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Flashcards in Audit chapter 7 Deck (20)
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In which engagements must you be independent

Yes -
Agreed Upon Procedures
Compilations yes and No
Tax services
Book keeping
F/S Prep


What kind of assurance do you give in F/S prep, Compilation and review

F/S prep - no assurance
Compilation - no assurance
Review - limited assurance


Review - what two documents must they get?

A Signed engagement letter and a mgt rep letter - both are required


What is the goal of a compilation

to read the F/S to determine if they are free of obvious misstatements.

they do not look for material misstatements but if they come across them then add explanatory paragraph


What do you do in a review of interim or annual F/S of a non issuer- why do you do it

To provide limited assurance that the F/S are not in need of "material modification" to be in conformity with GAAP


What does a standard Compilation report state:

- the accountant or firm did not audit or review the F/S
- They did not perform any procedures to verify the accuracy or completeness of information
- compilation provides no assurance
-accountant is not aware of any material modification (limited assurance)


What do you do if you are doing a Review and discover the illegal acts that materially affect the F/S that go beyond merely modifying the standard report

withdraw from the engagement

you aren't expressing an opinion so no disclaimer, adverse or qualified


What must the report on compilations include

A statement that the accountant did not audit or review the F/S


What type of understanding is is required of Prep of F/S, Compilation, and Review

Prep - understand of Financial reporting framework and significant acting policies

Compilation - Understanding of F R framework AND read F/S to see if free from obvious material misstatements and is appropriate in form

Review - Understanding of framework, AND knowledge of industry an identity, ANDFaply A/P and Inquiry (Limited Assurance)


When Reviews are in comparative form - LY Audit, CY Review - what must you add

Add a emphasis or other matter paragraph and indicate that you audited LY, the date of the report, and the type of report, the opinion, the date of the report, if there was a modification any reasons why you have the modifications


when the highest level of service you are performing is Prep of F/S - what standards do you use



What standards do you use if you Prep the F/S that will be compiled by another auditor



What id you prep F/S as a necessary step to compile, Review or audit them . . .

- Not subject to SSARS


What is the date of the compilation report

The date the accountant completed the compilation

The report does not include a description of procedures performed


How can a CPA accept an engagement to compile pro forma financial information

You can except a compilation engagement to provide pro forma financial information as long as you have the historical F/S that were compiled, reviewed or audited.

In your report includes paragraph explaining the objective and limitations of the pro forma information


What kind of procedures must you perform in a Review

Analytical procedures and Inquiries


What is included in the compilation report:

Its a single paragraph that includes:
- a statement of management responsibility for F/S
-Identification of the F/S that were compiled and name of entity
- the compilation was performed in accordance to SSARS
-accountant did NOT audit or review the F/S and did NOT verify the accuracy or completeness of the information
- therefore NO opinion, conclusion, or other form of assurance


When can you report on a single balance sheet?

You can as long as your scope is not limited - you can do all the procedures you need to


What are reasonable basis for downgrading an engagement from an audit to a review or compilation

- the users determine that they do not need a full audit


When is a report required?

- compilation, review, and audit
- not needed if you withdraw from an engagement
- not needed in a prep engagement