Audit 2: Other Reports Flashcards
OCBOA stands for…
Other Comprehensive Bases of Accounting
Some Special Purpose Frameworks
Cash Basis
Tax Basis
Regulatory
OCBOA
Additional Requirements for Auditor when preparing in accordance with special purpose framework?
Know
- Purpose prepared for
- Intended users
- mgmt knows disclosures needed
Get mgmt to agree
In Auditor’s report what titles to use for Fin Stmts prepared by special purpose framework?
Dont Use GAAP titles
Balance Sheet Titles for Special Purpose Frameworks
cash basis
income tax basis
Stmt of assets and liabilities arising from cash transactions-cash basis
Stmt of assets, liabilities, and stockholders equity-income tax basis
What does Mgmt Responsibility paragraph need to say when prepared under Special Purpose Framework
That the reporting framework is acceptable in these circumstances
When and how to restrict use of report on special purpose framework
Restrict always unless prepared on regulatory basis and intended for general use
And if not regulatory use need Emphasis of Matter paragraph
Restrict Use in Other Matter Paragraph
When Regulatory basis report for general use what needs to go in Auditors Report
Fairly Presented in accordance to GAAP
Prepared with Special Purpose Framework
Can you report on single Fin Stmt or Specific Element in Special Purpose Framework?
Yes but need to report on it separately
What to do when Incomplete Presentation but otherwise GAAP in special purpose framework?
Add Emphasis of Matter Paragraph
Negative Assurance is
phrase used
Stmt saying nothing came to the Auditor’s Attention that led them to believe entity was non compliant
“nothing came to our attention”
What sort of Opinions can you give on Summary Financial Stmts?
Unmodified or Adverse or Disclaimer
Not Qualified due to the Summary nature
If Summary Fin Stmts are to get Adverse or Disclaimer what to do?
You should withdraw if you can
Unless forced by law to stay
Levels of Service Below Audit
Assurance
Attestation
Independence
Preparation= No No No
Compilation= No Yes Independence not needed but need to disclose status
Review= Yes Yes Yes
Who is authoritative body on unaudited non issuer stmts and what do they issue
Acct and Review Services Committee AICPA
Statements on Standards for Accounting and Review Services (SSARS)
When does SSARS apply
Preparation of Full Financial Stmts
For Levels of Service Below Audit which need an Engagement Letter?
All do including Preparation
During a compilation an Auditor must understand the parts of the clients business.
What are these parts?
“STAFF”
Staff Qualifications
Transaction Types and Frequency
Accounting Basis used
Form of acct records
Form of Fin Stmts
The Performance Requirements for a Review are
U LIAR CPA Understanding with client Learn Business Inquiries Analytical Procedures Review Client Rep letter from Mgmt Professional Judgement CPA should communicate results
Who should inquires be made of during a review
Inquire of Internal people
Not External people
this is a frequent trick question on Exam
What activities do not have to be performed for Review?
Test of Internal Controls
Audit Test Work
What opinions can be issued for Review?
A2-52
Only Unmodified
cannot do qualified or Adverse
Needs to be modified until it is GAAP or need to withdraw
When performing a higher level of service in the current period what needs to happen to prior period?
Needs to be updated and issued as last paragraph of current report
Other accountant involved in prior period non-audit report should do what if reissuing?
Read the stmts and report
Compare prior and current stmts
Obtain letter from successor CPA saying unaware of any material misstatements
If prior accountant does not reissue report what does current CPA need to do?
Make reference to prior period report and CPAs
or
perform that level of service themselves
If one period is audited what needs to be done
Unaudited stmts need to be clearly marked
and
reissue the prior period report
or
include an other matter report assuming responsibility for prior period stmts
Comfort letters are…
letter to underwriter just before registration of clients securities
It covers date of last auditors report to effective date of registration
When should an auditor not comment or provide assurance?
On
Market Risk Sensitive Instruments
and
Qualitative Disclosures
Attest Engagements are
Auditing/examining something other than historical F/S
Ex.
Compliance with laws and regs
Internal Control
Computer Systems
Etc
Who issues and what are standards for attestation engagements called?
AICPA issues
Statements on Standards for Attestation Engagements (SSAEs)
What is the mnemonic for the attestation standards?
TIPPY PASS ER
What are the general standards of attestation?
TIPPY
Training
Independence
Professional Care in Performance and Planning
Professional Knowledge
Your Belief that information can be evaluated
What are the Fieldwork Standards of Attestation?
PA
Planning and Supervision
Appropriate, Sufficient Evidence to support conclusion
What are the Reporting standards of Attestation?
SSER
Subject matter Identified
Significant Reservations Disclosed
Express Conclusion
Restrict Use
Conclusions that can be reached in Attestation
Examination=High Assurance - positive,
Review=Moderate Assurance - negative
Agreed Upon Procedures=No Assurance
Conditions needed for Agreed upon procedures
I AM SURE
Independence Agreement btw parties Measurabilty Sufficient Procedures Use is Restricted Responsibility is Clients Engagement must include summary of significant assumptions
Difference between Financial Forecast and Financial Projection
Forecast- expected conditions and expected courses
Projection- hypothetical what if scenarios
Pro forma financial stmts are…
Financial stmts are not prospective financial stmts
but may be used to demonstrate a hypothetical or future event
Can be review or examination
For summary financial stmts what are they prepared to be in conformity/compared with?
With the complete financial stmts
NOT GAAP!!!
When are compilation reports issued with compiled stms?
Always even when Restricted use
Financial statements reviewed by an accountant should be accompanied by a report stating
a review is substantially less in scope than an audit
What kind of report says “substantially less in scope than an audit”?
A Review Report
Does an auditor express an opinion in a review?
No
Is a Rep letter from CEO required in a Review?
Compilation?
Review=Yes
Compilation=No
Cutoff tests occur in what sort of engagement?
Audit only
In what engagement are analytical procedures used in the final stage?
During an audit
Can you compare fin stmts that have GAAP disclosure versus ones that do not have them?
No
They are not comparable
SSARS apply when?
to whom?
Reviews of
NonIssuers
The objective of a review of interim financial stmts is…
What if any material modifications need to be made to conform with GAAP
When to talk to predecessor auditor when doing review of a entity’s interim financial information?
When it is a public company
Do not need to do if non-issuer
Restrict the use during an Attestation when…
Material is appropriate only to a limited number of parties
Reporting on agreed upon procedures
Reporting on subject matter and written assertion has not been provided
What sort of engagement on financial projections evaluate the hypothetical assumptions used?
An Examination does
A compilation report on unaudited financial statements of a non issuer should state what?
Disclaim an opinion on the financial stmts
Do you need to present a hard copy of Report if you submit electronic copy for
Review?
Compilation?
No to both, electronic copy only is fine
Do you need to obtain a management representation letter for..
Review?
Compilation?
Review Yes
Compilation NO
The Sufficiency of the procedures performed for agreed upon procedures are whose responsibilities?
The Specified parties (usually Management and the audit committee)
NOT the auditor
