Audit chapter 7 Flashcards
SSARS
In which engagements must you be independent
Yes - Agreed Upon Procedures Reviews Examinations Compilations yes and No No Consultations Tax services Book keeping F/S Prep
What kind of assurance do you give in F/S prep, Compilation and review
F/S prep - no assurance
Compilation - no assurance
Review - limited assurance
Review - what two documents must they get?
A Signed engagement letter and a mgt rep letter - both are required
What is the goal of a compilation
to read the F/S to determine if they are free of obvious misstatements.
they do not look for material misstatements but if they come across them then add explanatory paragraph
What do you do in a review of interim or annual F/S of a non issuer- why do you do it
To provide limited assurance that the F/S are not in need of “material modification” to be in conformity with GAAP
What does a standard Compilation report state:
- the accountant or firm did not audit or review the F/S
- They did not perform any procedures to verify the accuracy or completeness of information
- compilation provides no assurance
- accountant is not aware of any material modification (limited assurance)
What do you do if you are doing a Review and discover the illegal acts that materially affect the F/S that go beyond merely modifying the standard report
withdraw from the engagement
you aren’t expressing an opinion so no disclaimer, adverse or qualified
What must the report on compilations include
A statement that the accountant did not audit or review the F/S
What type of understanding is is required of Prep of F/S, Compilation, and Review
Prep - understand of Financial reporting framework and significant acting policies
Compilation - Understanding of F R framework AND read F/S to see if free from obvious material misstatements and is appropriate in form
Review - Understanding of framework, AND knowledge of industry an identity, ANDFaply A/P and Inquiry (Limited Assurance)
When Reviews are in comparative form - LY Audit, CY Review - what must you add
Add a emphasis or other matter paragraph and indicate that you audited LY, the date of the report, and the type of report, the opinion, the date of the report, if there was a modification any reasons why you have the modifications
when the highest level of service you are performing is Prep of F/S - what standards do you use
- SSARS
What standards do you use if you Prep the F/S that will be compiled by another auditor
- SSARS
What id you prep F/S as a necessary step to compile, Review or audit them . . .
- Not subject to SSARS
What is the date of the compilation report
The date the accountant completed the compilation
The report does not include a description of procedures performed
How can a CPA accept an engagement to compile pro forma financial information
You can except a compilation engagement to provide pro forma financial information as long as you have the historical F/S that were compiled, reviewed or audited.
In your report includes paragraph explaining the objective and limitations of the pro forma information
