Becker AUD 2 Flashcards
Current period reviewed & prior period compiled (sic upgrade)
Prior period should be updated
&
issued as the last PP of current report
Current period compiled & PP reviewed (svc downgrade)
- Issue compilation & PP assuming responsibilities for PP
must include:
a. date of review in PP
b. statement saying “no review” after date of review - Reissue PP review report cobbled or seperate
If client is NOT responsible party
Report may be issued with sufficient evidence
Report should be restricted.
Do you need written assertion for “Agreed-upon procedures”?
does NOT equal written assertion
Who uses general use financial forecast?
Statements will be used by parties not negotiating directly with responsible party.
Examination of prospective F/S purpose
Express opinion:
- Statements are in conformity with AICPA guidelines
- Assumptions provide a reasonable basis for F/S
What are the compilation of financial projection report requirements?
Aside from 5 standard report requirements:
- Description of purpose of projection at end of 1st PP.
- Reference to hypothetical assumption in 2nd PP.
Content of compilation report for prospective F/S:
- ID prospective F/S
- Stmt that F/S compiled w/AICPA
- Limited in scope & no opinion
- statement that prospective results may not be achieved
- Practitioner has no responsibility to update report of date of report
- Signature
Practitioner is associa. w/prospective F/S by:
- Compilation (no assurance)
- Examination (report used by 3rd party)
- Agreed-upon procedures
Compilation of prospective F/S. Do not issue report if:
Entity fails to disclose summary of signification assumptions
Written assertion
Obtain from mgmt in examinations and reviews
Review report contains:
- Title
- Addressee
- Intro
- Mgmts resonsibilities
- Acct resp.
- Engagement results
- Sign & Date
Review intro:
A
M
I
S
A
D
Mgmt rep letter (for review):
- F/S are fair
- I/C is good
- Mgmt is truthful in responses
- Completeness
- Subsqeunt events disclosed
- Mgmts respons to detect fraud
- Knowledge of material fraud
- Add’l representation (if applicable)
“Review” requirements?
U
L
I
A
R
C
P
A
Plain paper report (ex. compilation not used by 3rd party)
Use eng. lt signed by mgmt comp report NOT required
Compilation of personal F/S NOT to obtain credit
SSARS “not” required
Departure from applicable financial reporting framework
Disclosure or withdrawal ONLY
Compiled F/S omitting disclosures ok if:
- F/S are in conformity with AFRF
What is AFRF?
Applicable Financial Reporting Framework
F/S in compilation MUST have:
Reference to “see (independent) Accountant’s compilation report”
Accountant’s responsibility @ compilation report?
- Compilation in accordance w/SSARS
2. “Objective” of compilation is “assist” mgmt with F/S
Compilation Report (content)
- Title
- Addressee
- Intro
- Mgmt Responsibility
- Accountants Responsibility
- Signature
- Date @ completion of compilation
Prospective F/S cannot…
have review
What is limited use financial forecast/projections?
F/S will only be used by responsible party
What is agreed-upon procedures?
Accountant is engaged by client to issue a report of findings
If client is responsible party, no written assertion:
= Scope limitation consider withdrawing
Agreed-upon procedures
No assurance, but procedures & finding are listed
What are attributes of a REVIEW?
Negative assurance, inquiry & analytical
What are attributes of examination?
Positive opinion, high level assurance
Search, verification, inquiry & analysis
Review of interim F/S
NONISSUERS
Latest F/S were audited
Reporting on comparative F/S:
Disclosures must
be the same. Cannot omit on one and not on the other
Scope limitations (change from audit to comp/review)
- Client refuses inquiry w/legal counsel
- No mgmt rep letter
* consider withdrawing*
Acceptable reasons for change from audit to review/compilation:
- Change in client requirement
2. Misunderstanding of nature of engagement
Supplemental information for a review:
- Subjected to analytics and inquiry
OR
- Has not been subjected and represent mgmt. Accountant does not express opinion or assurance.
Departures from applicable financial reporting framework:
- Modify report - add explanatory paragraph explaining
2. Withdraw
What is the nemonic for compilation report?
CAR MR ARSOM
What is the nemonic for review report?
AM I SAD MR FIR SALA
What is CAR MR ARSOM?
C - Compilation is neither an A - Audit or R - Review M - Mgmts R - Responsibility A - Accountants R - Responsibility, that report is in accordance with S - SSARS O - Objective is to assist M - Mgmt with F/S
What does AM I SAD MR FIR SALA?
A review consists of:
A- analytical procedures over M- mgmt financial data I- inquiries S- significantly less in scope than an A- audit, therefore, we D- do not express an opinion M- mgmt's R- responsibility F-fair presentation of F/S I- internal control R- responsibility of accountant S-SSARS by A- AICPA L-limited A-assurance
Compilation requirements
- Knowledge of industry accounting principles
- Understanding of client’s business
- Reading F/S
- Fraud, illegal acts, going concern & subsequent events
Understanding of client’s business:
Compilation
1, Staff qualifications
- Transaction types and frequency
- Accy basis used to prep F/S
- Form of accy records
- F/S form & content
Learn &/or obtain sufficient knowledge of the entity business?
- knowledge of ace principles
- Understand of client’s business
- Not required to test:
Internal Control
Perform audit test
Assess Fraud risk
Communicate w/pred. auditor - Design review procedures
Compliance attestations for:
- Agreed upon procedures - stmt: evaluate entity’s compliance
- Examination - stmt: exam does NOT mean legal determination on compliance
What are pro forma F/S requirements?
- Examined or reviewed
- Obtain mgmt rep letter
- Report should ref. F/S derived & if F/S were audited/reviewed
When should we modify the exam opinion?
- AICPA guidelines not followed
- Significant assumption are NOT disclosed
- Basis not reasonable
- Scope limiation
Agreed-upon procedure conditions:
I- independence A-agreement of parties M-measureability & consistency S-sufficiency of the procedures U-use of report - restricted R-responsibility of subject matter E-engagement to perform agreed-upon procedures on prospective financial
