19.2 Flashcards
Which of the following items should be included in prospective financial statements issued in an attestation engagement performed in accordance with Statements on Standards for Attestation Engagements?
All significant assumptions used to prepare the financial statements.
Prospective financial statements consist of financial forecasts or projections, including summaries of significant assumptions and accounting policies. A practitioner should not accept an engagement to examine or apply agreed-upon procedures to prospective financial statements if the significant assumptions are not disclosed.
A practitioner in an attestation review engagement intends to express a qualified conclusion in the report based on a misstatement that is material but not pervasive. The practitioner should use the language
Except for the effects.
If the subject matter is misstated and not corrected, the practitioner should determine whether an “except for the effects” qualification is appropriate. A qualified conclusion normally is expressed when the misstatement is material but not pervasive. In this case, the assurance should be directly on the subject matter, not on the assertion.
Which of the following should a practitioner perform as part of an engagement for agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements?
Issue a report on findings based on specified procedures performed.
An agreed-upon procedures engagement is one in which a practitioner is engaged by a client to issue a report of findings based on specific procedures performed on subject matter.
A practitioner who performs an examination attestation engagement should document
Who reviewed the work.
For an examination service, attestation documentation should suffice, among other things, to (1) describe the nature, timing, and extent of the procedures performed and (2) identify the specific items or matters tested. It also should state (1) who performed the work, (2) the date such work was completed, (3) who reviewed the work, and (4) the date and extent of such review.
In an attestation review engagement, each of the following items should be included in the presentation of pro forma financial statements except
All direct and indirect effects attributed to the related transaction.
Pro forma adjustments are based on management’s assumptions. They should include all significant direct effects of the transaction (or event).
In which of the following engagements would a practitioner provide limited assurance about the possible significant effects on the historical financial statements if a change in capitalization had occurred at an earlier date?
A review of Pro forma financial information.
PFFI shows “what the significant effects on historical financial information would have been had a consummated or proposed transaction (or event) occurred at an earlier date.” Consequently, the practitioner in a review engagement provides limited assurance.
A practitioner has been engaged to apply agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements (SSAE) to prospective financial statements. Which of the following conditions must be met for the practitioner to perform the engagement?
The practitioner and specified parties agree upon the procedures to be performed by the practitioner.
The following conditions should be met to accept an engagement: (1) The specified parties agree to the procedures and take responsibility for their sufficiency, (2) an alert restricts report use to those parties, and (3) the statements include a summary of significant assumptions.
A practitioner may accept an agreed-upon procedures engagement to calculate the rate of return on a specified investment and verify that the percentage agrees with the percentage in an identified schedule provided that
The use of the practitioner’s report is restricted.
An independent practitioner may accept such an engagement if (1) the specified parties agree to the procedures and take responsibility for their sufficiency, (2) the subject matter is subject to reasonably consistent measurement, (3) evidence is expected to exist providing a reasonable basis for the findings, (4) the use of the report is restricted, and (5) other conditions are met. The report should state that it is intended solely for the information and use of the specified parties and is not intended to be used and should not be used by anyone other than these specified parties.
A practitioner may accept a compliance attestation engagement to perform
Agreed-upon procedures:
Examination:
Review:
Yes
Yes
No
The practitioner may perform agreed-upon procedures if the specified users participate in establishing the procedures to be applied and take responsibility for the sufficiency of such procedures for their purposes. The practitioner also may conduct an examination in which (s)he gathers evidence to support an opinion. Both types of engagements may be performed with respect to compliance with specified requirements. But an examination to report on control over compliance is not performed under AT-C 315. AT-C 315 also does not provide for a review engagement.
All attestation engagements require the practitioner to
Be independent.
All attestation engagements require the practitioner to be independent.
All of the following are correct statements regarding compliance attestation engagements except
A compliance attestation provides a legal determination of an entity’s compliance.
A compliance attestation engagement includes but is not limited to providing assurance about the entity’s (1) compliance with specified financial or nonfinancial requirements (laws, regulations, rules, contracts, or grants) and (2) effectiveness of internal control over compliance with specified requirements (only in an agreed-upon procedures engagement). A compliance attestation engagement does not provide a legal determination of an entity’s compliance.
In an attestation review engagement, the practitioner should request from the responsible party
Written assertion.
The practitioner must request a written assertion from the responsible party in attestation examination or review engagements.
Preconditions for all attestation engagements include all of the following except
Be satisfied that the practitioner can be considered the responsible party.
The responsible party is responsible for the subject matter. The practitioner cannot be the responsible party.
Relative to prospective financial statements, a practitioner may accept an engagement to
Review:
Examination:
No
Yes
AT-C 305 does not provide for a review of PFSs but does allow an examination.
In an examination or review attestation engagement, an engaging party may not be the responsible party. For example, this party may be a potential acquirer of another entity. If a responsible party who is not the engaging party refuses to provide a written assertion, the practitioner should
Disclose the refusal in the report.
In an examination or review attestation engagement, when an engaging party is not the responsible party, and the responsible party refuses to provide a written assertion, the practitioner need not withdraw from the engagement. But the practitioner should (1) disclose the refusal in the report and (2) restrict use of the report to the engaging party.
