Assurance and Non-Assurance Services: Review and Compilations Engagements Flashcards
What are 4 types of assurance engagements?
They are broad, including a wide variety of services such as financial statement audits, review engagements, certain types of management consulting, and specialized reports.
Who are the 3 parties to these engagements?
- The user
- The practitioner - Auditor
- The management (or another accountable party)
What is an attest engagement?
What is an example?
When the assertions are made explicitly in writing by the accountable party (the asserter).
The financial statements and the notes.
What is a direct reporting engagement?
What does the PA need to develop?
What is an example?
If there is no explicit assertions made in writing by the accountable party.
The public accountant needs to develop the explicit standards of performance for themselves.
A government auditor assigned to determine whether the goals of environmental protection agency are met by the agency.
What do financial statement reviews provide?
What are review engagements completed for?
They provide some assurance (limited assurance/negative assurance) for the clients that do not require an audit.
Review engagements are completed for other financial information (like verifying the sales for a lease agreement)
Do compilations provide assurance? What do compilations provide?
They provide no assurance, but enable the accountant to prepare financial statements or tax returns, or compile other types of financial information.
For the following three items, describe what type of service they are, whether a public accounting license is needed to perform them, and what is their applicable standards
- Audit engagements
- Review engagements
- Compilations Engagement
- Assurance services (attestation services) and PA license is required, and CAS or IAS
- Assurance services (attestation services) and PA license is required, CSRE 2400
- Non assurance services and a PA license is not require, Canadian Standards on Related Services (CSRS) 4200
For the following three items, describe their independence requirements, level of assurance, then list the assurance procedures performed for each one
- Audit engagements
- Review engagements
- Compilations Engagement
- Yes, high/positive/audit level assurance
- Confirmation
- Inspection
- Re-performance
- Observation
- Enquiry (discussion)
- Analysis
- Yes, negative/moderate/ review level assurance.
- Enquiry (Discussion)
- Analysis
- No, No assurance provided, and non assurance procedures
What does negative assurance mean?
What procedure should not be done in a review engagement?
It means that there is a greater than 0 probability that the financial statements are plausible or meaningful for the given circumstances
You should not confirm the bank, unless you deem it is necessary to perform additional procedures.
For the following three items, describe their proficiency requirements, obtaining an understanding of the business, obtaining an understanding of internal controls, testing the internal controls
- Audit engagements
- Review engagements
- Compilations Engagement
- Proficiency in audits, requirement, requirement, required (for combined audits)
- Proficiency in reviews, requirement, requirement, not required
-Proficiency in compilations, requirement, not a requirement, not required
For the following three items, describe their materiality calculation, due care, training and supervision, and the type of audit report required
- Audit engagements
- Review engagements
- Compilations Engagement
- Requirement, required, required, auditors report
- Requirement but is follows the same formula as the audit engagement, required, required, review report
- Not required, required, not required, NTR (Notice to Reader)
For the following three items, describe their engagement letter requirement, management representation letter, CPA subject to rule of association
- Audit engagements
- Review engagements
- Compilations Engagement
- Yes, yes( and if there is no letter than it is a scope limitation), yes
- Yes, yes (and if there is no letter than it is a scope limitation), yes
- Yes, not required but it is strongly recommended as a best practice, yes
What are the 5 assurance engagement general standards
- The practitioner should have a reasonable basis for believing that the engagement can be completed in accordance with the assurance standards.
- Management must acknowledge the responsibility of the subject matter
- Adequate proficiency to perform the engagement and adequate knowledge of the subject matter
- Engagements performed with due care and an objective status of mind
- Criteria for evaluating the subject matter should be identified or developed.
What are the audit engagement general standards?
The auditor should comply with relevant professional ethical requirements relating to the audit engagements - Competence, Objectivity, and Due Care.
What are the 3 standards for engagement reviews?
They are under CSRE 2400 which have individual general, reporting, and examination standards.
They are also subjected to 7060, of the Auditor Review of Interim Financial Statements and other standards.
What happens if a material misstatement is detected under a review engagement?
If the practitioner becomes aware of a matter that causes the practitioner to believe the financial statements are materially misstated, the practitioner designs and performs additional procedures, that they deem necessary for the circumstances, to conclude on the financial statements.
What is the proper form to report on the financial statements?
Regardless if whether the practitioners conclusion on the statements were modified or unmodified, they shall express it in a form that is applicable to the financial reporting framework that has been applied.
When does the practioner express an unmodified conclusion on the financial statements?
They report an unmodified conclusion if they have obtained limited assurance that enables them to conclude that nothing has come to the practioners attention that causes them to believe that the financial statements are not made with all material respects according to the applicable financial reporting framework.
What are the review engagement general standards?
Performed by persons having adequate technical training and proficiency in conduct reviews, with due care and an objective state of mind.
What are the 3 review engagement examination standards
How do we assess whether something is plausible?
- Adequate planning, proper execution, and proper supervision of assistance
- Posses sufficient knowledge of the business for intelligent enquiry and assessment of information.
- Assess whether information is plausible or meaningful in the circumstances using - Enquiry, discussion, and analysis (other may be used if required)
What are the 2 review engagement reporting standards
- Indicate scope, clearly indicate the nature of the review, and distinguish it from the audit.
- Indicate whether anything causes you not to believe information is in accordance with the criteria. - Explain any reservations and if readily determinable, their effect.
What can the review engagements result in?
Are these reports typical in practice.
The review engagements can result in a qualified opinion report or an adverse opinion report (departure from GAAP)
However these review reports are rarely encountered in practice.
What are the 3 general forms of evidence for review engagements?
What is the objective of the review engagements? What framework must it stay within?
Enquiry, analytical, and discussion procedures
Assess whether the information being reported on is plausible or meaningful in the circumstances within the framework of appropriate criteria (GAAP for financial statements)
What are the four specific procedures that are suggested for reviews
- Obtain knowledge of the clients business
- Make enquiries of client personnel concerning control systems.
- Perform analytical procedures
- Have discussions with management concerning information received and the information being reported on..
