A2 - Other Engagements, Reports, and Accounting Services

Question 1

A special purpose framework is a financial reporting framework other than GAAP that is one of the following bases of accounting:

Answer 1

1. Cash basis
2. Tax Basis
3. Regulatory Basis
4. Contractual Basis

A2-3

Question 2

Certain regulators require F/S to be prepared in accordance with a financial reporting framework that is based on U.S. GAAP, but does not comply with all the requirements of U.S. GAAP. Such frameworks are ____.

Answer 2

regulatory bases of accounting.

A2-3

Question 3

The cash, tax and regulatory bases of accounting are commonly referred to as ____.

Answer 3

other comprehensive bases of accounting.

A2-4

Question 4

When applying auditing standards to an audit of F/S prepared in accordance with a special purpose framework, the auditor should:

Answer 4

1. Obtain an under of the purpose, intended users, and steps taken by management to determine that it applicable financial reporting framework is acceptable in the circumstances.
2. Obtain the agreement of management that it acknowledges and understands its responsibility to include all informative disclosures that are appropriate for the special purpose framework.
3. Obtain an understanding of any significant interpretations of the contract that management made in the preparation of the F/S.

A2-4

Question 5

When the F/S are prepared in accordance with a regulatory, contractual or other basis of accounting, the auditor should describe _____.

Answer 5

The purpose for which the F/S were prepared or refer to a note that contains that information.

A2-5

Question 6

Special purpose statements use ___ titles.

Answer 6

non-gaap titles.

A2-5

Question 7

Special Purpose Framework

The explanation of management’s responsibility for the F/S should also make a reference to___. (when management has a choice of financial reporting frameworks).

Answer 7

Its responsibility for determining that the applicable financial reporting framework is acceptable in circumstances.

A2-5

Question 8

Special Purpose Framework

Except when the special purpose financial statements are prepared in accordance with regulatory basis and are intended for general use, the auditor’s report should include an emphasis of matter paragraph that:

Answer 8

1. Indicates that the F/S are prepared in accordance with the applicable special purpose framework.
2. Refers to the note to the F/S that describes that framework.
3. States that the special purpose framework is basis of accounting other than GAAP.

A2-5

Question 9

Special Purpose Framework

Except when special purpose financial statements are prepared in accordance with regulatory basis and are intended for general use, the auditor’s report should include an other-matter paragraph that restricts the use of the auditor’s report to those within the entity, the parties to the contract or agreement, or the regulatory agencies to which the entity is subject, when the special purpose framework F/S are prepared in accordance with either:

Answer 9

1. A contractual basis of accounting; or
2. A regulatory basis of accounting.

A2-5

Question 10

Special Purpose Framework

An other matter paragraph that restricts the use of the auditor’s report should also be used when special purpose financial statements are prepared in accordance with ____.

Answer 10

an other basis of accounting.

A2-5

Question 11

Special Purpose Framework

If the special purpose F/S are prepared in accordance with regulatory basis and intended for general use, the auditor should not include an emphasis of matter or other matter paragraph. Instead, the auditor should express an opinion whether the F/S are:

Answer 11

1. Fairly presented, in all material respects, in accordance with GAAP.
2. Prepared in accordance with special purpose framework.

A2-6

Question 12

Audits of Single FS or Specific Elements

An audit of single F/S or a specific elements, or items of a F/S may be performed as____.

Answer 12

A separate engagement or in conjunction with an audit of an entity’s complete set of F/S.

A2-10

Question 13

Audits of Single FS or Specific Elements

When auditing a single F/S or a specific element of a F/S. the auditor should obtain an understanding of:

Answer 13

1. The purpose for which the single F/S or specific element of a F/S is prepared.
2. The intended users and;
3. The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances.

A2-11

Question 14

Audit of Single FS or Specific Elements

If the auditor’s modified opinion on the complete set of F/S is relevant to the audit of a specific element on the F/S, the audit should:

Answer 14

• Express an adverse opinion on the specific element when the modified opinion on the complete set of F/S is due to a material statement.
• Express a disclaimer of opinion on the specific element when the modified opinion on the complete set of F/S is due to a scope limitation.

A2-12

Question 15

Audits of Single FS or Specific Elements

When the auditor expresses an adverse opinion or a disclaimer of opinion on the complete set of F/S, an unmodified opinion on a specific element in the same auditor’s report would contradict the adverse opinion or disclaimer of opinion and would be the same as expressing a piecemeal opinion. In this situation, when the auditor considers it appropriate to express an unmodified opinion on the specific element, the auditor should do only if:

Answer 15

The opinion on the specific element is not published with and does accompany the auditor’s report on the complete set of the F/S; and

The specific element does not constitute a major portion of the entity’s complete set of F/S or the specific element is not, or is not based on, S/E or NI.

A2-13

Question 16

Audits of Single FS or Specific Elements

An incomplete presentation that is otherwise in accordance with GAAP is a type of single F/S. When the auditor reports on an incomplete presentation that is otherwise in accordance with GAAP, the auditor’s report should include an emphasis of matter paragraph that:

Answer 16

1. States the purpose for which the presentation is prepared and refers to the note in the F/S that describes the basis of the presentation; and
2. Indicates that the presentation is not intended to be complete presentation of the entity’s assets, liabilities, revenues or expenses.

A2-13

Question 17

Compliance Audited FS

Often an auditor is asked to issue a report on a client’s compliance with contractual agreement or regulatory requirement in connection with a F/S audit. The auditor must have ____ the client’s F/S and may only issue a ___ assurance on compliance.

Answer 17

audited; negative.

A2-17

Question 18

Compliance Audited FS

When the auditor’s report on compliance is included in the auditor’s report on the F/S, the restriction on the use of the report applies to ___. If a separate report is issued, then ____.

Answer 18

The entire audit report;

If separate report is issued, then only the report on compliance needs to be restricted as to use.

A2-19

Question 19

Summary F/S

An auditor may be engaged to report on whether summary F/S are consistent, in all material respects, with the audited F/S from which they have been derived.

The auditor should not accept this engagement unless___.

Answer 19

The auditor has also been engaged to audit the F/S from which the summary F/S are derived.

A2-19

Question 20

Summary F/S

The following procedures, and any other procedures deemed necessary, should be performed by the auditor:

Answer 20

Evaluate whether the summary F/S adequately disclose their summarized nature and identify the audited F/S.

A2-20

Question 21

Summary F/S

When the summary F/S are not accompanied by the audited F/S, evaluate:

Answer 21

1. Whether the summary F/S describe where the audited f/s are available; and
2. Whether the audited F/S are readily available to the intended users of the summary F/S.

A2-20

Question 22

Summary F/S

The auditor may issue _____ opinions on the summary F/S. ___ opinion is not appropriate due to the summarized nature of these F/S.

Answer 22

Unmodified or adverse

Qualified

A2-21

Question 23

Summary F/S

The auditor should ___ from the engagement to report on the summary F/S when the auditor’s report on the F/S contains an adverse or disclaimer of opinion.

Answer 23

withdraw

A1-21