A4 AUP & Prospective FS Flashcards
Agreed Upon Procedures (AUP)
Agreed upon procedures engagement involves a practitioner performing specific procedures & report the findings without expressing an opinion or assurance (AICPA Standards)
Elements of AUP
AUP consist on several key elements including agreement on procedures, independence, engagement terms, nature of procedures, use of the report,
AUP Report Elements
The AUP report key elements include Title & Addressee, Intro, Scope & purpose, findings, other information (if applicable), signature, date, & practitioner’s firm address.
There is also a reiteration of NO assurance expressed in the report.
Limited Use
Any type of prospective FS (forecasts) or projections would normally be appropriate for limited use.
Financial Projection
These reflect the financial position & results of operations based on what if scenarios. They are intended solely for the information & use of specified parties.
Compilation of a Projection
A accountant’s standard report on a compilation of a projection shares that:
They have no responsibility to update the report for future events
There’s usually a difference between projected & actual results
Is performed in accordance with SSARS
Compilation of Forecasts
A compilation on a financial forecast includes a statement that there will be differences between forecasted & actual results, and a warning (caveat) that the prospective results of the forecast may not be achieved. No assurance is given that the statements have been prepared in accordance with AICPA guidelines.
Attestation Engagement on Prospective FS
When performing an attestation engagement related to a client’s prospective financials, they should ensure that the client discloses all significant assumptions that are used for prospective financials.
Examinations of Financial Forecasts
An examination of financial forecast/prospective FS is a professional service that involves evaluating:
The preparation of the prospective FS, presentation of the prospective FS in conformity with AICPA guidelines, & examination of report.
If one or more of the significant assumptions don’t provide a reasonable basis for these statements, ad adverse opinion would be issued.
A qualified opinion may be issued if AICPA presentation guidelines were not followed
Partial Presentations
Presntations of prospective financial information which would ordinarily be appropriate for general use because they omit one or more essential elements such as:
Sales or Gross Revenue
Gross Profit or COGS,
Unusual or Infrequently Occurring items
Provision for Income Taxes
, Discontinued Operations, Extraordinary Items, Income From Continuing Operations, Net Income,
Earnings Per Share,
Significant Changes in Financial Position
Review of Pro Forma Financials
A review of pro forma financial information provides limited assurance about the effect of a future or hypothetical event by showing how it might have affected the historical financial statements if it had occurred at an earlier date.
Report on Pro Forma Financials
These reports should include a reference to the FS from which the historical information is derived & a statement as to whether such FS were audited or review.
Financial Forecasts
These reflect the expected financial results of a future period to the best of mgmt’s knowledge.
Prospective Financial Statements
Used for general & limited uses. They are also associated with a practitioner in 4 ways: Preparation, compilation, examination, & AUP engagements
General Use
General Use includes statements used by parties not negotiating directly with the company issuing or other responsible parties.
