Attestation/Non-Attestation Flashcards
Compilation
Does not include review of IC .
A review of the segregation of duties in the cash disbursement process won’t be included in the documentation
Review engagement (attestation service)
obtaining corroborating external evidence would generally not be required.
Normally Accountant DO perform the following:
A. Inquiring of the accounting department’s management.
B. Reading the available minutes of the latest stockholders’ meeting.
C. Applying financial ratios to the interim financial information.
Compilation
Items included in Accountants documentation could include:
> A memo to the CFO about a potentially significant fraud revealed during compilation procedures.
> Discussion with the client regarding the proper presentation of gross cash flows for investment purchases.
> An engagement letter.
Compilation
An accountant may compile financial statements that omit substantially all disclosures required by GAAP provided the omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant’s report as an additional paragraph.
Neither Compilation nor engagement rwview need to present understanding of internal control.
Neither Compilation nor engagement rwview need to present understanding of internal control.
Compiled financial statements should be accompanied by an accountant’s report stating that:
The compilation was conducted in accordance with SSARS promulgated by the Accounting and Review Services Committee of the AICPA.
Preparation Engagement
Each page of the financial statements in a preparation engagement should include
A statement indicating that no assurance is provided.
Preparation Engagement of FS:
Accountant was precluded by management from including a statement on each page of the financial statements indicating that no assurance is provided. Accountant should:
Issue a disclaimer making clear that no assurance is provided.
The accountant could also choose to instead perform a compilation engagement or withdraw from the engagement altogether.
Compilation report on FS date should be the date of completion of the compilation.
The date on the report should be the date of completion of the compilation.
An accountant agrees to the client’s request to change an engagement from a review to a compilation of financial statements. The compilation report should include:
If an accountant decides that the change is justified, the report should not make reference to the original engagement.
Review engagements should include
inquiries within the client’s organization, such as asking management about the entity’s procedures for recording transactions.
The objective of a review of interim financial information of a public entity is to provide the accountant with a basis for:
Reporting whether material modifications should be made for such information to conform with generally accepted accounting principles.
Example of COMPILED FS: PY audit CY only Review
If the review report on the current period includes a separate paragraph describing the responsibility assumed for the prior period’s financial statements, the additional paragraph should explicitly state that no audit procedures were performed subsequent to the previous period’s audit.
If the review report on the current period includes a separate paragraph describing the responsibility assumed for the prior period’s financial statements, the additional paragraph should explicitly state that no audit procedures were performed subsequent to the previous period’s audit.
UNAUDITED FS:
If the client refuses to accept the CPA’s suggestions, the CPA should add a paragraph modifying the disclaimer to describe the nature and effect of the departure from GAAP.
UNAUDITED FS:
If the client refuses to accept the CPA’s suggestions, the CPA should add a paragraph modifying the disclaimer to describe the nature and effect of the departure from GAAP.
Review Engagements vs. Compilation Engagements
In a review engagement, accountants provide limited assurance, but a compilation expresses no assurance.
Review Engagements :
Understand the accounting principles of the industry in which the entity operates
Understand the accounting principles of the industry in which the entity operates
Review Engagements :
require a management representation letter.
Obtain a management representation letter.
Example of COMPILED FS: PY Compiles & CY Audited
The auditor should either reissue his or her report on the compiled statements or include a separate paragraph in the current year report describing the responsibility assumed for the compiled statements.
I. The report on the compiled Year 1 financial statements should be reissued.
II. The report on the audited Year 2 financial statements should include a separate paragraph describing the responsibility assumed for the compiled Year 1 financial statements.
A compilation report should not include any assurance at all.
A compilation report should not include any assurance at all.
Review Engagements :
Example of PY Documentation from the preceding year’s annual audit NOT relevant for the Interim Review of CY
Scope limitations relate to problems in performing the audit, and, especially since they were overcome, they would bear little relationship to procedures performed in a review.
