A2: Other Reports-Attest Engagements

Question 1

Attest Engagements

What is it?

Answer 1

Where we are doing an audit or examination or something other than historical financial information.

Question 2

Attest Engagements may result in reports related to:

Answer 2

Compliance with laws or regulations

compliance with contracts

intenral control

computer systems and software (Trust Services)

info supplimental to fs

prospective info

Question 3

Types of Trust Services-2

Answer 3

WebTrust Engagements-ecommerce

SysTrust Engagements-provide assurance on reliability of electronic systems

Question 4

Statements on Standards for Attestation Engagements (SSAE)

Answer 4

established by AICPA for major attestation services such as:

1. Agreed upon procedures- not doing an audit, instead whatever they tell you to do
2. Financial forecasts and projections
3. pro forma F/S
4. Intenral control over financial reporting
5. Compliance
6. Managements Discussion and Analysis-*required by SEC

Question 5

Types of Standards that apply to services a CPA may provide

Answer 5

Audit Engagements-SAS (Statements on Auditing Standards)

Compiliation and Review engagement:SSARS (Statements on Standards for Accounting and Review Services)

Attest engagements :SSAE (Statements on Stds for Attestation Engagements)

Question 6

Attestation Standards

Answer 6

A framework for attest function beyond historical f/s

Question 7

The Eleven Attestation Standards include

Answer 7

Five General are (TIPPY)

Training and Proficiency

Independence

Performance/due professional care in planning and peformance

Professional, adequate knowledge of subject matter

Your belief that the subject matter is capable of evaluation against criteria that are suitable and available to users

Two fieldwork standards (PA)

planning and supervision

appropriate, sufficient, evidence to provide a reaosnable basis for that conclusion

Four reporting standards

identify subject matter or the assertion being reported on

disclose signifiicant reervations about the gnagmenet

expression conclusions about subject matter

restrict use of report to specified parties when:

limited number of parties

reporting on subject matter and written assertion has not been provided

reporting on an agreed upon procedures engagement

Question 8

Scrope Restrictions

Two types

Answer 8

Examination-positive assurance

review-negative assurance

*with both of these considered withdrawing if there is a scope limitation

Question 9

Conclusion

Answer 9

The conclusions expressed by the practiioner fall into three groups:

1. Conclusion-a positive opinion, high level of assurance, generally based on a variety of procedures, including search, verification, inquiry, and analysis.
2. Review (negative assurance)-moderate level of assurance, generally based on inquiry and analytical procedures.
3. Agreed-upon Procedures-no assurance but procedures and findings are listed.

Question 10

Agreed-Upon procedures Engagements

Answer 10

engagement is one in which the practioner is engaged by a client to issue a report of findings based on specific agreed-upon procedures. Remember (IAMSUR)

Question 11

Agreed upon procedures engagements

Conditions (IAMSUR)

Answer 11

1. Independence of the practiioner
2. Agreement of the parties
3. Measurability and Consistency
4. Sufficiency of the Procedures
5. Use of the Report is restricted to the specified parties
6. Responsibility for the Subject Matter
7. Engagements to Perform agreed upon procedures on prospective F/S-must include summary of significant assumptions

Question 12

Financial Forecasts and Projections

Answer 12

two types of prospective f/s that attempt to reflect a company’s expected financial position and expected results of operations. . *Note that pro forma f/s, which are not considered to be prospective financial statements, show what past financial results of an expired period would have been if something had been different.

Financial Forecasts(general and limited use)-reflects, to the best of responsiblle party’s knowledge, the expected financial results of a future period. It is based on expected conditions and expected courses of action.

Financial Projection(limited use only)-is different than a forecast in that it is based on hypothetical assumptions. A projection reflects the financial position and results of operations based on “what if” type of scenario.

Question 13

A practioner is associated with prospective f/s primarly in one of three ways:

Answer 13

Compilation-no assurance

Examination engagement -opinion

agreed upon proceducres-disclaimer

*note that a review of prospective f/s is not allowed.

Question 14

Compilation of prospective f/s purpose

Answer 14

proper assembling of the financial data based on the responsible party’s assumptions. There is no assurance expressed.

Question 15

Compilation of prospective f/s

The practitioner is not required to gather?

a practitioner may not issue a compiliation report if the what?

Answer 15

1. supporting evidence
2. the entity fails to disclose a summary of the significant assumptions that are used in the prospective f/s

Question 16

Contents of Compilation Report

Answer 16

1. statement that the practitioner has compiled f/s in accordance with attestation stds estbalished by AICPA
2. stmnt that comp is limited in scope and does not enable the practitioner to express an opinion or any other form or assurance on the pros. f/s or the assumptions
3. a caveat that the pros. results may not be acheived
4. a statemnt that the practiioner assumes no responsibility to update the report for events and circumstances occurring after the date of the report. and
5. the signature of the practitioners firm and the date of the report.
6. identificaiton of the prospective f/s presented by the responsible party

Question 17

Is there a statement in the compilation report that the prosective financials are in conformity with AICPA guidelines?

Answer 17

No

Question 18

Examination of Prospective F/S

Answer 18

purpse is to express an opinion as to whether:

the statements are presented in conformity with AICPA guidelines and the underlying assumptions provide a reasonable basis for the prospective f/s

independence is required

evidence is required

Question 19

Modifications to the Opinion of Examination of prospective F/S

Answer 19

1. AICPA guidelines not followed
2. significant assumptions are not disclosed (adverse opinion)
3. Basis not reasonable: one or more of the significant assumptions do not provide a reasonable basis for the f/s (adverse opinion)
4. Scope limitation (disclaimer)

Question 20

Prospective F/S-Agreed-upon procedures

Answer 20

must include summary of significant assumptions and a disclaimer on whether the statements are in conformity with AICPA guidelines and on whether the underlying assumptions provide a reasonable basis for the statements.

Question 21

Pro Forma F/S

Answer 21

ARe not prospective f/s, but they may be used to demonstrate the effect of a future or hypothetical event by showing how it might have affected the historical f/s if it had occurred during the period covered by those f/s.

Question 22

Pro forma F/S maybe examined or reviewed?

Answer 22

Yes

Question 23

Pro forma F/S need to obtain written rep letter from management?

a practitionar shoud make reference to the f/s from which the historical financial information is derived, and state whether the such f/s were audited or reviewed?

Answer 23

yes

yes

Question 24

Managements’ Discussion and Analysis

Answer 24

A CPA’s attest function may include examining or reviewing the MD&
A report that mgmnt of a public company issues with audited f/s. The requirements for the MD&A are established by the SEC. The CPA must obtain an understanding of these requirements before undertaking an examination or review of the MD&A.