Preparation, Compilation, Review, and Attestation Flashcards Preview

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Flashcards in Preparation, Compilation, Review, and Attestation Deck (21)
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1
Q

What type of Statements on Standards for Accounting and Review Services (SSARSs) engagement does not require Independence?

A

A Compilation Engagement

THE CAVEAT IS THAT THE CPA SHOULD DISCLOSE THE LACK OF INDEPENDENCE

2
Q

What statement should be included when a CPA compiles financial statements of a nonissuer in accordance with SSARSs?

A

A statement that the CPA does not express an opinion on the financial statements

Why? - Because the CPA did not audit or review the statements; and

  • was not required to verify the completeness or accuracy of management’s information
3
Q

What statement should be included when a CPA reviews financial statements of a nonissuer in accordance with SSARSs?

A

A statement that the accountant is not aware of material modifications that should be made to the financial statements for them to be in conformity with GAAP

4
Q

What is a CPA firm providing SSARSs services required to have?

A

An effective quality control system

E.g. This includes a monitoring process designed to provide the firm with reasonable assurance

5
Q

What type of assurance does a review engagement provide?

A

LIMITED ASSURANCE

Thus, it ordinarily does not involve activities such as obtaining an understanding of the entity’s internal control

6
Q

What type of report does an examination involve?

A

An examination results in issuance of a report stating the practitioner’s opinion on whether;

(1) the presentation conforms with AICPA guidelines and;
(2) the assumptions provide a reasonable basis for the forecast

NOTE: If significant assumptions are not disclosed in the presentation (to include summary of assumptions) then the CPA issues an ADVERSE Opinion

7
Q

What statement should be accompanied in a report on a review of Financial statements of a nonissuer the CPA completed?

A

A statement that:

“All information included in the financial statements is the representation of the management of the entity.”

E.g. This would be included in the second paragraph of the report

8
Q

What should the CPA do when the client requests they change the engagement from an audit to a review;

  • because the client refuses the CPA communication with client’s legal counsel?
A

The CPA should not accept a review engagement

9
Q

What types of engagements do Statements on Standards for Accounting and Review Services (SSARSs) apply to?

A

SSARSs apply ONLY to engagements involving nonissuers (e.g. nonpublic entities)

10
Q

What type of SSARSs engagement should a CPA make inquiries about material subsequent events?

A

The CPA should make these types of inquiries in Review engagements

11
Q

For what types of services may a CPA accept a compliance attest engagement to perform?

A

(1) Application of Agreed Upon Procedures
(2) An Examination

The CAVEAT for the agreed upon procedures is that the;

  • specified users MUST participate in establishing the procedures to be applied and take responsibility for the adequacy of such procedures
12
Q

What should NOT be included in a presentation of pro forma financial statements?

A

All DIRECT and INDIRECT effects attributed to the related transaction

They should include material direct effects

13
Q

What type of report does NOT require a report under Statements on Standards for Accounting and Review Services (SSARSs)?

A

Preparations do NOT require a report

REMEMBER: A preparation is a service to prepare financial statements without attaching a report or determining whether the accountant is independent

AGAIN: Preparation engagement = NO Report

14
Q

What should a CPA do when they are completing a review engagement and discover a lack of adequate disclosure that is material to the financial statements?

A

He should disclose this departure from generally accepted accounting principles in a separate paragraph of the report

15
Q

What type opinion is expressed in a review engagement?

A

NO OPINION is expressed in a Review

Remember: A review provides Limited Assurance

16
Q

What is the contingency for a CPA if they compile the financial statements of a nonissuer intended for third-party use that omits all of the disclosures required by U.S. GAAP?

A

He must clearly indicate this in his report; and

clearly report that the omission is NOT undertaken with the intention of misleading the financial statement users

17
Q

What should a CPA make the client aware of WHEN;

  • they accept an engagement to compile a financial projection?
A

They would make the client aware that the;

  • Engagement does not include an evaluation of the support for the assumptions underlying the projection

Why? - Because a compilation provides limited in scope and does not enable the practitioner to express an opinion;

  • thus it should state that evaluation was completed on the underlying financial projection
18
Q

What if nonissuer (e.g. Nonpublic Company) requests that a CPA change an audit engagement to a review engagement and the CPA agrees to the change?

HOW should the accountant’s review report be modified?

A

The CPA should;

  • Issue the review report without mentioning the change in engagement

Why? -Because the subsequent report should not refer to the original engagement Hence the change in engagement is not mentioned

NOTE: the auditor should consider the reason for the request

19
Q

Under what condition can a CPA accept an engagement to apply agreed-upon procedures to prospective financial statements?

A

When the use of the report is restricted to specified users

E.g. The report should be in the form of procedures performed and the findings based on those procedures

20
Q

What type of Preparation engagement is NOT allowed?

E.g. What type of Financial Statement can a CPA NOT make?

A

presenting statements other than for an annual period comparatively with statements for an annual period

  • This is usually is inappropriate
21
Q

Which engagements of the SSARs engagements require an Engagement (e.g. agreement) Letter?

A

ALL 3 - The Preparation, Compilation and Review Engagement all require the written agreement (e.g. Engagement Letter) which;

  • describes the terms of the engagement

CAVEAT - Neither the Preparation nor Compilation engagement require a Management Rep Letter

Why? - Because the CPA is NOT gathering evidence to express an opinion