A2: Other Reports-Attest Engagements Flashcards
Attest Engagements
What is it?
Where we are doing an audit or examination or something other than historical financial information.
Attest Engagements may result in reports related to:
Compliance with laws or regulations
compliance with contracts
intenral control
computer systems and software (Trust Services)
info supplimental to fs
prospective info
Types of Trust Services-2
WebTrust Engagements-ecommerce
SysTrust Engagements-provide assurance on reliability of electronic systems
Statements on Standards for Attestation Engagements (SSAE)
established by AICPA for major attestation services such as:
- Agreed upon procedures- not doing an audit, instead whatever they tell you to do
- Financial forecasts and projections
- pro forma F/S
- Intenral control over financial reporting
- Compliance
- Managements Discussion and Analysis-*required by SEC
Types of Standards that apply to services a CPA may provide
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)
Attestation Standards
A framework for attest function beyond historical f/s
The Eleven Attestation Standards include
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
Scrope Restrictions
Two types
Examination-positive assurance
review-negative assurance
*with both of these considered withdrawing if there is a scope limitation
Conclusion
The conclusions expressed by the practiioner fall into three groups:
- Conclusion-a positive opinion, high level of assurance, generally based on a variety of procedures, including search, verification, inquiry, and analysis.
- Review (negative assurance)-moderate level of assurance, generally based on inquiry and analytical procedures.
- Agreed-upon Procedures-no assurance but procedures and findings are listed.
Agreed-Upon procedures Engagements
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)
Agreed upon procedures engagements
Conditions (IAMSUR)
- Independence of the practiioner
- Agreement of the parties
- Measurability and Consistency
- Sufficiency of the Procedures
- Use of the Report is restricted to the specified parties
- Responsibility for the Subject Matter
- Engagements to Perform agreed upon procedures on prospective F/S-must include summary of significant assumptions
Financial Forecasts and Projections
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.
A practioner is associated with prospective f/s primarly in one of three ways:
Compilation-no assurance
Examination engagement -opinion
agreed upon proceducres-disclaimer
*note that a review of prospective f/s is not allowed.
Compilation of prospective f/s purpose
proper assembling of the financial data based on the responsible party’s assumptions. There is no assurance expressed.
Compilation of prospective f/s
The practitioner is not required to gather?
a practitioner may not issue a compiliation report if the what?
- supporting evidence
- the entity fails to disclose a summary of the significant assumptions that are used in the prospective f/s
Contents of Compilation Report
- statement that the practitioner has compiled f/s in accordance with attestation stds estbalished by AICPA
- 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
- a caveat that the pros. results may not be acheived
- a statemnt that the practiioner assumes no responsibility to update the report for events and circumstances occurring after the date of the report. and
- the signature of the practitioners firm and the date of the report.
- identificaiton of the prospective f/s presented by the responsible party
Is there a statement in the compilation report that the prosective financials are in conformity with AICPA guidelines?
No
Examination of Prospective F/S
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
Modifications to the Opinion of Examination of prospective F/S
- AICPA guidelines not followed
- significant assumptions are not disclosed (adverse opinion)
- Basis not reasonable: one or more of the significant assumptions do not provide a reasonable basis for the f/s (adverse opinion)
- Scope limitation (disclaimer)
Prospective F/S-Agreed-upon procedures
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.
Pro Forma F/S
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.
Pro forma F/S maybe examined or reviewed?
Yes
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?
yes
yes
Managements’ Discussion and Analysis
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.
