List the three types of attestation engagements.
1. Examinations. 2. Reviews. 3. Agreed-Upon Procedures.
What level of attestation risk does an examination provide?
An examination provides a positive expression of opinion and, therefore, a low level of "attestation risk."
What is the First General Attestation Standard?
Training - The practitioner must have adequate technical training and proficiency to perform the attestation engagement.
What level of attestation risk does a review provide?
A review provides negative assurance and, therefore, a moderate level of "attestation risk."
List the two categories of requirements applicable to attestation engagements.
Unconditional requirements - indicated by "must" or "is required;" and Presumptively mandatory requirements - indicated by "should", which permit rare departures.
What is the Second General Attestation Standard?
Knowledge - The practitioner must have adequate knowledge of the subject matter.
What is the First Attestation Standard of Reporting?
Nature of engagement - The practitioner must identify the subject matter or the assertion being reported on and state the character of the engagement in the report.
What is the Fifth General Attestation Standard?
Due professional care - The practitioner must exercise due professional care in the planning and performance of the engagement and the preparation of the report.
What is the Second Attestation Standard of Reporting?
Conclusions - The practitioner must state the practitioner's conclusion about the subject matter or the assertion in relation to the criteria against which the subject matter was evaluated in the report.
What is the Fourth General Attestation Standard?
Independence - The practitioner must maintain independence in mental attitude in all matters relating to the engagement.
What is the Third Attestation Standard of Reporting?
Reservations - The practitioner must state all of the practitioner's significant reservations about the engagement, the subject matter, and, if applicable, the assertion related thereto in the report.
What is the Second Attestation Standard of Field Work?
Evidence - The practitioner must obtain sufficient evidence to provide a reasonable basis for the conclusion that is expressed in the report.
List the hierarchy of attestation standards and guidance.
Statements on Standards for Attestation Engagements (SSAE) - compliance is enforceable by Rule 202 of the AICPA Code of Professional Conduct, Compliance With Standards; Attestation interpretations - consist of interpretations and appendices) of the SSAEs, etc.; and "Other attestation publications" - such publications have no authoritative status and the practitioner is not required to take them into consideration.
Define "responsible party."
The person(s) responsible for the subject matter, or a party who has a reasonable basis for making a written assertion about the subject matter. Being able to identify a responsible party is a prerequisite for an attest engagement.
Define "attest engagement."
An engagement where a CPA practitioner is engaged to issue (or does issue) an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter that is the responsibility of another party.
What is the Third General Attestation Standard?
Criteria - The practitioner must have reason to believe that the subject matter is capable of evaluation against criteria that are suitable and available to users.
Describe an Agreed-upon procedures attestation engagement.
An engagement whereby the practitioner and the "specified parties" agree upon the specific procedures to be performed and the specified parties take responsibility for the sufficiency of the procedures for their purposes.
What is the First Attestation Standard of Field Work?
Planning and supervision - The practitioner must adequately plan the work and must properly supervise any assistants.
What do projections represent?
Projections represent the financial statement outcome based on certain specified hypothetical assumptions, which may or may not be likely.
What is the only type of prospective financial statement for which an examination report can have general unrestricted distribution?
Forecast can have unrestricted distribution (any report on a projection must have restricted distribution).
What do forecasts represent?
Forecasts represent the predicted financial statement outcome - the "best guess."
What is meant by a partial presentation of a forecast?
A forecast that does not meet the requirements of the AICPA's minimum presentation guidelines and which is, therefore, inappropriate for general distribution.
Describe the structure of an examination report on a projection.
Examination report on a projection typically includes the following four paragraphs: Introductory paragraph; Scope paragraph - reference attestation standards established by the AICPA; and Opinion paragraph; Restricted distribution - limit the distribution to the specified parties.
List the two types of prospective (forward-looking) financial statements.
1. Forecasts 2. Projections.
List the three types of engagements that are permitted by AICPA attestation standards that are directly related to "prospective" financial statements.
Examination - positive assurance is expressed; Agreed-upon procedures - assurance is provided as "procedures, findings;" or Compilation - no assurance is expressed. Note that a "review" is not permitted!
List the two types of engagements related to pro forma information.
1. Examination 2. Review.
An examination report on pro forma financial information involves expressing an opinion on three matters. List the three matters.
Whether management's assumptions provide a reasonable basis for presenting the significant effects attributable to the transaction/event; Whether the adjustments appropriately reflect those assumptions; and Whether the pro forma column reflects the proper adjustments of the historical financial statements.
What is the purpose of pro forma financial information?
To show the significant effects on historical financial information that might have resulted from a transaction consummated after the balance sheet date.
Describe the structure of the examination (or review) report on pro form financial information.
Introductory paragraph; Second paragraph - reference attestation standards established by the AICPA; Third paragraph - identify the objective of pro forma information; Fourth paragraph - express an opinion for an examination report or negative assurance for a review report.
What conditions are required to be present when reporting on pro forma financial information?
1. The document containing the pro forma information includes or references the complete historical financial statements; and 2. The accountant has audited or reviewed the related historical financial statements.