A6 Accounting and Review Service Engagements, Interim Reviews and Ethics and Professional Responsibilities Flashcards
What is the authoratative body designed to promulgate standards concerning accountant’s association with unaudited financial statements?
Acounting and Review Services Committee
What is included in a preparation engagment?
- Preparing clients financials - non issuer
- Each page must state “no assurance provided”
- No report
- Independence not required
- SSARS
What is included in a compilation engagement?
- No assurance provided (do NOT say we are not aware of material modifications….)
- Independence NOT required, but if you are not independent, must indicate in report
- Low level of service, look over for accuracy of F/S, no inquiry to management, no analytical procedures
- SSARs
- Exam trick: No adverse opinion on Compilation … no opinion at all
- NO management rep letter
What should be included in the standard compiliation report if substantially all disclosures are omitted?
- Paragraph identifiying that disclosures are omitted
- disclaiming that no opinion is expressed
- state that if omitted disclosures were included, they might affect the user’s conclusion
*Note: It is okay to exclude disclosures, as long as it is not done with intent to decieve.
What are some of the key statements on a review report??
- Review includes primarily applying analytical procedures and making inquiries of management
- Substantially less in scope than an audit (explicitly stated)
- Not aware of any material modifications to the F/S (limited assurance)
- Each page should say “See Independent Accountant’s Review Report”
What type of work is completed in a financial statement review of a non-issuer?
- Limited assurance = independence required
- SSARS
- Management Rep letter required
- Understand the client’s business
- Perform analytical procedures
- Make INTERNAL inquiries
- NOT: Test internal controls, perform audit tests, assess fraud risk - this is audit business
What is the treatment if there is a departure from GAAP in a review engagement and management will not revise?
Disclose the departure in a a separate paragraph.
after Accountant’s Conclusion under the heading “Known Departures from GAAP”
*NOTE* Departures from GAAP are the only reason to modify standard review report
Comparative statements, if last year was audited and this year reviewed, what should be included in separate paragraph in review report?
- That prior period statements were audited
- date of previous reports
- the opinons expressed, and if other than unmodified, the reasons for modification
- No auditing procedures have been performed
If interim review is presented in an SEC registration statement, what clarifying statement should be added?
Accountant’s review report is not art of the registration statement within the meaning of the Securities Act of 1933
When is CPA allowed to charge contingent fees?
- When contingent fees are fixed by the court
- Providing a private letter ruling
- compilations of F/S expected to be used by 3rd party only if the member includes a statement that member is not independent (remember, lack of independence ok in compilation if disclosed)
Why does the CPA profession find it so essential to promugate ethical standards?
A distinguishing mark of the profession is its acceptance of responsibility to the public.
What is the review process for firms which audit public companies?
- Must be registered with PCAOB
- Any firms which perform more than 100 audits a year are inspected annually
- Less than 100 audits a year are inspected at least once every 3 years
What is required to be filed in the annual report of an issuer by Section 404 of SOX?
Management’s assessment of the effectiveness of internal control over financial reporting.
The auditors are required to attest to andreport on the internal control assessment made by the management of the issuer.
The PCAOB consists of :
Two CPAs and three non-CPAs
What is the authoratative body designed to promulgate standards that provide performance and reporting guidance for preparation of financial statements, compilations engagements and reviews of the unaudited financial statements of a nonissuer is the
AICPA : American Institute of Certified Public Accountants
Statements on Standards for Accounting and Review Services (SSARS) are issued by the AICPA’s Accounting and Review Services Committee, the senior technical committee of the Institute designated to issue pronouncements in connection with the unaudited financial statements or other unaudited financial information of a nonissuer. Just as how the audit reports refer to GAAS or PCAOB, Audit and Compilation reports refer to SSARS as promulgated by the AICPA
