Audit Report 4

Question 1

If the predecessor auditor’s report is not reissued, an other-matter paragraph is added to the successor auditor’s report indicating

Answer 1

If the predecessor auditor’s report is not reissued, an other-matter paragraph is added to the successor auditor’s report indicating

1. That the financial statements of the prior period were audited by a predecessor auditor.
2. The type of opinion expressed by the predecessor and, if the opinion was modified, the reasons therefor.
3. The nature of an emphasis-of-matter paragraph or other-matter paragraph included in the predecessor auditor’s report, if any.
4. The date of that report.

Question 2

The assertions embodied in MD&A include

(management discussion and analysis)

Answer 2

The assertions embodied in MD&A include

a. Occurrence
b. Consistency with financial statements
c. Completeness
d. Presentation and disclosure

MD&A is included in reports filed with the SEC (e.g.,
Form 10K and 10Q) and in annual reports sent directly to shareholders. In addition, a number of companies that do not report to the SEC prepare such information. This service allows a CPA to provide assurance (“negative assurance” for a review, and “reasonable assurance” for an examination) on a client’s MD&A.

Question 3

Segment information

Answer 3

Segment information

The auditor should obtain sufficient appropriate audit evidence on segment information in accordance with the applicable financial reporting framework by
(1) Obtaining an understanding of the methods used by management in determining segment
information, and (a) Evaluating whether such methods are in accordance with the applicable financial reporting
framework, and (b) Where appropriate, testing the application of such methods.
(2) Performing analytical procedures or other audit procedures appropriate in the circumstances.

NO reference need be made to the segment information when the information has been audited and is found to be adequate and in conformity with GAAP.

Question 4

Trust Services

Trust Services Principles and Criteria

Answer 4

Trust Services are designed to provide information system business assurance and advisory services that instill confidence in an organization, system, or other entity by improving the quality or context of information for decision makers.

They were developed by the AICPA’s Assurance ServicesExecutive Committee.

The CPA reports on whether the system meets one or more of the following PRINCIPLES over a particular reporting period:
1. Security. The system (infrastructure, software, people, procedures, and data) is protected against unauthorized
access (both physical and logical).
2. Availability. The system is available for operation and use as committed or agreed.
3. Processing Integrity. System processing is complete, accurate, timely and authorized.
4. Online Privacy. Private information obtained as a result of electronic commerce is collected, used, disclosed, and retained as committed or agreed.
5. Confidentiality. Information designated as confidential is protected as committed or agreed.

For each principle reported upon by the auditor, the auditor considers each of the following 4 CRITERIAS: 1). Policies. The entity has defined and documented its policies relevant to the particular principle. These policies are written statements that communicate management’s intent, objectives, requirements, responsibilities, and/or standards for a particular subject. 2). Communications. The entity has communicated its defined policies to authorized users.3). Procedures. The entity utilizes procedures to achieve the objectives in accordance with its defined policies. 4). Monitoring. The entity monitors the system and takes action to maintain compliance with its defined policies.