AUD 6 Flashcards
What reports can be included in SSARS?
SSARS -preparation, compilation, review
In SSARS report, what must the auditor have?
- Sufficient knowledge to identify applicable SSARS
- Exercise professional judgment
- Able to justify departure from SSARS
- Does NOT apply to other accounting services
Independence is impaired if:
- Spouse, family or close relative is client management
Exception is automobile, insurance loans and borrowing cash or credit cards - Member has a material indirect financial interest in an attest client
- Member is previously employed for the attest client
- Member leaves firm to work for the client
1 year cool off - CPAs make mgmt decisions for the client
- Client is more than 1 year overdue for professional fees
- Actual or threatened litigation
What 2 ethical standards must a CPA keep at all times?
Objectivity and integrity.
Note: independence is only required for attest services
What is included in engagemetn letter of a compilation? and procedures performed in a compilation?
Objective
Auditor responsibility
No accuracy or completeness
Management’s responsibility
Limitations of the engagement
Our report
Gaining an understanding (Procedures)
1. Read the FSs
2. Staff appropriately
What is included in the auditor’s report of a compilation?
Management responsible for FSs
FSs subjected to compilation
Date or period covered
Accountant complied with SSARS
Statement that Accountant did not audit or review the FSs
No procedures to verify accuracy or completeness
Additional paragraphs for:
1. Lack of independence
2. Disclosing omissions and statement on disclosures
3. Supplemental information
information that is the representation of management without audit or review.
Each page marked
Usefulness of projected FSs
What should be included in the additional paragraph when prior period has been audited for a review or compilation?
- The prior period statements were audited
- The date of the previous reports
- The opinions expressed and reasons for it
- That no auditing procedures have been performed since that date
Steps for a review (U LIAR CPA)
- Understanding the client (EL)
Objectives, responsibilities, limitations, framework, form of report
Similar to compilation - Learn and obtain sufficient knowledge of entity’s business
Principles, framework, industry and business
Design analytical procedures and inquiries based on this - Inquiries
Management and personnel
Accounting principles and practices
Procedures in FSs
Significant events or transactions - Analytical procedures
Develop expectation and comparing recorded amounts (Ratios/budgets) - Review other procedures
Read FSs
Perform additional procedures on incorrect work - Client rep letter
Required, Accountant report date, Signed by management - Professional judgment
Document clear understanding of work that you did - Accountant standard report results
Title “independent”
Addressee
Introductory paragraph
Management responsibility
Accountant’s responsibility
Limited assurance
Independent reference
Conclusion
Sign and date
What level of assurance do the following give: Preparation, compilation, review?
Preparation - None
Compilation - None
Review - Limited
Which of the following require independence: Preparation, compilation, review?
Preparation - Not required
Compilation - Not required
Review - Required
What documentation should be included in a preparation?
- EL
- Copy of FSs
- Any significant findings or issues
- Communication with management regarding non-compliance
What is the difference between a compilation and preparation?
- Compilations require a report, while preparations do not.
- Compilations require to disclose nonindependence, while preparations do not.
What is included in a review report?
- Title (Independent accountant review report)
- Addressee
- Intro paragraph
a. State FSs have been reviewed
b. State period covered
c. Statement that review includes analytical procedures and inquiries
d. Statement that review is less than an audit - Management’s responsibility - implementation
- Accountant’s responsibility
a. Conducted with SSARS
b. Limited assurance for an opinion
c. Requirement to be independent - Accountant conclusion
