AUD-Lesson 7 COMPILATIONS and Preparation_GRADUAL

Question 1

What are the five categories in AR-C 60?

Answer 1

Financial Statements
Ethical Requirements
Professional Judgement
Conduct of the Engagement in Accordance with SSARS
Engagement Level Quality Control

Question 2

Under a compilation, when is withdrawal required?

Answer 2

Management is unable or unwilling to provide info needed to satisfactorily complete the engagement

There are departures from the AFRF and management is unwilling to correct or disclose these departures

Question 3

What is the length of the compilation report?

Answer 3

One paragraph report. (No assurance)

Question 4

Which of the three types of SSARs engagements need a signed engagement letter?

Answer 4

All three – Preparation, Compilations, Reviews

Question 5

What is the objective of a SSARS Financial Statement preparation engagement?

Answer 5

To prepare F/S in accordance with the applicable Financial Reporting Framework

Question 6

What is the objective of a SSARS Compilations engagement?

Answer 6

Apply accounting and financial reporting expertise to assist management in the presentation of F/S and reporting in accordance with AR-C 80, without giving any assurance about the accuracy and completeness of F/S, and without making material modifications.

Question 7

Is independence required for the preparation of F/S?

Answer 7

No.

Question 8

Is independence required for Compilations?

Answer 8

No, but independence is assumed unless it the accountant states otherwise.

Question 9

For F/S preparation, what is included in the engagement letter?

Answer 9

Objective of engagement
Management Responsibility: Preparation & presentation of F/S
Accountants Responsibility: Comply with SSARS
Limitations of the engagement
Applicable framework
Expected non-GAAP or inadequate disclosure
Management agrees that no assurance is provided (EACH PAGE)

Question 10

For Compilations, what is included in the engagement letter?

Answer 10

Objective of engagement
Management Responsibility: Preparation & presentation of F/S
Accountants Responsibility: Comply with SSARS
Limitations of the engagement
Applicable framework
Expected form & content of compilation report

Question 11

What kind of an engagement is F/S preparation?

Answer 11

None attest; no assurance

Question 12

What kind of an engagement is a Compilation?

Answer 12

Attest engagement; no assurance

Question 13

Is a report required for F/S preparation?

Answer 13

No

Question 14

Is a report required for Compilations? What is included?

Answer 14

Yes. The report needs to statement that no procedures were performed to verify the accuracy of the F/S - A disclaimer of opinion.

Question 15

What are the elements of a report for a Compilation?

Answer 15

CARD
Compiled Statements
AICPA Standards - included SSARs
Responsibility of Management
Disclaim opinion or assurance

Question 16

What standards govern SSARS engagements?

Answer 16

Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services)

Question 17

What disclosures are required for Compilation engagements?

Answer 17

Disclosures not necessary must state that they are not included

Question 18

What are the requirements for Agreed Upon Procedures?

Answer 18

Independence is required; Only limited use by the client is allowed.

Question 19

In simple terms, what is a compilation report?

Answer 19

When a CPA assists management in presenting F/S information that comply with an applicable financial reporting framework. Goal is to make sure F/S are free from obvious clerical errors or errors in applying accounting principles. Is an attest engagement, but does no assurance that there are not any material misstatements.

Question 20

What are the AR-C Sections for Preparations, Compilations, and Reviews

Answer 20

Preparation: AR-C 70

Compilation: AR-C 80