SSARS- Other Toptics

Question 1

Define Pro Forma Financial Information-

Answer 1

Show the significant effects on historical financial information that might have resulted had an actual or proposed transaction occurred at an earlier date

Example: Show the impact of a business combination, dropping a business segment, change in capitalization

Question 2

What a CPA is asked to do a pro forma financial information engagement, what is the pre-requisit requirement?

Answer 2

They must have reviewed, audited, or compiled the historical financial information

Question 3

What are the procedures an accountant must do when asked to review Pro Forma financial statements?

Answer 3

Read the financial statements and read the assumptions made for obvious misstatements

Question 4

Is independence required for a Pro Forma Review?

Answer 4

NO- You’ll want to state that there was no independence in the compilation report

Question 5

What should be stated on the F/S for the pro forma financial statements?

Answer 5

“See compilation report”

Question 6

If the auditors are asked to PREPARE the pro forma information, then no compilation report is required?

Answer 6

TRUE- Only when you COMPILE is the COMPILATION REPORT required

Question 7

What are the two types of prospective financial information?

Answer 7

1) Financial forecast- Prospective financial statements that present expected financial position. Based on assumptions reflecting conditions it expects to exist and take. This is a best guess.
2) Financial projection- Prospective financial statements that present given hypothetical assumptions. “what would happen if”

Question 8

An accountant should never be associated if prospective financial information does not have a disclosure on SIGNIFICANT ASSUMPTIONS?

Answer 8

True– You never associate yourself without this disclosure

This includes hypothetical assumptions made on a financial statements and usefulness of the projection

Question 9

What should be included in the compilation report?

Answer 9

• Expected outcomes may not be achieved
• No responsibility to update the report for any matters after the date of the report
• Distribution has be restricted. Any report has to be restricted or “limited use distribution.” Forecast do not have to restricted, just projections