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AUD > 19 - IV: Other types of reports 2 > Flashcards

19 - IV: Other types of reports 2 Flashcards

1
Q

What is GAGAS?

A

Generally Accepted Government Auditing Standards.

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2
Q

Who issues GAGAS?

A

Government Accountability Office by the Comptroller General of the United States.

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3
Q

What is GAGAS refer to?

A

Yellow Book.

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4
Q

GAGAS: is a written report on IC required for every audit?

A

Yes.

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5
Q

GAGAS: what should report on IC include?

A
  • the auditor’s understanding for planning purposes and assessment of control risk.
  • scope of the auditor’s testing of control.
  • if any sig deficiencies are identified, obtain a response from management (include a written response or summary if verbal) in the report on IC.
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6
Q

GAGAS: reporting on compliance when there is no noncompliance, what should be included?

A
  • Distinguish between general requirements and specific requirements.
  • Focuses on noncompliance having a “material and direct effect” on FS (more than inconsequential).
  • Scope of auditor’s compliance testing.
  • My have duty to report fraud, illegal acts, abuse (if management not responsive).
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7
Q

GAGAS: what kind of illegal acts must the auditor report?

A

Those that could result in criminal prosecution.

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8
Q

GAGAS: what are 3 Cs of reporting requirements?

A

Controls: report on IC over FS in all cases.
Compliance: report on compliance (general/specific).
Crimes: report all know illegal acts - criminal prosecution.

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9
Q

GAGAS: under what Act must an entity who uses above certain federal money be audited? What is the purpose? What are 2 requirements?

A

Single Audit Act of 1984 - applies to State/local government that receive/spend more than $750,000 expenditures in a yr.
Promote efficiency.

  1. Requires a single coordinated audit of the aggregate federal funds (w/ emphasis on “major” assistance programs to be audited), not grant by grant audits.
  2. Requires an audit of the entity’s FS and a schedule of expenditures of federal assistance.
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10
Q

GAGAS: Single Audit Act: which stds should be used in audit? What should an auditor identify? What are other responsibilities?

A

GAGAS.
Identify each “major program” based on risk assessments (determine materiality separately for major programs).
*Test controls over each major program.
*Evaluate compliance (emphasis on direct/material effects on major programs).

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11
Q

GAGAS: Single Audit Act: Reporting requirements?

A
  • Fairness of FS and schedule of expenditures of federal assistance.
  • IC over financial reporting (and testing of controls over major programs) - does not require audit of IC - (sig deficiencies/material weaknesses).
  • Compliance (direct/material affects).
  • Schedule of findings and questioned costs - if the auditor identified any audit findings.
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12
Q

GAGAS: Report title? How does it begin? What are 2 separate sections?

A

“Independent Auditor’s Report on IC over financial reporting on Compliance and Other Matters Based on an Audit of FS performed in accordance w/ Government Auditing Stds”
Begins by identifying that audit of FS performed.
1. IC over Financial Reporting.
2. Compliance and Other matters.

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13
Q

GAGAS: how is illegal acts disclosed?

A

Through references.

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14
Q

GAGAS: Single Audit Act: What does opinion on schedule look like? On compliance look like?

A

S: In our opinion…is fairly stated in all material respects in relation to the FS taken as a whole.
C: In our opinion, …complied in all material respects, with the compliance requirements …that could have a direct and material effect on each of its major federal programs for the yr ended…

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15
Q

When does Compliance Audits (SAS No. 117) apply?

A

When performing a “compliance audit” under GAAS, Government Auditing Standards, a governmental audit requirement to express an opinion on compliance requirements.

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16
Q

Compliance Audits (SAS No. 117): 2 objectives?

A
  1. To express an opinion about the applicable compliance requirement.
  2. To identify requirements that are supplementary to GAAS and GAGAS and to evaluate those requirements.
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17
Q

Compliance Audits (SAS No. 117): which stds does it incorporate re: risk assessment? What understanding must be obtained? What are things must be assessed?

A

AICPA’s risk assessment standards.
An understanding of the applicable compliance requirements and IC over compliance.

  • Assess the risk of material noncompliance and consider whether those risks are pervasive to compliance.
  • Perform further audit procedures in response to risks and develop an overall response to any pervasive risks - perform tests of details.
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18
Q

Compliance Audits (SAS No. 117): what must the auditor do re: supplementary audit requirements?

A

Identify them (beyond GAAS and GAGAS) in the governmental audit requirements.

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19
Q

Compliance Audits (SAS No. 117): are supplementary audit requirement always specified?

A

No, sometimes yes, sometimes just provide frameworks.

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20
Q

Compliance Audits (SAS No. 117): opinion: what is it directed at?

A

At compliance at the program level (and materiality is determined for the program as a whole).

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21
Q

Compliance Audits (SAS No. 117): reporting: what are 3 reporting options?

A
  1. A separate report on compliance.
  2. A combined report on compliance and IC over compliance.
  3. A separate on IC over compliance.
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22
Q

Compliance Audits (SAS No. 117): when does the auditor give positive and negative assurance?

A

P: on items tested.
N: on items not tested.

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23
Q

What is SSARSs?

A

Statements on Standards for Accounting and Review Services.

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24
Q

Who issues SSARSs?

A

AICPA’s Accounting and Review Services Committee (ARSC).

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25
Q

SSARSs: is this applicable to issuers or non issuers? Is this positive or negative assurance?

A

non issuers.

Negative.

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26
Q

SSARSs: what are 3 types of engagement this is applicable to?

A

Preparation of FS.
Compilation.
Review.

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27
Q

SSARSs: what is the organization?

A

Objectives.
Definitions.
Professional requirements.
Application and other explanatory material.

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28
Q

SSARSs: what are 2 types of professional requirements and key word for each?

A
  1. Unconditional requirements - must.

2. Presumptively mandatory requirements - should.

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29
Q

SSARSs: Application and other explanatory material: Is this required? where would it be reported? What does it assist? Key words?

A

No.
Under professional requirements.
Assist in meeting professional requirements.
May, might, or could.

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30
Q

SSARSs: is this enforceable?

A

Yes, by AICPA Rule of Conduct.

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31
Q

SSARSs: what are other guidance? Are they enforceable?

A

Interpretive publications.

Other compilation and review publications.

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32
Q

SSARSs: what are 3 circumstances that may prevent acceptance?

A

Ethical requirement not met (ex: independence).
Necessary info not available or reliable.
Readon to doubt management’s integrity.

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33
Q

SSARSs: what are 3 things an accountant should do before accepting the engagement?

A

Determine competence.
Determine acceptability of the financial reporting framework by management.
Obtain required agreement w/ management.

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34
Q

SSARSs: Preparation engagement (FS) (AR-C 70): what must an accountant obtain initially? what must he meet?

A

A written agreement as to the terms (like engagement letter).
“Preconditions”.

35
Q

SSARSs: Preparation engagement (FS) (AR-C 70): is there report or opinion issued? Is an accountant required to be independent? Why or why not?

A

No.

No because there is no assurance provided.

36
Q

SSARSs: Preparation engagement (FS)(AR-C 70): what must each page of FS say?

A

“No assurance provided”

37
Q

SSARSs: Preparation engagement (FS) (AR-C 70): what understanding must an accountant obtain?

A

Of reporting frameworks used and sig accounting policies.

38
Q

SSARSs: Preparation engagement (FS) (AR-C 70): management responsibility?

A

Sig judgment.

39
Q

SSARSs: Preparation engagement (FS) (AR-C 70): special purpose framework: how must it be presented and where?

A

Must be identified on the face of FS or in a note.

40
Q

SSARSs: Preparation engagement (FS) (AR-C 70): what must an accountant do if records/other info is incomplete/inaccurate?

A

Request additional or corrected info.

41
Q

SSARSs: Preparation engagement (FS) (AR-C 70): what must an accountant do if FS contain known departure?

A

Discuss w/ management and disclose the departure in FS.

42
Q

SSARSs: Preparation engagement (FS) (AR-C 70): what must be documented?

A

The work performed: engagement letter, copy of FS prepared.

Reasons for any noncompliance with a “presumptively mandatory requirement.

43
Q

SSARSs: what are services that are applicable to AR-C 70?

A

Preparation of FS, specified elements, supplementary info, required supplementary info, pro forma financial info, prospective financial info.

44
Q

SSARSs: what are services that are NOT applicable to AR-C 70?

A

“Bookkeeping” services (assisting with preparing), preparation FS to taxing authorities, FS as part of (NOT alongside of) personal financial planning, FS associated w/ litigation services of business valuation.

45
Q

SSARSs: Compilation engagement: what must an accountant obtain initially? what must he meet?

A

A written agreement as to the terms (like engagement letter).
“Preconditions”.

46
Q

SSARSs: Compilation engagement: Is there any report issued?

A

Yes, compilation report.

47
Q

SSARSs: Compilation engagement: Is the accountant required to be independent? what must he do if not?

A

No.

State the fact in a paragraph at the end of the report.

48
Q

SSARSs: Compilation engagement: performing: what are procedures?

A

Obtain an understanding of reporting frameworks used and sig accounting policies.
Read FS to identify obvious material misstatements.

49
Q

SSARSs: Compilation engagement: performing: what must an accountant do if records/other info is incomplete/inaccurate?

A

Request additional or corrected info.

50
Q

SSARSs: Compilation engagement: Report: Structures?

A

Title: “Accountant’s Compilation Report”
Body: 1 paragraph (4 sentences).
Signature block: signature, city/state; date.

51
Q

SSARSs: Compilation engagement: what does it say in the body?

A
  • Management responsibility of FS - in accordance w/GAAP.
  • Performed compilation in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Service Committee of AICPA.
  • Did not audit or review FS or perform procedures to verify management’s info.
  • Disclaimer of opinion: accordingly, we do express an opinion, conclusion, or provide any form of assurance.
52
Q

SSARSs: Compilation engagement: Reporting: what must an accountant do when special purpose framework is used?

A

Add a separate paragraph to state the fact.

Refer to the note to FS.

53
Q

SSARSs: Compilation engagement: what must an accountant do if FS contain known departure? When should he withdraw from engagement?

A

Propose adjustments.
Modify the report by adding a separate paragraph.

When management refuses adjustment or adding a paragraph is not sufficient.

54
Q

SSARSs: Compilation engagement: what must be documented.

A

The work performed: engagement letter, copy of FS compiled, copy of compilation report.
Reasons for any noncompliance with a “presumptively mandatory requirement.

55
Q

SSARSs: Review engagement: Acceptance: What must an accountant do?

A

Meet preconditions.

Obtain a written agreement as to the terms.

56
Q

SSARSs: Review engagement: must an accountant be independent? Why or why not?

A

Yes because he will provides negative assurance.

57
Q

SSARSs: Review engagement: performance: procedures?

A
  • Obtain an understanding of the industry, business activities, accounting principles, etc.
  • Read FS to identify departures.
  • Agree (reconcile) FS to accounting records.
58
Q

SSARSs: Review engagement: performance: If records incomplete/inaccurate?

A

Request correction/additional info.

59
Q

SSARSs: Review engagement: primary review procedures?

A
  • Analytical procedures.
  • Inquiry.
  • Obtain a written management representations letter (signed by CEO and CFO).
60
Q

SSARSs: Review engagement: Report structure?

A

Title: “Independent Accountant’s Review Report.”
Body: 4 paragraph.
Signature block: signature, state/city, date.

61
Q

SSARSs: Review engagement: Report: What’s included in the body?

A
  • Introductory paragraph (no label).
  • “Management’s responsibility” (label).
  • “Accountant’s responsibility” (label).
  • Accountant’s conclusion” (label).
62
Q

SSARSs: Review engagement: Report: What are sentences in the introductory paragraph?

A
  • “We have reviewed…(identify FS and periods).”
  • “A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management.”
  • “A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding FS as a whole.”
  • “Accordingly, we do not express such an opinion.”
63
Q

SSARSs: Review engagement: Report: What are sentences in the management responsibility paragraph?

A

“Management is responsible for the preparation and fair presentation of FS in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of IC relevant to the preparation and fair presentation of FS that are free from material misstatement whether due to fraud or error.”

64
Q

SSARSs: Review engagement: Report: What are sentences in the accountant’s responsibility paragraph?

A
  • “Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Service Committee of AICPA.”
  • “Those stds require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to FS for them to be in accordance with accounting principles GAAP.”
  • “We believe that results of our procedures provide a reasonable basis for our conclusion.”
65
Q

SSARSs: Review engagement: Report: What are sentences in the accountant’s conclusion paragraph?

A

“Based on our reviews, we are not aware of any material modifications that should be made to the accompanying FS in order for them to be in accordance with accounting principles generally accepted in the United States of America.”

66
Q

SSARSs: Review engagement: Report: what must an accountant do if special framework involved?

A

Add an emphasis-of-matter paragraph.

67
Q

SSARSs: Review engagement: Report: what must an accountant do if there is know departure?

A

Add a “Known Departures..” paragraph after conclusion.

68
Q

SSARSs: Review engagement: Documentation requirements?

A

Work performed:
Engagement letter, management representations letter, sig findings (judgments), copy of FS reviewed, copy of the review report

Document reasons for any noncompliance with presumptively mandatory requirement.

69
Q

SSARSs: compiling pro forma info: what is pro forma info?

A

shows the effects that an actual or potential transaction might have had on historical financial information if the transaction had occurred at an earlier date.

Ex: to show the effects of business combinations, a disposal of a business segments, a change in capitalization, etc.

70
Q

SSARSs: compiling pro forma info: acceptance requirements?

A

Must have complied, reviewed or audited the historical FS that is the basis of the pro forma information.
Obtain an engagement letter.

71
Q

SSARSs: compiling pro forma info: procedures?

A

Read the compiled pro forma information (and summary of sig assumptions) for obvious misstatements.

72
Q

SSARSs: compiling pro forma info: Report: what must each page state?

A

“See Accountant’s Compilation Report”

73
Q

SSARSs: compiling pro forma info: must an accountant be independent? Reporting requirement?

A

No.

Report should state the fact.

74
Q

SSARSs: compiling pro forma info: Is a report required? When is it not required?

A

Yes.

When engaged to assist with the preparation.

75
Q

SSARSs: Supplemental info: how should an accountant present responsibility when compiling or reviewing?

A

Add an other-matter paragraph or State in a separate report on that info.

76
Q

SSARSs: Required supplemental info: how should an accountant present responsibility when compiling or reviewing?

A

Add an other-matter paragraph.

Ex: whether included or omitted, combined.reviewed or not, presented in accordance w/ guidelines or not.

77
Q

SSARSs: Preparing or compiling prospective financial info: what are 2 types?

A
  1. Financial forecast - expected financial position (best guess).
  2. Financial projection - hypothetical (what if).
78
Q

SSARSs: Preparing or compiling prospective financial info: what services are allowed and not allowed?

A

Ok: Preparation, compilation.

Not ok: Review.

79
Q

SSARSs: Preparing or compiling prospective financial info: When should an accountant not associate with prospective info?

A

When sig assumptions are omitted.

80
Q

SSARSs: Preparing or compiling prospective financial info: when should an accountant not associate with financial projections?

A

When (1) fails to identify the hypothetical assumptions or (2) omits a description of the limitations of the usefulness of the projection.

81
Q

SSARSs: Preparing or compiling prospective financial info: compilation report: what must be included?

A
  • The forecasted/projected results may not be achieved.

* The accountant assumes no responsibility to update the report for matter occurring after the date of the report.

82
Q

SSARSs: Preparing or compiling prospective financial info: which report should be restricted for general distribution?

A

A projection.

83
Q

SSARSs: Preparing or compiling prospective financial info: Other services: Is “examination” under SSAE permitted? Does it provide opinion? Is review on these permitted?

A

Statements on Standards for Attestation Engagement.
Yes.
Positive expression of opinion.
Report on the procedures on projection must be restricted.
No.

84
Q

SSARSs: Preparing or compiling prospective financial info: Other services: Agreed-upon procedures allowed? Is review on these permitted?

A

Yes.
Report on the procedures on projection must be restricted.
No.

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