AUD 5 - Integrated Audits, Attestation, Compliance, etc

Question 1

What is an attest engagement?

Answer 1

In an attest engagement, a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter (or an assertion about the subject matter for examinations or reviews) that is the responsibility of another party.

Also, the practitioner must state a conclusion about the subject matter (or the assertion) in relation to the criteria against which the subject matter was evaluated in the report.

Question 2

Difference between an attestation review is similar to a review of financial statements under the AICPA’s SSARSs?

Answer 2

In a financial statement review, the independent practitioner provides limited assurance about whether any material modifications should be made to the financial statements for them to be in accordance with the financial reporting framework (e.g., GAAP).

In an attestation review, the practitioner provides limited assurance about whether any material modifications should be made to subject matter for it to conform to specific criteria.

Question 3

In an audit of an issuer, the auditor must provide an opinion on?

Answer 3

1. The financial statements; and,
2. The effectiveness of internal control

Question 4

In an audit of an issuer, does management or the auditor must assess and report on internal control?

Answer 4

both management and the auditor MUST assess and report on IC

Question 5

What types of controls are considered to be entity level controls?

Answer 5

Entity level controls are:

1. the control environment
2. the risk assessment process
3. policies over risk management practices

Question 6

A report on an issuer’s integrated audit conducted in accordance with AICPA standards?

Answer 6

no it is not, an issuer’s integrated audit is conducted in accordance of the standards of the PCAOB

Question 7

When should an auditor of an issuer render a qualified opinion on internal control?

1. When there is a scope limitation
2. When there is a material weakness in internal control

Answer 7

neither, when there is a scope limitation, the auditor should either disclaim or withdraw; when there is a material weakness the auditor is required to issue an adverse opinion

Question 8

What are examples of an attest engagment?

Answer 8

Examination reports, a review report, an agreed upon procedures report; these are subject to the Statements on Standards for Attestation Engagements (SSAE)

Question 9

What standards are the following subjected to:

1. Audit Engagements
2. Preparation, compilation, and review engagements
3. Attest Engagements

Answer 9

1. Audit Engagements - subject to Statements on Auditing Standards (SAS) for non issuers, PCAOB standards for issuers
2. Preparation, compilation, and review engagements - Statement on standards for accounting and review services (SSARS)
3. Attest Engagements - Statements on Standards for Attestation Engagements (SSAE)

Question 10

What should agreed upon proceeds (AUPs) contain?

Answer 10

a list of the procedures performed and a summary of findings

Question 11

Does an auditor need to be independent for an AUP and a compiliation report?

Answer 11

they need to be independent for an AUP but they do not need to be independent for a compiliation

Question 12

What does an examination of a financial forecast by an auditor involve?

Answer 12

1. Evaluating the preparation of the prospective financial statements
2. Evaluating the support of the underlying assumptions
3. Evaluating the presentation of the prospective financial statements in conformity with AICPA guidelines, and
4. Issuing an examination report

Question 13

Can financial projections and financial forecast be distributed to all stockholders?

Answer 13

a financial projection would be inappropriate if distributed to all stockholders as they are only for limited use. A financial forecast would be appropriate as they are for general use

Question 14

What is a SOC 1 report?

Answer 14

The SOC 1 report addresses the internal controls of a service organization and the effect those controls may have on a user entity’s financial statements.

Question 15

What is the difference between a SOC 1 type 1 report vs Type 2?

Answer 15

A Type 1 report describes the procedures and controls that have been installed, while a Type 2 report provides evidence about how those controls have been operated over a period of time.

A Type 1 report attests to the suitability of the controls being used, while a Type 2 report contains an opinion regarding the operating effectiveness of those controls over the audit period.

A Type 1 report describes procedures and controls as of a specific point in time, while a Type 2 report covers how the controls have been operating during the audit period.

Question 16

Difference between a SOC 1 and SOC 2 report?

Answer 16

SOC 1 is a report on the internal controls over financial reporting at a service organization;

SOC 2 is a report on the internal controls related to one or more of the Trust Services Criteria

Question 17

What is the difference between a financial projection, not a financial forecast?

Answer 17

a financial projection, not a financial forecast, contains one or more hypothetical assumptions.

Question 18

In an audit of an issuer, who should assess and report on internal control?

Answer 18

both management and the auditor

Question 19

The objectives of an examination attestation engagement are to

Answer 19

(1) obtain reasonable assurance about whether the subject matter, as measured or evaluated based on the criteria, is free from material misstatement;
(2) express an opinion in a written report about whether (a) the subject matter is in accordance with (or based on) the criteria, or (b) the responsible party’s assertion is fairly stated; and
(3) communicate further as required (e.g., to those charged with governance).

Question 20

An attestation engagement addresses subject matter that is the responsibility of someone other than the practitioner. The subject matter of an attestation engagement is best defined as

A. What is measured or evaluated against criteria.
B. Data collected by the practitioner.
C. Information used to develop the criteria.
D. Financial statements and information derived from financial statements.

Answer 20

A. What is measured or evaluated against criteria.

In an examination or review, the underlying subject matter is what is measured or evaluated against criteria. In an agreed-upon procedures attestation engagement, it is the phenomenon on which procedures are performed. Subject matter may have many forms, for example, historical or prospective performance (e.g., performance measures) or physical characteristics (e.g., square footage of facilities).

Question 21

For an examination service, attestation documentation should suffice, among other things, to

Answer 21

(1) describe the nature, timing, and extent of the procedures performed and (2) identify the specific items or matters tested. It also should state (1) who performed the work, (2) the date such work was completed, (3) who reviewed the work, and (4) the date and extent of such review.

Question 22

What are the opinions that can be expressed for an examination?

Answer 22

unmodified, qualified, disclaimer, and adverse

Question 23

A practitioner may accept a compliance attestation engagement to perform:

AUPs, Review, and/or Examination?

Answer 23

only for AUPs and Examinations; not for reviews.

Question 24

If there is a scope limitation when the auditor is engaged to express an opinion on IC, what opinion would the auditor give?

Answer 24

a scope limitation requires the auditor to disclaim an opinion or withdraw from the engagement…NOT A QUALIFIED opinion

Question 25

The date of a practioner’s report on AUPs is determined by the occurrence of what event?

Answer 25

The completion of the agreed upon procedures…NOT the delivery date of the final report

Question 26

When an auditor is asked to issue a report on a client’s compliance with contractual agreements or regulatory requirements in connection with a financial statement audit….is it required that the auditor audited those financial statements

Answer 26

yes the auditor must have audited the financials and must be either a qualified or unmodified opinion