A6 Accounting and Review Service Agreements, Interim Reviews, and Ethics and Professional Responsibilities Flashcards
What is a non-attest service?
An engagement to prepare financial statements (preparation engagement) and does not require independence. (SSARS) No assurance provided.
If auditor finds that prior going concern issues are alleviated during a review engagement, what is the auditors responsibility regarding the reporting of the matter?
Auditor is not required to modify the accountant’s review report but can choose to emphasize the issue in the report.
Contingent Fee Rule
Prohibited for an examination, review, or audits of a prospective client’s financial info. Permitted when they involve a legal proceeding or ruling. When a CPA receiving a contingent fee for a private letter ruling, it would be allowed the the Rule and not be considered “contingent” because of the legal requirements.
What are the required procedures for a review engagement for interim financial information of a public held entity?
- compare disaggregated revenue data for current interim review period with prior periods. Ex. comparing ratios from recorded amounts to accountant’s expectations.
- obtain evidence that reconciles with accounting records. But no need to confirm account balances.
- inquire with management to see if they are aware of any fraud, suspected fraud, or allegations of fraud.
GAGAS ethic principles include:
- serving public interest
- integrity
- objectivity
- proper use of government information
- resources and positions
- professional behavior
What’s the objective of a review of interim financial information of a public entity?
To provide the accountant with a basis for reporting whether modifications should be made to confirm with GAAP.
PCAOB: Lead audit or coordinating partner and the reviewing partner must rotate off the audit every ___ years.
Five
Rule 2-01 of the US Securities and Exchange Commission (SEC) Regulation S-X outlines rules for auditors of SEC registrants. These rules concern what standard?
Independence requirements of auditors.
What are some examples of a business relationship that will impair the relationship with an attestation client?
- Director, officer, employee or management level
- promoter, underwriter, borker-dealer or voting trustee
- stock transfer or escrow agent
- general counsel
- Trustee for a client’s pension or profit-sharing trust
What are some activities that impair independence with an attestation client?
- bookkeeping services
- custody of client assets
- supervising/management of client employees
- financial information system designs and implementation
- appraisal, valuation, or actuarial services (material and subjective)
- manage internal audit activities
- litigation services (court appointed expert)
- expert witness services
For current period compiled and prior period reviewed engagements, what are the reporting options?
- Assume responsibility for prior period statements
- Combine prior period reviewed and current period compiled (should state that no review procedures were used after date of reviewed report)
- Issue separate reports.
If an accountant was asked to issue a review on one of the financial statements, what will the accountant need to do?
Accountant can issue a review report on one financial statement as long as the scope of the accountant’s inquiry and analytical procedures are not restricted.
For compilation report on unaudited financials of a nonissuer, the accountant should….
Disclaim an opinion on the financial statements
If there is a change in accounting principle such as LIFO to FIFO accounting for inventory and it’s disclosed in the footnotes AND not material to the FS, what is the opinion the auditor should issue?
Unmodified opinion
A compilation report should include what kind of assurance?
no assurance
