Audit 2 Flashcards
Other comprehensive bases of accounting
OCBOA
- Cash
- Tax
- Regulatory
Special purpose framework- additional auditor requirements
- the purpose
- intended users
- steps taken by management to determine that the framework is acceptable in the circumstances
Which types of special purpose framework reports are restricted use?
- Contractual basis
2. Regulatory basis (except when regulatory basis for general use)
Piecemeal opinion
These are prohibited.
Definition: different opinions are issued on enough different elements in the same FS as to constitute a “Major portion” of the FS
Compilation requirements- understanding the client’s business
"STAFF" Staff qualifications Transaction types and frequency Accounting basis used to prepare FS Form of the accounting records Financial statements' form and content
3 body paragraphs of a Compilation Report
"CAR MR ARSOM" Compiled (the statements) Audited or Reviewed Management's Responsibility Accountant's Responsibility SSARS Objective is to assist Management in presenting FS
Performance requirements for a Review engagement (for public and private)
"U LIAR CPA" Understanding with the client established Learn and/or obtain sufficient knowledge of the business Inquires Analytical procedures Review- other procedures Client representation letter Professional judgment Accountant should communicate results
What is an accountant no required to do in a Review engagement?
- Test internal controls
- Perform audit tests
- Assess fraud risk
- Communicate with predecessor auditor
3 body paragraphs for a Review engagement
"AM I SAD MR FIRSALA?" Analytical procedures Management's financial data Inquiries Substantially less in scope than an Audit Does not express such an opinion Management's Responsibility Financial statements (prep and fair presentation) Internal control Responsibility (of accountant) SSARSs AICPA Limited Assurance
Acceptable reasons for a change from an audit to a compilation or review
- Change in client requirements
2. Misunderstanding as to nature of the service
Unacceptable reasons for a change from an audit to a compilation or review
- the engagement would uncover errors or fraud
- Client attempting to create misleading or deceptive financial statements
- Client refuses correspondence with legal counsel
- client refuses to provide a signed rep letter
Rule for accountant independence with regard to Review engagements
- An accountant MUST be independent to issue a review report.
- ANY DIRECT interest impairs independence
When is a compilation exempt from the SSARS requirements?
When it is for personal financial statements that are NOT being used to obtain credit.
Compiling current and prior period when there was a service downgrade
Either:
1. issue a compilation report and add a paragraph to report on current period
or
2. reissue prior period report (combined or separately)
When a predecessor accountant’s report is reissued unchanged, they should perform the following procedures
- Read the statements and report of current period
- Compare prior period statements with previous and current
- obtain a letter from the successor accountants
