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AUD > Audit Reports & Other Reports > Flashcards

Audit Reports & Other Reports Flashcards

1
Q

What are the overall objectives of the Auditor?

A

1) to obtain reasonable assurance that F/S are free from material misstatement
2) report on financial statements

If cannot, the disclaim or withdraw

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2
Q

What should be included for the Auditor’s address?

A

The City and State where located

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3
Q

What is Management Responsible for in regards to the Financial Statements?

A

Preparation and Fair Presentation of Financial Statements in accordance with the Applicable Financial Reporting Framework

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4
Q

What is Management Responsible for in regards to Internal Control?

A

Internal Control Design, Implementation, Maintenance

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5
Q

What are the headings in the Audit Report for an Unmodified Opinion?

A

(TIM-AA) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion

” MR. DIM REPPORTS CRAME”

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6
Q

What are the headings in the Audit Report for an Modified Opinion?

A

(TIMA-BA) Title; Introduction; Management Responsibility; Auditor Responsibility; Basis for (Modified) Opinion; Audit Opinion

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7
Q

In an Unmodified Opinion with Emphasis-of-Matter / Other-Matter sections, what is the order of the headings?

A

(TIM-AA EMO) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion; Emphasis-of-Matter; Other-Matter

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8
Q

What are the requirements for referencing a Component Auditor in the Audit Report?

A

1) Component Financial Statements must be prepared using same Financial Reporting Framework as the Group Financial Statements (or obtain evidence to support any adjustments for conversion)
2) Component Auditor must have performed audit in accordance with GAAS or PCAOB Standards.
3) The report is not restricted in use.

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9
Q

What must the Group Engagement Partner do if they assume responsibility for the Component Auditor’s work?

A

Perform additional audit procedures; Be involved in Component Auditors work; Perform Risk Assessment procedures; Assess Risk of Material Misstatement; No reference to component auditor is required

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10
Q

What standards govern SSARS engagements?

A

Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services)

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11
Q

Which clients can have compilation engagements?

A

Non-SEC (non-public) registrants only.

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12
Q

What is a Compilation?

A

Accountant puts together financial statements with information PROVIDED BY MANAGEMENT. No opinion is expressed and no assurances are given. Independence is not required.

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13
Q

What disclosures are required for Compilation engagements?

A

Disclosures not necessary. Must state that they are omitted in a 4th paragraph.
1) F/S should be in conformity with GAAP
2) No deception of users
3) Warn for missing disclosures
Limited disclosures marked as “selected information”

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14
Q

What standards govern Review engagements?

A

SSARS (Statements on Standards for Accounting and Review Services)

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15
Q

What type of assurance is given in a Review engagement?

A

Reviews give limited assurance.

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16
Q

What procedures are required for Review engagements?

A

Analytical procedures are required for reviews. Compare results to documented predictions.

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17
Q

What is a Review engagement?

A

Financial statements are presented with no opinion expressed- and limited assurances are given. Independence is required for a review engagement.

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18
Q

What is a Financial Forecast?

A

A prospective financial statement that uses normal/expected circumstances. General and limited use allowed.

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19
Q

What is a Financial Projection?

A

A prospective financial statement using hypothetical situations (what if scenarios). Only limited use by the client is allowed.

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20
Q

What are Agreed Upon Procedures?

A

Report of findings is based on agreed upon procedures and they provide no assurance. I-AM-SURE

1) Independence required
2) Agreed upon by parties
3) Measurability & Consistency
4) Sufficiency of procedures
5) Use of report is restricted
6) Responsibility for subject matter
7) Engagements to perform agreed upon procedures on prospective financial statements

Disclaimer of opinion ONLY/NO OPINION

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21
Q

What disclosures are required for remote likelihood of losses?

A

No disclosure required.

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22
Q

What disclosure is required for a probable loss contingency?

A

Accrue if estimable. Emphasis-of-Matter paragraph if not estimable.

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23
Q

What disclosure is made if a loss contingency is reasonably possible?

A

Auditor assesses need for Emphasis-of-Matter paragraph based on loss likelihood.

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24
Q

How is a gain contingency reported?

A

Gain contingencies are not reported.

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25
Q

How does an immaterial GAAP issue affect the audit opinion?

A

It doesn’t. Opinion is Unmodified.

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26
Q

How does a very material GAAP issue affect the Audit Report?

A

Modified-Adverse Opinion is issued. Emphasis-of-Matter paragraph is added after Opinion paragraph.

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27
Q

How do GAS standards compare to GAAS?

A

GAS is more strict than GAAS.

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28
Q

What is required under the Single Audit Act?

A

An audit performed under governmental auditing standards (GAS). A report on internal control is required. GAAS and GAS don’t require the I/C report.

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29
Q

Auditors must address special considerations in the application of US GAAS for which areas?

A

1) Special Purpose Frameworks
2) Audits of Single F/S
3) Compliance Audited F/S
4) Summary Financial Statements

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30
Q

Which type of bases fall under special purpose frameworks?

A

1) Cash basis
2) Tax basis
3) Regulatory basis
4) Contractual basis

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31
Q

Which type of bases are considered OCBOA (other comprehensive bases of accounting)

A

1) Cash basis
2) Tax basis
3) Regulatory basis

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32
Q

What type of titles do special purposes frameworks use?

A

Titles that omit GAAP references and terms

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33
Q

Which type of special purpose frameworks bases use an emphasis of matter paragraph?

A

All bases except regulatory basis statements which are intended for general use

1) Cash
2) Tax
3) Regulatory (specific use)
4) Contractual

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34
Q

Which type of special purpose frameworks bases use an other matter paragraph?

A

Contractual basis and regulatory basis (not intended for general use)

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35
Q

What type of opinions do regulatory basis (general use) financial statements have?

A

General use regulatory basis F/S have a dual opinion:

1) Statements are fairly presented in accordance with GAAP (Adverse opinion)
2) statements are prepared in accordance with a special purpose framework (Unmodified opinion)

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36
Q

What happens when special purpose financials are presented in an inappropriate or prescribed form?

A

The auditor should reword the prescribed form or attach an appropriately worded separate report.

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37
Q

Which special purpose basis have to define the purpose for which statements are prepared?

A

1) Regulatory (specific)
2) Regulatory (general use)
3) Contractual

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38
Q

Regarding special purposes F/S and single/specific F/S, what type of understanding should auditors obtain?

A

1) Purpose of F/S
2) Users
3) Acceptability of F/S framework used by management

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39
Q

Which audit procedures should be applied to audits of specific elements?

A

Can use audit evidence obtained during the audit of the complete set of F/S in the audit of a single F/S or specific element

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40
Q

What type of materiality is present in single/specific element F/S

A

When auditing a single/specific element F/S, materiality should be obtained for each element/single F/S rather than complete set

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41
Q

What type of opinion should be given in single/specific element F/S?

A

A separate opinion should be given for each engagement. The opinion given on the complete set of F/S should be shared in an other matters paragraph

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42
Q

What type of opinion should be given in single/specific element F/S when there is a modified opinion on the complete set of F/S?

A

1) Adverse Opinion = due to material misstatement (GAAP issue)
2) Disclaimer of opinion = due to a scope limitation (GAAS issue)

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43
Q

What is a piecemeal opinion?

A

This is when an auditor expresses an adverse or disclaimer of opinion on the complete set of financial statements and a contradictory opinion is given on the specific F/S

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44
Q

What are the exceptions to the piecemeal opinion?

A

1) Opinion on specific element does not accompany auditor’s report on complete set of F/S
2) Specific element does not constitute a major portion of complete F/S

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45
Q

How should emphasis of matter and other matter paragraphs be reported on specific element F/S?

A

If they are present on the complete set of F/S, then they should be added to the specific element report

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46
Q

How should an incomplete presentation that is in otherwise accordance with GAAP be reported?

A

There should be an emphasis of matter paragraph with the unmodified opinion that states the:

1) purpose
2) presentation is not intended to be complete

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47
Q

How should compliance audited F/S be reported?

A

1) Separate report

2) Included in auditor’s report, which also has an other matters paragraph

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48
Q

What type of assurance should be given on compliance audited F/S?

A

There should be negative assurance and the report should be restricted use.

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49
Q

When should an auditor accept summary F/S?

A

Auditor should also be engaged to audit F/S from which summary F/S are derived.

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50
Q

What type of opinion should be given on summary F/S?

A

1) Unmodified opinion
2) Adverse opinion
A qualified opinion is not allowed due to summarized nature.

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51
Q

When should an auditor withdraw from summary F/S engagement?

A

When there is an adverse opinion or disclaimer of opinion on the AUDITED F/S

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52
Q

What is mandatory in a compilation engagement?

A

1) Engagement letter (presumptively mandatory)
2) Significant findings
3) Oral/written communication with management regarding illegal acts

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53
Q

What are the requirements of a compilation?

A

1) Knowledge of client industry
2) Client business (“STAFF”)
3) Reading F/S
4) Fraud, illegal acts, going concern, and subsequent events - inform management if aware

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54
Q

What is the format of a compilation report?

A

CAR MR. ARSOM

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55
Q

What happens when compilations are presented in an inappropriate or prescribed form?

A

1) Alternative form of standard report used

2) Additional paragraph stating F/S are not applicable with reporting framework

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56
Q

What happens when there are departures from applicable financial reporting framework for compilations?

A

There are no opinions given. Auditors can disclose or withdraw.

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57
Q

What are the requirements of complilations of PERSONAL F/S?

A

1) Cannot be used to obtain credit

2) Nothing comes to auditor’s attention that they will be used to obtain credit

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58
Q

What hapens when unaudited F/S are not for third party use?

A

There should be a paragraph restricting the use and written communication is required in the form of a compilation or engagement letter (plain paper report).

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59
Q

What are the requirements of a review?

A 
U - LIAR- CPA
Understanding with client established
Learning business and industry
Inquiries of management/within company
Analytical procedures
Review - other procedures
Client representation letter
Professional judgment to evaluate results
Accountant (CPA) communicates results
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60
Q

What is an auditor NOT required to do in a review?

A

1) Test internal controls
2) Audit tests
3) Fraud risk
4) Contact predecessor auditor

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61
Q

What is the format of a review report?

A

AM I SAD MR. FIARSALA

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62
Q

What should an auditor do when there is a departure in a compilation or review?

A

Modify report by adding a separate paragraph. If modification is not adequate, then withdraw. Cannot give an adverse or qualified opinion because no audit was conducted.

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63
Q

What actions should an auditor take when there are subsequent events that occur after report issuance?

A

1) Tell client to issue revise F/S
2) Make necessary disclosures
3) Alert users that report is unreliable

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64
Q

What actions should an auditor take when there are subsequent events and the client refuses to comply?

A

DAR them

1) Disassociate
2) Alert regulatory agencies
3) Relying parties (alert them)

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65
Q

When do SSARS not apply?

A

To accounting services

1) Preparing adjusting entries
2) Consulting on financial matters
3) Preparing tax returns
4) Bookkeeping services
5) Processing financial data for clients

66
Q

For comparative F/S, what should the auditor do if only one period is audited (others are compiled or reviewed)

A

The unaudited statements should be marked and the auditor should either 1) reissue report OR 2) include an additional paragraph in the current report

1) if current period is unaudited - mention that no auditing procedures have been performed since previous report
2) if prior period is unaudited - add statement that the service was less in scope than an audit and did not provide basis for an opinion (other matters paragraph)

67
Q

For comparative F/S, what should the auditor do if all periods are reviewed or compiled?

A

Update the prior period report and issue as part of the current year report

68
Q

For comparative F/S, what should the auditor do if the current period is reviewed and the prior period compiled?

A

Update the prior period report and issue as part of the current year report’s last paragraph

69
Q

For comparative F/S, what should the auditor do if the current period is compiled and the prior period reviewed?

A

Issue a compilation report and add a paragraph to the current period statements OR reissue prior period report combined or present separately

70
Q

How should omission of disclosures be treated in COMPILED comparative financial statements?

A

Cannot issue a report if disclosures are omitted in one or more periods because of lack of comparability. Okay if all periods omitted.

71
Q

What does a predecessor accountant need to do if prior period COMPILED or REVIEWED statements are reissued

A

1) Read
2) Compare current year with prior year
3) Obtain letter from new accountants

72
Q

What should a successor accountant do if predecessor’s report is not issued?

A

1) Make reference to prior accountant OR 2) perform that level of service themselves

73
Q

What is a comfort letter?

A
  • Letter from the CPA to an underwriter just before the registration of the client’s securities
  • Not required by the SEC or filed with the SEC
  • Requesting party provides the auditor with an attorney’s opinion or representation letter
  • RESTRICTED USE
74
Q

What are attest engagements?

A

An examination, review, compilation or an agreed upon procedures report on a subject matter

75
Q

Comfort letters provide positive assurance regarding:

A

1) CPA’s independence

2) Compliance as to the form of financial statements with SEC Act, if they are audited

76
Q

Comfort letters provide negative assurance regarding:

A

1) Changes in selected financial statements
2) Compliance as to the form of financial statements with SEC Act, if they are UNAUDITED
3) Whether certain nonfinancial data complies to Regulation S-X

77
Q

Comfort letters should provide no assurance regarding:

A

1) Qualitative disclosures

2) Market risk sensitive instruments

78
Q

Which standards govern attest engagements?

A

SSAE - Statements on Standards for Attestation Engagements

79
Q

SSAE do not apply to:

A

1) Audits
2) Compliations and reviews for nonissuers
3) Tax return preparation
4) Advocating for the client/Litigation
5) Consulting/advisory services
6) Operational audits

80
Q

What are the general standards of attestation?

A

TIPPY

1) Training & Proficiency
2) Independece
3) Performance/Due Car
4) Professional knowledge
5) Your belief/professional judgment

81
Q

What are the fieldwork and reporting standards of attestation?

A

PASSER

1) Planning and supervision
2) Appropriate, sufficient evidence
3) Subject matter identification
4) Significant reservations disclosed
5) Express conclusions
6) Restrict use of report

82
Q

What is the difference between an Examination, a Review, and Agreed Upon Procedures?

A

An examination provides high level, positive assurance and a review provides moderate level, negative assurance. Both require written assertions.

Agreed upon procedures provide no assurance, but procedures & findings are listed

83
Q

What are the three types of prospective financial statements? (Hint: CYA!!)

A

1) Compilation
2) Examination
3) Agreed-upon procedures

Reviews are NOT allowed!!

84
Q

What is the purpose/requirements of a compilation of prospective financial statements?

A
  • Proper assembling
  • No assurance is provided
  • Accountant must read
  • Practitioner is not required to gather supporting evidence
  • Describes limitations on projection’s usefulness
  • Cannot issue compilation report unless there is a “summary of significant assumptions.”
85
Q

What is the content of a compilation report for prospective financial statements?

A
  • Prospective
  • In accordance with AICPA
  • Limited in scope and no opinion presented
  • Prospective results may not be achieved
  • No responsibility to update for future events
86
Q

What is the purpose/requirements of an examination of prospective financial statements?

A
  • Purpose is to express an opinion and provide reasonable basis in conformity with AICPA
  • Independence is required
  • Evidence is required
87
Q

What is the content of an examination report for prospective financial statements?

A
  • Independent
  • Prospective
  • Responsible parties mentioned
  • Responsibility is to express an opinion in accordance with AICPA
  • Report provides reasonable basis
  • Prospective results may not be achieved
  • No responsibility to update for future events
88
Q

What are the modifications for an examination report for prospective financial statements?

A
  • AICPA guidelines not followed - Q or A
  • Significant assumptions not disclosed - A
  • Basis not reasonable - A
  • Scope limitation - D
89
Q

What are the requirements of financial projections for compilations and examinations?

A
  • Purpose
  • Hypothetical assumption
  • Restrict use of report
90
Q

What is the content of an agreed upon procedures report for prospective financial statements?

A

Basic agreed upon procedures report requirements, AND:

  • Prospective
  • Summary of significant assumptions required
  • In accordance with AICPA
  • Assumptions provide reasonable basis
  • Prospective results may not be achieved
  • No responsibility to update for future events
  • List procedures performed
  • Limited in scope
  • Limited use only!
91
Q

What are proforma financial statements?

A

Demonstrate hypothetical future event by applying facts to historical financial statements. Perform either:

1) Examination
2) Review

92
Q

What are the requirements of proforma financial statements?

A
  • Obtain understanding, including assumptions and written representations
  • Refer to original financial statements in report
  • Do NOT re-evaluate internal control
  • Do Determine computations are correct.
93
Q

What types of reports can be issued for reporting on internal controls?

A

1) Examination

2) Agreed upon procedures

94
Q

What types of reports can be issued for reporting on compliance attestations?

A

1) Examination (no legal determination)
2) Agreed upon procedures (procedures performed to assist in evaluation of compliance)

NO REVIEWS

95
Q

What types of reports can be issued for reporting on MD&A?

A

1) Examination
2) Review

Required by SEC for ISSUERS

96
Q

What are some examples of attestation services?

A

1) Agreed upon procedures
2) Prospective financial statements
3) Pro forma financial statements
4) Internal control reporting
5) Compliance
6) MD&A

97
Q

What is a WebTrust Engagement?

A

Provide assurance related to e-commerce; assess website

98
Q

What is a SysTrust Engagement?

A

Provide assurance to the reliability of any defined electronic system

99
Q

What is a partial presentation for prospetive financial statements?

A

Not for general use presentations because they omit the following:

  • Sales/gross revenue
  • Gross profit/cost of sales
  • Unusual/infrequent items
  • Provision for income taxes
  • Discontinued or extraordinary items
  • Income from continuing operations
  • Net income
  • Earnings per share
  • Significant changes in financial position
100
Q

What is the purpose of an audit?

A
  • Provide users with opinion
  • F/S are present fairly
  • In accordance with applicable financial reporting framework
101
Q

What are an auditor’s responsibilities in regards to an audit?

A

To express an opinion and provide reasonable assurance that the F/S are free from material misstatement

102
Q

What is the auditor’s responsibility in regards to internal control?

A

To “test” internal control and NOT to express an opinion on the effectiveness of internal control

103
Q

What are audits of issuers (SEC registrants) governed by?

A

PCAOB

104
Q

What are audits of nonissuers governed by?

A

AICPA’s SAS

105
Q

What do GAGAS govern?

A

Audits of government organizations

106
Q

What do ISA’s govern?

A

ISA’s of the IASB govern international standards

107
Q

Which paragraphs are GAAS and GAAP refered to in an unmodified report?

A

GAAS - Auditor’s responsibility (scope)

GAAP - Opinion

108
Q

What are some GAAP issues?

A
  • Material misstatements
  • Departure from GAAP
  • Accounting policies
  • Presentation
  • Disclosures
  • Estimates
109
Q

What are some GAAS issues?

A
  • Insufficient Evidence
  • Significant going concern uncertainty
  • Lack of independence
  • Scope limitations
110
Q

When is the use of the “emphasis of matter” paragraph required?

A

1) Going Concern
2) Consistency/Change in Accounting Principle
3) Change in Prior Period Audit Opinion
4) Special Purpose Framework

111
Q

When is the use of an emphasis of matter paragraph optional?

A

1) Uncertainty due to a litigation
2) Major catastrophe
3) Related party transactions
4) Subsequent events

112
Q

When is the use of an “other matters” paragraph required?

A
  • Restrict use of report
  • Change in prior period audit opinion
  • Audit report NOT reissued
  • Comparative F/S with different levels of service
  • Material inconsistency
  • Supplementary information reporting
  • Supplementary information reference
  • Special purpose F/S (regulatory and contractual basis)
  • Report on compliance
113
Q

What are the procedures that should be performed for a “going concern” issue?

A

“ADMITS”

1) Analytical procedures
2) Debt compliance
3) Minutes
4) Inquiry
5) Third parties
6) Subsequent events

114
Q

What are the conditions and events to be considered for a “going concern” issue?

A

“FINE”

1) Financial difficulties
2) Internal matters
3) Negative trends
4) External matters

115
Q

What are some examples of financial difficulties?

A
  • Loan defaults
  • Dividend arrearages
  • Denial of usual trade credit
  • Debt restructuring
  • Noncompliance with capital requirements
  • New financing sources or methods
  • Disposal of substantial assets
116
Q

What are some examples of internal matters?

A
  • Work stoppages
  • Labor difficulties
  • Substantial dependence on a particular project
  • Uneconomic long term commitments
  • Significant revision of operations
117
Q

What are some examples of negative trends?

A
  • Recurrent losses
  • Working capital deficiencies
  • Negative cash flows
  • Adverse financial ratios
118
Q

What are some examples of external matters?

A

-Legal proceedings
-New legislation
-Loss of a key franchise, license, or patent
-Loss of a principal customer or supplie
Natural disasters

119
Q

What are the mitigating factors to be considered with a “going concern” issue?

A

1) Postponement of expenditures (including R&D)
2) Plans to dispose assets
3) Plans to borrow money or restructure debt
4) Plans to increase ownership equity (sell stock)

120
Q

What wordings should an emphasis of matter paragraph for a going concern issue include?

A
  • Substantial doubt and going concern for GAAP

- Significant doubt for ISA’s

121
Q

What type of changes do not affect the consistency standard?

A

Change in accounting estimates (prospective)

122
Q

What type of changes affecting consistency require an emphasis of matter paragraphs?

A
  • Period of change in accounting principle, and all subsequent periods until applied
  • Change of accounting principle by a retroactive statement
  • Change in accounting estimate, inseparable from a change in accounting principle
  • Corrections of an error in accounting principle
  • Change in reporting entity
  • Significant investment accounted by equity method
  • Correction of a prior period material misstatement by restatement
123
Q

What is the difference in wording for a qualified vs. an adverse opinion?

A
  • Qualified opinion uses the words “except for”

- Adverse opinion uses the words “do not present fairly”

124
Q

What should an auditor do when there is a scope limitation?

A

-Use disclaimer of opinion or withdraw. If an auditor cannot withdraw, then the reason should be described in an “other matter” paragrah.

125
Q

How is a disclaimer of opinion worded?

A

The auditor “has not been able to obtain sufficient, appropriate evidence” and “does not express an opinion.”

126
Q

How should a qualfied opinion due to a scope limit be worded?

A

Except for not appropriate. The qualification relates to the possible effect of the matter on the financial statements and not the scope limitation itself.

127
Q

What type of opinion should be issued when the prior period was unaudited, and the current year is being audited?

A

Disclaimer of opinion due to scope limitation (cannot verify beginning balances)

128
Q

How should updated/change prior opinions be presented?

A 
In an emphasis of matter or other matters paragraph with the following: 
"DORCS"
1) Date
2) Opinion (previous)
3) Reason
4) Changes
5) Statement that opinion is different
129
Q

What steps should a predecessor auditor take when their report is reissued?

A

1) Read statements of current period
2) Compare audited statements with current period
3) Representation letter from successor auditor
4) Representation letter from management
5) Date report

130
Q

What steps should a successor auditor take when the report is NOT reissued?

A

Express opinion on current period only; Other matter paragraph; “POND”

1) Predecessor auditor audited PY F/S - do not name
2) Opinion (previous)
3) Nature of any emphasis or other matter paragraph in previous report
4) Date

131
Q

What happens when prior period statements are not audited (reviewed or compiled)?

A

Other matter paragraph describes:

1) Service performed in prior period
2) Date
3) Descriptions of any material modifications in report
4) Statement that service was less in scope than an audit and does not provide basis for expressing an opinion

132
Q

What happens when prior period statements are not audited, reviewed or compiled?

A

Unaudited F/S should be marked and “other matter paragraph” presented

133
Q

What are recognized (type I) events?

A

Exist on or before balance sheet date; Already recorded and require adjustment

134
Q

What are recognized (type II) events?

A

Exist after balance sheet date; Footnote disclosure

135
Q

What is the auditor’s responsibility for subsequent events?

A

“PRIME”

1) Post balance sheet transactions
2) Representation letter from management
3) Inquiry
4) Minutes
5) Examine latest interim F/S

136
Q

What is the auditor’s responsibility for subsequent events after the original date of report?

A

No active responsibility, unless auditor becomes aware of events before report release.

137
Q

What type of opinion should be given if management refuses to update report for subsequent events?

A

Qualfied or adverse opinion

138
Q

What happens when auditor discovers facts/omitted procedures after the report release date?

A

1) Assess importance of omitted procedures
2) See if alternative procedures can be applied
3) Request management to revise
4) If they refuse, contact board of directors AND take “DAR” steps
5) Management is responsible to notify creditors/users

139
Q

How should an auditor deal with “other information documents” that contain audited F/S?

A

The auditor should read the information for material inconsistencies.

140
Q

How should an auditor deal with “other information documents” when they contain material inconsistencies and managemen refuses to comply?

A

An “other matter” paragraph can be added. The auditor can withhold report or withdraw from engagement. The auditor must also notify governance.

141
Q

What are the auditors objectives in regards to supplementary information to F/S?

A

1) Evaluation presentation to F/S as a whole

2) See if fairly stated

142
Q

What audit procedures should an auditor engage in for supplementary information?

A

1) Inquire of management regarding purpose & criteria
2) Check compliance of form & content of report
3) Check methods use to prepare
4) Compare and reconcile to audited F/S
5) Inquire regarding assumptions
6) Evaluate appropriateness & completeness
7) Obtain written representations from management

143
Q

In what format can an auditor’s report on supplementary information be in?

A

1) Other matter paragraph (“fairly stated”)

2) Separate report (refer to report)

144
Q

What are the auditor’s responsibilities in regards to required supplementary information?

A

1) Inquire of management of methods
2) Determine if information consistent
3) Obtain written management representations

No opinion should is required; “Other matter paragraph” added to report any deficiencies & omissions

145
Q

How should a reporting accountant report on the “application of the requirements of an applicable financial reporting framework?”

A
  • Cannot report on hypothetical transaction
  • Not required to be independent
  • Must request permission of management to communicate with continuing accountant
146
Q

What should a reporting accountant’s report on the “application of the requirements of an applicable financial reporting framework” include?

A
  • Description of report
  • In accordance with AICPA
  • Identification of facts, parties involved, transactions, etc
  • Statement on appropriate application of the requirements
  • Statement that management is responsible for proper accountant
  • Any difference in facts may change report
  • RESTRICTED USE OF REPORT
  • Lack of independence disclosed
147
Q

How should an auditor report on financial statements in accordance with a reporting framework of another country? DISTRIBUTION WITHIN US

A

Emphasis of matter paragraph - identify framework, refer to notes, and indicate framework is different from US GAAP.

148
Q

How should an auditor report on financial statements in accordance with a reporting framework of another country? DISTRIBUTION OUTSIDE OF US

A

1) The report of the other country OR report of ISA’s

2) US form of report

149
Q

How does a standard auditor’s report differ for ISSUERS (PCAOB)?

A 
Title (independent)
Addresee (not management) 
Introduction - Management's responsibility
Scope - Refers to PCAOB
Opinion - GAAP
Firm Name, City, and State
Date
150
Q

What are attestation services?

A

CPA expresses a conclusion about an assertion - Compliance with lawsNOT considered a Consulting engagementIndependence Required

151
Q

What is the independence requirement for consulting services?

A

Independence is not required for consulting services.

152
Q

What is the independence requirement for Compilations?

A

Independence NOT required for Compilations
No Internal Control work allowed
No assurance given

153
Q

Describe the limitations on Prospective Financial Statements?

A

Report is restricted to specified users

Agreed-upon procedures are implemented.

154
Q

Which literature governs Compilation services?

A

SSARS - Statements on Standards for Accounting and Review ServicesThese govern reporting for non-public entities only

155
Q

What type of assurance is provided by a Compilation?

A

Compilations are not an assurance service. No assurance is provided.

156
Q

What type of assurance is provided by Review services?

A

Reviews provide NEGATIVE assurance.

157
Q

What is the independence requirement for a Review?

A

Reviews require independence
No Internal Control work allowed
Performs analytical procedures
No material indirect financial interest allowed
No immaterial direct financial interest allowed

158
Q

For compilations and reviews- what knowledge must a service provider have?

A

Must have an understanding of the client industry.

159
Q

What are interim F/S?

A
  • F/S for a shorter period

- Can be issued for issuers or nonissuers

159
Q

What are some differences between interim F/S for issuers vs. nonissuers?

A
  • Issuers according to PCAOB, instead of SAS
  • Management rep letter contains internal control considerations
  • Management responsible for internal control
  • Auditor’s responsibility paragraph contains statement that “we do not express any opinion.”
  • Auditor should clarify that report is not part of registration statement

AUD (9 decks)

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