A2 (3) - Compilation and Review of Financial Statments

Question 1

Compilation Engagement Objective

Answer 1

Present in the form of financial statements information that is the representation of management without undertaking to express any assurance on the financial statements.

Compilation is not an assurance engagement, it is an attest engagement

Question 2

Review Engagement Objective

Answer 2

Express limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework.

Review is both an assurance engagement and an attest engagement

Question 3

Performance of more than one service

Answer 3

Isue the report that is appropriate for the highest

level of service rendered.

Question 4

SSARS - Statements on Standards for Accounting and Review Services

Answer 4

SSARS provide standards with respect to compilations and reviews of financial statements.

Also apply to engagements in which the accountant is engaged to compile or issue a compilation report on specified elements, accounts, or items of a nonissuer’s
financial statements, or on pro forma financial information of a nonissuer

Also Apply when accountant prepares many adjusting or correcting entries, this could be considered preparation of financial statements

Question 5

SSARS do not apply

Answer 5

1) . few adjusting or correcting entries,
2) . consulting on financial matters,
3) . preparing tax returns,
4) . rendering manual or
5) . automated bookkeeping or data processing services,
6) . processing financial data for clients .

Question 6

Compilation engagement - engagement letter

Answer 6

1. The objectives of the engagement.
2. Management’s responsibilities.
3. The accountant’s responsibilities.
4. The limitations of the engagement,
   5 .Description not other accounting services, if any, to be performed
5. Description about restricted use if the engagement is not expected to be used by third party

Question 7

Compilation engagement - Requirements

Answer 7

1. Knowledge of Industry Accounting Principles and Practices.
2. Understanding of Client’s Business
3. Reading the Financial Statements
4. Fraud and Illegal Acts, Going Concern, and Subsequent Events

Question 8

Compilation engagement - Financial Statements that May be Inaccurate or Incomplete

Answer 8

Withdrawal if the client refuses to provide or revise the information that cause Financial Statements Inaccurate or Incomplete

Question 9

Compilation engagement - Documentation

Answer 9

1. The engagement letter
2. Any significant findings or issues
3. Oral or written communications with management regarding fraud or illegal acts

Question 10

Compilation engagement -Reporting

Answer 10

1. Title
2. Addressee
3. Introductory Paragraph
4. Management’s Responsibility Paragraph
5. Accountant’s Responsibility Paragraph
6. Signature of Accountant
7. Date of the Accountant’s Report

Question 11

Compilation engagement -Other Reporting requirements

Answer 11

Each page of the statements should be marked “See Accountant’s Compilation Report” or “See Independent Accountant’s Compilation Report

compilation report NOT printed on the accountant’s letterhead.

Separate paragraph of the report may be used to

a) . emphasize any matter , such as going concern or subsequent event
b) . Inconsistent with the applicable financial reporting framework
c) . fourth paragraph disclosing omissions of All Disclosures.

Question 12

Compilation engagement - Reporting when Not Independent

Answer 12

YES may compile financial statements and Disclosure Required

Question 13

Compilations of Personal Financial Statements

Answer 13

YES but mention that FS will not be used to obtain credit or for any purpose other than developing the financial plan

Question 14

Exception to Compliance Reporting Requirement

Answer 14

Financial Statements Not Expected to be Used by Third Parties, in that case A written communication is required. It may consist either of a compilation report
or an engagement letter

Question 15

Review engagement - requirements

Answer 15

1. Understanding with client should be established
2. Learn knowledge of the entity’s business
3. Inquiries
4. Analytical procedures
5. Review-other procedures should be performed
6. Client representation
7. Professional judgment used to evaluate results
8. communicate results

Question 16

Review engagement - Reporting

Answer 16

1. Title
2. Addressee
   3- Introductory Paragraph
   4- Management’s Responsibility Paragraph
   5- Accountant’s Responsibility Paragraph.
   6- Engagement Results Paragraph.
3. Signature of Accountant
4. Date of the Accountant’s Report

Question 17

Review engagement - Departure from the Applicable financial Reporting Frame work .

Answer 17

a separate paragraph disclosing the departure should be added to the end of the report.

OR withdraw from the engagement and provide no further services in case not indicate the deficiencies

Question 18

Fraud and illegal act for Both engagements

Answer 18

1. communicated to an appropriate level of management
2. consider the impact of the report
3. Obtain additional or revised information if impact are materially misstated
4. withdraw from the engagement if refused .
5. Communication should be documented

Question 19

Subsequent Discovery of Facts Existing at the Date of both engagement and client refusal to revise information

Answer 19

1. Advising the client to issue revised financial statements
2. Notify, if applicable, any regulatory agencies
3. Notify persons known to be relying or likely to rely on the financial statements

Question 20

Supplementary information - Compilation engagement

Answer 20

Refer to the supplementary information, or the accountant can issue a separate report

Question 21

Supplementary information - Review engagement

Answer 21

Explanation should be included in the review report or in a separate report

Question 22

PASS KEY - while performing compilation service the client omit substantially all disclosures required by generally accepted accounting principles (GAAP).

Answer 22

Accountant should provide in the report that the omission is not intended to mislead the users of the financial statements and is properly disclosed in the accountant’s report.