Lec 20

Question 1

what 3 services fall ONLY under the non-assurance services

Answer 1

• tax
• accounting and bookeeping
• majority of managemnt consulting

Question 2

can management consulting be both assurance and non-assurance

Answer 2

yes, certain management consulting may be in both

Question 3

what is the major category that is in assurance services and what 2 services are offered in there

Answer 3

the big category is attestation services
in here there is audits and reviews

Question 4

what 4 services are offered in attestation enganemnts

Answer 4

• audits
• review engament
• certain managment consulting
• specialized reports

Question 5

when an assurance engamgnet occurs, immediately there is what kind of accountability

Answer 5

three party acocuntability model

Question 6

what is the three party accountability model, describes who is accountable to who, and can there be more than three parties

Answer 6

• the auditor provides conclusions, is paid by the accountable party, and is accountable to the users
• the accountable party is accountable to the users
• although the auditor is paid by hte accountable party, it is very distinct from a lawyer as the auditor is not working for the person who paid them
• the subject matter is the financial statement and its notes
• there can be more than 3, and the third party may be an external party who is paying for the audit of the acocuntable prty

Question 7

what is the difference between attest and direct reporting engaements

Answer 7

• ATTEST engamgent is when the accountable party has made explicit assertions in writting
• DIRECT reporting engagement is when there is no explicit assertions made and the auditor needs to develop the explicit standards of performance

Question 8

what is an example of assertions made for attest engagement

Answer 8

notes of the financial statements - writen assertions

Question 9

what is an example of an a direct reporting engagement

Answer 9

government auditors assigned to determine whether goals of environmental protection agency are being met

Question 10

why do auditors need to develop standards in direct reporting engagements

Answer 10

need to be developed because there are no explicit assertions made

Question 11

what do financial statement reviews provide in terms of assurnce

Answer 11

they provide limited assurance, also called negative assurance

Question 12

what clients is a review assurance done for

Answer 12

done for clients that do not require an audit

Question 13

review engagements can be done for specific financial information, give an example of this and why it is done

Answer 13

done for sales if the lease that is being paid has a direct % corralation to sales, thus are done to determine how much is going to be paid

Question 14

do compilation exngaments provide assurance? what can you do with compilation engagmentns

Answer 14

no assurance, but can be used by accountants to prepare F/S, or tax returns, or compile other types of financial information

Question 15

does assurance engamgent have its own standards

Answer 15

yes, they have their own general standards. additionally, audit and review have their own specific standards as well

Question 16

what are the 5 assurance engament general standards

Answer 16

• there should be reasonable basis for believing that the engagement can be completed in accordance with assurance standards
• management must ackknowledge responsibility for subject matter
• auditors must have adequate proficiency to perform the engagement and of the subject matter
• engagnement is performed with due care and objectivity
• criteria for evaluating subject matter should be identified or developed

Question 17

what are the 3 general standards of AUDIT engagements

Answer 17

• comepetence
• ibjectivity
• due professional care

Question 18

review engagements have their own standard, the CSRE 2400, what are three important take aways from it

Answer 18

• it must be distinguished and made clear to users that a review engagment was done rather than an audit engagment because review offers less assurance
• only analytical and inquiry procedures are PRIMARILY done
• if auditor becomes aware of possibly material issues, they may perform additional procedures as seen fit
• provides consluion whether F/S, whether modified or unmodified
• ensure you disclose negative/limited assurance provided

Question 19

what are the 3 REVIEW engagement general standards

Answer 19

• person must have adequate knwoeldge and training in per forming reviews
• due care
• objective state of mind/independence

Question 20

what does it mean for an individual that is doing a review engament to be proficient

Answer 20

to have good knowledge of the industry

Question 21

what are the 3 examination standards for REVIEW engagement

Answer 21

• adequate planning and execution
• possess sufficient knoeledge of business so that meaningful enquiries and assessment can be done
• asses whether information is plausible or meaningful using inquiry and analysis

Question 22

what are the 2 reporting standards for REVIEW engagements

Answer 22

• indicate scope, nature of review, and distinguish it from an audit
• indicate whether anything causes you not to believe the informaion is in accordance with criteria and explain reservations

Question 23

what sort of companies are review engamgents common for?

Answer 23

private companies

Question 24

can review engagments be done for public companies and why

Answer 24

yes, but they may be done ONLY on hte interim statemtns, because the FYE ones require an audit

Question 25

what 2 procedures is review engagemnt evidence gathered from

Answer 25

enquiry and naalytical

Question 26

what is the objective in a review engagment

Answer 26

to assess whether the information being reported is plausible or meaningful in the circumstances

Question 27

when doing enquiry for reviews, what 3 things can be done?

Answer 27

• obtain knowledge of cleints busienss
• make enquiries to personel regarding control systems
• have discussions with management

Question 28

what are 3 types of reviews

Answer 28

• f/s reviews
• financial infromation reviews
• compliance with agreements and regualtions

Question 29

what engagemtns may be done on interim f/s

Answer 29

audit, reviews, and compilation

Question 30

why are interim f/s often made?

Answer 30

to fulfill reporting requiraments of regualtory authoritiesw

Question 31

what is the difference between usa and canada in terms of F/S reviews

Answer 31

• in usa quarterly reviews are required while in canada it is optional

Question 32

who is the audit report required by

Answer 32

the stock excahanges and secutirities commissions that ocmpany is listed on

Question 33

what is assessed during hte financial statement rewie (2)

Answer 33

• most importantly, asses whet ehr the accounting principles have been applied on a consitent basis, i.e. depreciation is applied the same at interim and at FYE
• assess and presume the knowledgability of the accountants

Question 34

should an interim review be done by the same auditor as an FYE audit?

Answer 34

yes, they shiuld be done by hte same

Question 35

what are hte 4 aspects of the nature of review procedures

Answer 35

• types - enquiry and analysis
• timing - performed at or near date of interim
• extent - PA needs to acquire sufficient knowledge of client’s business
• reporting - provide ONLY limited/negative assurance and F/S interim should be marked as unaudited

Question 36

what are compilation engagements

Answer 36

bookkeeping services that lead to the completion of financial statements

Question 37

what services does compilation engagent also incude

Answer 37

tax services

Question 38

do comipilation engagments provide assurance?

Answer 38

no

Question 39

what procedures should be done during a compilation engagement (2)

Answer 39

• assemble information
• ensure that it is arithmetically correct

Question 40

what is the difficulty for an accountant when providing compilation services, and what can be done

Answer 40

it is difficult to not be associated with false or missleading infromation since they have such limited involvement.
in the case htat this is suspected, they should withdraw from engagement

Question 41

what are hte 5 professional standards in compilation engagements

Answer 41

• adequate technical training and proficiency in accounting (no need for CPA to do compilation)
• due care
• work is dequately planned and properly executed
• assitants are properly supervised
• have NO need for independence

Question 42

what are the 4 points in hte compilation report/notice to reader

Answer 42

• assertion that the cmopiled F/S are based on information provided by management
• statement that accountant did not attempt to verify completeness of information
• caution to reader that F/S may not be appropriate
• no expression of any form of opinion or negative assurance

Question 43

where are the terms of the engagment set out, and must it be done for all engagments?

Answer 43

in the engagement letter and they must be done for all engagments

Question 44

what does engagment letter help with

Answer 44

clarifying:
- nature of work
- cost
- what work should be completed