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AUD > Audit 7 - SSARS Compilations & Reviews > Flashcards

Audit 7 - SSARS Compilations & Reviews Flashcards

1
Q

<p>Nonattest Services -</p>

A

<p>Nonattest Services - Preparing a trial balance and preparing monthly journal entries are nonattest services that are not subject to the requirements of SSARS, unless they are conducted as part of a financial statement preparation engagement, and require no compilation or review report.</p>

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2
Q

<p>Nonattest Services -</p>

A

<p>Nonattest Services - SSARS establishes the standards for the performance of reviews, compilations, and financial statement preparation engagements.</p>

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3
Q

<p>Prepare F/S Engagement -</p>

A

<p>Prepare F/S Engagement - An engagement to generate financial statements for a nonissuer is an engagement to assist management in presenting financial information in the form of financial statements, which is a financial statement preparation engagement subject to SSARS.</p>

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4
Q

SSARS/Personal Financial Statement - SSARS establishes the standards for financial statement preparation engagements, reviews, and compilations, which include the compilation of personal financial statements.

A

SSARS/Personal Financial Statement - SSARS establishes the standards for financial statement preparation engagements, reviews, and compilations, which include the compilation of personal financial statements.

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5
Q

<p>Completeness/Correctness </p>

A

<p>Completeness/Correctness - When an accountant is engaged to prepare financil statements in a SSARS engagement, the accountnt is NOT REQUIRED to verify the completeness or correctness of information provided by management.</p>

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6
Q

Communicate - The accountant is required to communicate with management regarding any incomplete or incorrect information that does come to the accountant’s attention.

A

Communicate - The accountant is required to communicate with management regarding any incomplete or incorrect information that does come to the accountant’s attention.

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7
Q

<p>Understanding/Client Accounting Policies -</p>

A

<p>Understanding/Client Accounting Policies - In order to prepare the client's financial statements, the accountant is required to UNDERSTAND the client's significant accounting policies.</p>

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8
Q

<p>Prepare FS Engage/GAAP -</p>

A

<p>Prepare FS Engage/GAAP - When financial statements are prepared in accordance with a framework other than GAAP, a description of the framework with major differences from GAAP will be included.</p>

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9
Q

Inadequate Disclosure - When an accountant compiles financial statements that are prepared in accordance with a financial reporting framework other than GAAP, the basis of accounting used and the primary differences between it and GAAP is required to be disclosed.

A

Inadequate Disclosure - When an accountant compiles financial statements that are prepared in accordance with a financial reporting framework other than GAAP, the basis of accounting used and the primary differences between it and GAAP is required to be disclosed.

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10
Q

<p>Review/Limited Assurance</p>

A

<p>Review/Limited Assurance - In a review engagement, the accountant provides limited assurance that the accountant is not aware of any material modifications that should be made to the financial statementsin order for them to be in comformity with GAAP or the appropriate AFRF.</p>

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11
Q

<p>Compilation/No Assurance </p>

A

<p>Compilation/No Assurance - No assurance is expressed in a compilation</p>

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12
Q

Review/Limited Assurance - A review provides limited assurance, which is a form of negative assurance, but does not provide positive (or reasonable) assurance, which only occurs with an audit.

A

Review/Limited Assurance - A review provides limited assurance, which is a form of negative assurance, but does not provide positive (or reasonable) assurance, which only occurs with an audit.

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13
Q

<p>Understanding/Compilation -</p>

A

<p>Understanding/Compilation - The accountant performing a compilation is required to have or obtain an understanding of the client and its business and is required to read the financial statements.</p>

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14
Q

<p>Understanding/Compilation - </p>

A

<p>Understanding/Compilation - Unless the compilation is restricted, management would not represent taht it will not use its compiled financial statements to obtain credit.</p>

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15
Q

Understanding/Compilation - Written representation letters, inquiries of management, and the application of analytical procedures are requirements for the performance of an audit or a review, but not for a compilation.

A

Understanding/Compilation - Written representation letters, inquiries of management, and the application of analytical procedures are requirements for the performance of an audit or a review, but not for a compilation.

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16
Q

<p>Report/Signature </p>

A

<p>Report/Signature - A compilation report is not required to be printed on the accountant's letterhead. Nor is there a requirement that the accountant manually sign the report.</p>

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17
Q

<p>Read Fin St/Obvious Misstatements</p>

A

<p>Read Fin St/Obvious Mistatements - A compilation requires the accountant to read the financial statements and, using that knowledge, evaluate whether there are obvious mistakes in the application of accounting principles.</p>

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18
Q

Read Fin St/Obvious Misttatements - A compilation consists of reading the financial statements with the goal of determining if they rae free of obvious misstatements.

A

Read Fin St/Obvious Misttatements - A compilation consists of reading the financial statements with the goal of determining if they rae free of obvious misstatements.

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19
Q

<p>Understanding of AFRF </p>

A

<p>Understanding of AFRF - Until recently, an accountant needed knowledge of client and industry in order to perform a compilation; now, the accountant is required merely to have an understanding of the financial reporting framework to beused.</p>

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20
Q

<p>Material Misstatements -</p>

A

<p>Material Misstatements - The accountant performing a compilation does not look for material misstatements in the financil statements but is alert to the possibility that they may exist when reading he financial statements.</p>

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21
Q

Testing of Financial Data - In a compilation, there is no testing of the financial data; however, the accountant does have the responsibilities to read the statemetns of for obvious errors as well as understand the company’s accounting records, business transactions and significant accounting policies and practices.

A

Testing of Financial Data - In a compilation, there is no testing of the financial data; however, the accountant does have the responsibilities to read the statemetns of for obvious errors as well as understand the company’s accounting records, business transactions and significant accounting policies and practices.

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22
Q

<p>Date of Report -</p>

A

<p>Date of Report - A compilation report is dated as of the date on which the accountant completes the compilation.</p>

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23
Q

<p>Report/No Opinion </p>

A

<p>Report/No Opinion - A compilation is a nonassurance engagement and, as a esult, the report is required to indicate that the accountant did not perform an audit or review and that no opinion, conclusion, or other type of assurance is provided.</p>

24
Q

Unmodified Report - An accountant’s unmodified compilation report consists of a single paragraph that includes a statement of management’s responsibilty for the financial statements; identification of the financial statements that were compiled, the entity whose financial statements they are, and the period covered by them; an indication that the compilation was performed in accordance with SSARS; and a statement that the accountant did not audit or review the financial statements, was not required to verify the accuracy or completeness of the information therein; and that, as a result, no opinion, conclusion, or other form of assurance is provided.

A

Unmodified Report - An accountant’s unmodified compilation report consists of a single paragraph that includes a statement of management’s responsibilty for the financial statements; identification of the financial statements that were compiled, the entity whose financial statements they are, and the period covered by them; an indication that the compilation was performed in accordance with SSARS; and a statement that the accountant did not audit or review the financial statements, was not required to verify the accuracy or completeness of the information therein; and that, as a result, no opinion, conclusion, or other form of assurance is provided.

25
Q

<p>SSARS -</p>

A

<p>SSARS - Statements on Standards for Accounting and Review Services (SSARS) relate to financial statement preparation engagements, oompilations, and reviews.</p>

26
Q

<p>SSARS -</p>

A

<p>SSARS - Processing financial date for clients of other CPA firms and consulting on accounting matters are nonattest services that are not subject to SSARS.</p>

27
Q

Independence - Independence is required in any assurance engagement, including the audit or review of financial statements.

A

Independence - Independence is required in any assurance engagement, including the audit or review of financial statements.

28
Q

<p>Fraud/Audit -</p>

A

<p>Fraud/Audit - The accountant is required to assess the risk of fraud in an audit, not in a review.</p>

29
Q

<p>Management Letter/Review </p>

A

<p>Management Letter/Review - The accountant is required to obtain a letter of representation from management before issuing a review report.</p>

30
Q

Review/No Opinion - An accountant provvides limited assurance in a review report but does not express an opinion.

A

Review/No Opinion - An accountant provvides limited assurance in a review report but does not express an opinion.

31
Q

<p>Obtain Understanding/Industry Accounting Principles-</p>

A

<p>Obtain Understanding/Industry Accounting Principles- Providing limited assurance is part of a review engagement in which the accountant will have or obtain an understanding of the accounting principles of the induistry as well as perform inquiries and analytical procedures.</p>

32
Q

<p>Inquiries/Analytical Procedures </p>

A

<p>Inquiries/Analytical Procedures - A review consists of performing analytical procedures and making inquiries as well as performing other procedures the accountant considers necessary under the circumstances.</p>

33
Q

Predecessor - Although the accountant may communicate with the predecessor accountant, it is more likely to be related to acceptance issues, not to review working papers.

A

Predecessor - Although the accountant may communicate with the predecessor accountant, it is more likely to be related to acceptance issues, not to review working papers.

34
Q

<p>Inquiries/Analytical Procedures</p>

A

<p>Inquiries/Analytical Procedures - An accounting performign a review engagement would most likely...inquire of management about related party transactions.</p>

35
Q

<p>Inquiries/Board Mtg Actions -</p>

A

<p>Inquiries/Board Mtg Actions - When performing a review engagement, an accounant most likely would ask abou tactions taken at board of directors' meetings.</p>

36
Q

<p>Review/Restricted Use </p>

A

<p>Review/Restricted Use - Review reports may be restricted but are ordinarily general use reports.</p>

37
Q

Review/Analytical Procedures - One analytical procedure conducted in a review may involve comparing the financial statements to budgets or forecasts.

A

Review/Analytical Procedures - One analytical procedure conducted in a review may involve comparing the financial statements to budgets or forecasts.

38
Q

<p>Single Statement Review/Scope Limitation </p>

A

<p>Single Statement Review/Scope Limitation - An accountant may accept an engagement to review or compile a single financial statement as long as the client has not imposed scope limitations on the accountant.</p>

39
Q

<p>Single Statement Review/Scope Limitation - </p>

A

<p>Single Statement Review/Scope Limitation - An accountant is permitted to report on one financial statement as long as the scope of the work is not limited.</p>

40
Q

<p>Obtain Limited Assurance -</p>

A

<p>Obtain Limited Assurance - Reviewed financial statements should be accompanied by a report stating that a review was performed in accordance with SSARS issued by the AICPA, which standards require the performance of procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements.</p>

41
Q

<p>Less Scope than Audit </p>

A

<p>Less Scope than Audit - It is sufficient to indicate that a review is substantially less in scope than an audit, and that accordingly, no opinion is expressed.</p>

42
Q

Review of Nonaudit Client - When engaged to perform the review of the financial statements of a nonaudit clienht, an accountant performs the same procedures as owuld be applied to annual financial statements, including reconciling the interim financial information to accounting records and inquiring of management about their knowledge of fraud affecting the entity.

A

Review of Nonaudit Client - When engaged to perform the review of the financial statements of a nonaudit clienht, an accountant performs the same procedures as owuld be applied to annual financial statements, including reconciling the interim financial information to accounting records and inquiring of management about their knowledge of fraud affecting the entity.

43
Q

<p>Review of Audit Client -</p>

A

<p>Review of Audit Client - Consideration of internal controls is required in a review of the interim financial statements of an AUDIT CLIENT and samples of transaction sis only required during audits when the auditor intends to rely on controls.</p>

44
Q

<p>Review Report/4th Paragraph</p>

A

<p>Review Report/4th Paragraph - The 4th paragraph of an unmodified review report indicates that the accountant is not aware of any material modifications that should be made to the financial statements for them to be in comformity with GAAP. This is a form of limited assurance, not reasonable assurance (for audits).</p>

45
Q

<p>Inquiries of Management -</p>

A

<p>Inquiries of Management - When performing a review, the accountant will make inquiries of management regarding matters such as the maturities, interest rates, and collateral related to notes payables.</p>

46
Q

<p>Confirm -</p>

A

<p>Confirm - Confirming notes payable balances with lenders is an audit procedure that is not generally performed in a review, as is examining records for proper authorization and documenting control procedures to obtain an inderstanding of internal controls.</p>

47
Q

Inquiries/Analytical Procedures - A review consists of performing analytical procedures and making inquiries, which may involve analysis of inventory turnover.

A

Inquiries/Analytical Procedures - A review consists of performing analytical procedures and making inquiries, which may involve analysis of inventory turnover.

48
Q

<p>Review/First Step</p>

A

<p>Review/First Step - The first step an accountant performs in a review engagement is to obtain an understanding of the client and its industry, including accoutning principles and practices followed. It is based on this knowledge that the accountant can evaluate and review evidence obtained as a basis for providing limited assurance. Using that knowledge the accountant will perform analytical procedures, comparing client data to expectations, which may be derived from prior periods, and make inquiries.</p>

49
Q

<p>Nonattest Engagement </p>

A

<p>Nonattest Engagement - When the preparation of FS is the highest level of service an accountant will be performing, the preparation engagement is a nonattest engagement that is subject to the requirements of SSARS, even if the FS are prepared in order to be compiled, reviewed, or audited by another accountant.</p>

50
Q

<p>Nonattest Engagement </p>

A

<p>Nonattest Engagement - When the accountant prepares financial statements in anticipation of compiling, auditing, or reviewing them, the engagement is a nonattest service that is NOT subject to SSARS.</p>

51
Q

Management Letter - In any engagement where an opinion or any other form of assurance is given, a CPA must obtain a representation letter from the client.

A

Management Letter - In any engagement where an opinion or any other form of assurance is given, a CPA must obtain a representation letter from the client.

52
Q

<p>Understanding/Interim Review - </p>

A

<p>Understanding/Interim Review - To obtain, or update, an understanding of the entity and its environment, the accountant will read available documentation; read the most recent annual and comparable interim period financial statements.; consider the results of any audit procedures performed with respect to the currehnt period's financial statements; and make inquiried of management about changes in the entity's business activities; transactions with related parties; and significant changes in internal control.</p>

53
Q

Downgrading Engagement - If an accountant accepts a downgrade from an audit to a review, the review report would not be modified due to the change in service (such as by adding a seperate paragraph discussing the change in engagement scope) but will reflect the results of the review engagement.

A

Downgrading Engagement - If an accountant accepts a downgrade from an audit to a review, the review report would not be modified due to the change in service (such as by adding a seperate paragraph discussing the change in engagement scope) but will reflect the results of the review engagement.

54
Q

<p>Downgrading Engagement </p>

A

<p>Downgrading Engagement - In making the decision to accept the downgrade, the accountant will consider the cost and effort to complete the engagement because, if it is negligible, the accountant would reject the downgrade.</p>

55
Q

<p>Downgrading Engagement -</p>

A

<p>Downgrading Engagement - The accountant will consider the client's reasons for the request to make certain that it is not to prevent the accountant from becoming aware of a material misstatement.</p>

56
Q

<p>Downgrading Engagement </p>

A

<p>Downgrading Engagement - Before a CPA downgrades an engagemen, he or she must first assess the reasons for downgrading to make certain that it is not due to management's desire to avoid the discovery of a material misstatement to the financial statements or to otherwise mislead users.</p>

57
Q

<p>Downgrading Engagement </p>

A

<p>Downgrading Engagement - The accountant must also evaluate the additional costs and effort necessary to complete the engagement to determine if a change in engagement will be cost effective.</p>

AUD (8 decks)

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