the accountant's report

26

What should the introductory paragraph in a review report state?

A review includes primarily applying analytical procedures to management's financial data and making inquiries of company management and a review is substantially less in scope than an audit

27

What should each page of the statements in a review report be marked as?

See Independent Accountant's Review Report

28

Is an accountant's independence required for review engagement?

Yes

29

Should a change in engagement be justified?

Yes

30

What are some acceptable reasons for a engagement change?

Change in client requirements and misunderstanding as to the nature of the service to be rendered