Audit, Review, Compilation Comparisons

Question 1

is an engagement letter required for all three

Answer 1

yes, it is important to let client know exactly what kind of engagement they need and must be outlined in engagement letter - helpful for future business relations

Question 2

is indipendence required for all three?

Answer 2

required for audit and review, not required for compilation - can even compile for a relative

Question 3

what is the level of assurance provided for all three

Answer 3

audit - high/positive/audit level
review - negative/review level
compilation - 0 assurance

Question 4

what proficiency is required in all three

Answer 4

audit - proficiency in audit
review - proficiency in performing reviews
compilation - only proficiency in accounting

Question 5

what understanding of business should be had for all three

Answer 5

understadning is required for all three

Question 6

which should materiality be calculated for

Answer 6

required for audit and review, but not for compilation as no assurance is provided

Question 7

is due care and supervision required for all three

Answer 7

yes, it is required for all three

Question 8

is a CPA required for all three?

Answer 8

audit and review - yes
compilation - no, can be done right after graduation

Question 9

should test of controls be done for the three?

Answer 9

audit - yes, but up to discretion of auditor
review - no
compilation - no

Question 10

what assurance procedures are done for all three?

Answer 10

AUDIT - 6 substantive - reperform, inspect, inquiry, confirmation, analysis, observation
4 control - reperform, inspect, inquiry, observation
REVIEW - analysis and inquiry/discussion - although if more needed or SAAE, may follow up by doing more
COMPILATION - no, as no assurance provided

Question 11

what type of report is issued to users

Answer 11

audit - audit report
review - review report
compilation - notice to reader