A6/M2 Preparation Engagement

Question 1

what is a preparation engagement?

Answer 1

• an engagement to prepare FS is a NON ATTEST service and does NOT REQUIRE a determination about whether the accountant is INDEPENDENT
• does not require the practitioner to obtain a management representation letter
• nonissuer/private co. only

Question 2

what are accountant’s responsibilities?

Answer 2

• prepare the FS
• NOT require and will not verify the accuracy and completeness of the financial info provided by client

Question 3

what are management’s responsibilities?

Answer 3

• select accounting principles generally accepted in the US as the financial reporting framework
• prevent and detect of fraud
• ensure that the entity complies with laws and regulations
• ensure the accuracy and completeness of records, documents, any significant judgements provided to the accountant to prepare FS
• provide additional documents and unrestricted access necessary to communicate
• agree that no assurance is provided on each page of FS

Question 4

what should auditor do if they cannot include a statement “no assurance is provided” on each page of the FS?

Answer 4

• issue a disclaimer that makes clear that no assurance is provided on the FS
• perform a compilation engagement
• withdraw from the engagement

Question 5

what are the services not required to follow SSARS?

Answer 5

1. personal financial plan/statements
2. financial statements solely for submission to taxing authorities
3. in conjunction with litigation services that involve pending or potential legal/regulatory proceedings
4. in conjunction with business valuation services