AUD - 6 - M1 Flashcards
SSARS - Preparation engagement
SSARS apply when an accountant prepares, compiles, or reviews financial statements. Using information in the general ledger to prepare financial statements outside an accounting software system is considered a preparation engagement.
SSARS - Compilation
Statements on Standards for Accounting and Review Services (SSARS) are applicable for a compilation of a nonissuer.
Do compiled statements need to be accompanied by a compilation report?
SSARS requires compiled financial statements to be accompanied by a compilation report even if the financial statements are not expected to be used by a third party.
When more than one service is performed, what type of report should be issued?
When an accountant performs more than one level of service (for example, a compilation and a review, or a compilation and an audit) concerning the financial statements of a nonissuer, the accountant generally should issue the report that is appropriate for the highest level of service rendered.
What entities are responsible for what types of auditing or accounting standards?
The Auditing Standards Board (ASB) is responsible for auditing standards under GAAS.
The General Accounting Office (GAO) is responsible for audit standards under the federal “Single Audit Act.”
The Financial Accounting Standards Board (FASB) is responsible for GAAP standards.
The Accounting and Review Services Committee is the authoritative body designated to promulgate standards concerning an accountant’s association with unaudited financial statements of a nonissuer (i.e., an entity that is not required to file financial statements with an agency regulating the issuance of the entity’s securities).
What body should an accountant comply with for preparation, compilation, or review of a nonissuer?
An accountant is required to comply with SSARS when he/she prepares, compiles, or reviews financial statements of a nonissuer. Compilation of financial statements requires compliance with SSARS.
Does a compilation provide assurance?
A compilation does not provideassuranceon the financial statements.
A preparation engagement does not require the practitioner to obtain a management representation letter.
A preparation engagement does not require confirmation of accounts receivable. Confirmation of accounts receivable is documentation likely to be included in an audit engagement.
A preparation engagement does not require the practitioner to perform analytical procedures. Therefore, it is unlikely that this would be included in the documentation.
Does a preparation require an engagement letter?
An engagement letter should be included in the documentation of a preparation.
Compilations - during a compilation, does a CPA need to correct financial statements that he believes are materially missated?
YES - the CPA should obtain the additional or revised information need to correct the financial statements
Compilations - if a CPA is performing a compilation and feels the statements are materially misstated and the client refuses to provide additional information what should the CPA do?
Withdraw from the engagement
Compilations - does a CPA express any level of assurance in a compilation?
NO - a CPA does not express any level of assurance on a compilation engagement
