22 - IV: Other professional services 3 Flashcards
Prospective financial information: What are 2 types of engagements?
Examination.
Agreed-upon procedures.
Prospective financial information: what are additional preconditions to accept an engagement for both forecast and projection? For projection? For a partial presentation?
*The responsible party has to agree to;
Disclose the sig assumptions.
Disclose which assumptions are hypothetical.
Comment on the limitations of the presentation’s usefulness.
The prospective financial info must include a summary of sig assumptions.
Prospective financial information: what must the practitioner request?
A written assertion from the responsible party.
Prospective financial information: what if responsible party refuses to provide a written assertion?
Withdraw.
Prospective financial information: what must the practitioner evaluate re: sig assumptions?
The support for sig assumptions - suitably supported? - if each sig assumption is supported by the “preponderance” (more than 50%) of the info.
Prospective financial information: Forecast: procedures - what should evaluate?
Evaluate whether there is a reasonably objective basis for the forecast and whether sufficiently objective assumptions can be developed for each key factor.
Prospective financial information: Projection: procedures - what should evaluate?
Evaluate whether the hypothetical assumptions are consistent with the purpose of the projection (need not obtain support for the hypothetical assumptions).
Prospective financial information: Examination of Forecast: Additional written representations?
The forecast presents the expected financial stmts and reflects expected conditions.
The underlying assumptions are reasonable and suitably supported.
The range was not selected in a misleading manner (if range was used).
Prospective financial information: Examination of Projection: Additional written representations?
- Identify the hypothetical assumptions and any that are considered to be improbable.
- Describe the limitations of the usefulness of the presentation.
- The projection presents the expected financial stmts and reflects expected conditions and hypothetical events.
- The underlying assumptions (excluding hypothetical ones) are reasonable and suitably supported.
- The range was not selected in a misleading manner (if range was used).
Prospective financial information: Written Representations: If refused when responsible party = engaging party? When responsible party is not engaging party?
No alternatives either way.
Scope limitation - may lead to withdrawal.
Prospective financial information: which report is appropriate for general use?
Examination report on a forecast.
Prospective financial information: Examination report: when should a qualified or adverse opinion expressed?
When prospective financial info departs in a material way from AICPA presentation guidelines.
Prospective financial information: Examination report: when should an adverse opinion expressed?
When prospective financial info fails to disclose any sig assumptions (or if any are not suitably supported) or they do not provide reasonable basis for the forecast or projection.
Prospective financial information: Examination report: when should disclaimer of opinion be expressed?
When unable to obtain sufficient appropriate evidence.
Pro Forma Financial Information: definition?
A presentation that shows what the significant effects on historical financial information might have been had a consummated or proposed transaction (or event) occurred at an earlier date.
Pro Forma Financial Information: what are 2 types of engagement?
Examination and reviews.
Pro Forma Financial Information: Additional preconditions?
*Doc containing pro forma info must include the historical financial stmts (or readily available).
*Can’t express a higher level of assurance than was expressed on the historical FS.
*Examination: The practitioner must have audited FS.
Review: The practitioner must have audited FS or reviewed.
*Audit report or review report must be included in the doc containing the pro forma info
*Obtain an appropriate level of knowledge of the entity’s accounting and financial reporting practices.
Pro Forma Financial Information: Written assertion: If refused?
Withdraw.
Pro Forma Financial Information: What are procedures?
Obtain;
an understanding of the transaction/events.
an understanding of the accounting and financial reporting practices.
Discuss w/ management their assumptions about the effects of the transaction/event.
Obtain sufficient evidence re: resulting adjustments.
Evaluate whether;
- pro forma adjustments are included for all all sig effects.
- management’s assumptions are presented appropriately.
- pro forma adjustments are consistent.
- computation of the adjustments are properly applied.
- Evaluate descriptions of the transactions/events, the underlying assumptions.
- historical FS are adequately identified.
Pro Forma Financial Information: Additional written representations?
- Management is responsible for the assumptions.
- Assumptions are factually supportable.
- Assumptions provide a reasonable basis for sig effects.
- The related adjustments properly reflect the assumptions.
- The pro forma amounts properly reflect those adjustments to the historical FS.
- Pro forma adjustments are consistent w/ applicable financial reporting framework.
- Properly presented w/ disclosures.
Pro Forma Financial Information: If management refuse to provide written representations?
No alternatives. Withdraw - scope limitation.
Pro Forma Financial Information: what are focus of opinion (examination)/conclusion (review)?
- Whether management’s assumptions provide a reasonable basis for presenting the sig effects.
- Whether the pro forma adjustments give appropriate effect to those assumptions.
- Whether the pro forma amounts reflect the proper adjustments to the historical FS amounts.
Compliance Attestation: what are 2 types of engagements?
Examination related to compliance.
Agreed-Upon procedures related to compliance (or IC over compliance) w/ specified requirements.
Compliance Attestation: what is material noncompliance?
quantitatively or qualitatively material, either individually or when aggregated with other noncompliance.
