Chapter 19

Question 1

What is an attest engagement?

Answer 1

it addresses subject matter that is the responsibility of someone other than the practitioner.

Question 2

What is the subject matter of an attest engagement?

Answer 2

What is measured or evaluated against criteria.

Subject matter may have many forms. Examples include:
historical, or prospective performance (performance measures) or physical characteristics (e.g square footage of facilities).

Question 3

What does SSAE apply to?

Answer 3

An examination or agreed upon procedure engagement performed on prospective financial statements (a forecast or projection).

Question 4

When practitioner performs an examination attestation engagement should document

Answer 4

Among other things:
1. the nature, timing, and extent of the procedures performed.

2. Identify specific items or matters tested.

It should also state:
who performed the work, the date such work was completed, who reviewed the work, and the date and extent of such review.

Question 5

In an examination or review attestation engagement, what happens when the engagement party is not the responsible party, and the responsible party refuses to provide a written assertion?

Answer 5

The practitioner does NOT need to withdraw from the engagement, but the practitioner should:

1. Disclose the refusal in the report, and
2. restrict use of report to the engaging party.

Question 6

What does the pro forma financial information show?

Answer 6

What the significant effects on historical financial information would have been had a consummated or proposed transaction (or event) occurred at an earlier date.

The practitioner in a review engagement provides limited assurance.

Question 7

What are suitable criteria for subject matter?

Answer 7

1. Relevant
2. Objective (free from bias)
3. Measurable
   (capable of reasonably consistent
   qualitative or quantitative measurement).
4. Complete
   (Not omitting relevant matters that could
   reasonably be expected to affect
   decisions).

Question 8

All attest engagements

Answer 8

require the auditor to be independent

Question 9

An attestation examination engagement most likely results in

Answer 9

An opinion on the subject matter.

Examination attest engagements results in an opinion on whether the subject matter is presented in accordance with the specified criteria.

Question 10

What is the objective of an attestation examination engagement?

Answer 10

1. To obtain reasonable assurance about whether the SUBJECT MATTER as measured or evaluated based on the criteria is free from material misstatements.
2. Express an opinion in a written report about whether:
   - The subject matter is in accordance with or (based on) the criteria. or
   - the responsible parties assertions is fairly stated, and
3. Communicate further as required (e.g. to those charged with governance.

Question 11

How should an attest examination report be presented?

Answer 11

In writing.
It should express an opinion on:
1. A written assertion, or
2. Directly on the subject matter

If the report is on the assertion, it should accompany the report or be clearly stated in the report.

Question 12

When misstatements are material and pervasive, what should an auditor do?

Answer 12

Withdraw from the engagement.

Question 13

A review typically consist of inquiries and analytical procedures. An attestation review may not rely heavily on analytical procedures because the subject matter may be…

Answer 13

Qualitative, not quantitative.

The practitioner then should perform other procedures, in addition to inquiries that provide equivalent review evidence.

Question 14

A practitioner may accept an agreed upon procedures engagement to calculate the rate of return on a specified investment and verify that the percentage agrees with the percentage in an identified schedule provided that

Answer 14

The use of practitioners report is restricted.

Question 15

An independent practitioner may accept an agreed upon procedure and the report should state…

Answer 15

That it is intended solely for the information and use of the specified parties, and is not intended to be used and should not be used by anyone other than these specified parties.

Question 16

What are the requirements for an auditor to accept agreed upon procedures engagement?

Answer 16

1. The specified parties agree to the procedures, and take responsibility for their sufficiency.
2. The subject matter is subject to reasonably consistent measurement.
3. Evidence is expected to exist providing a reasonable basis for the findings.
4. The use of the report is restricted
5. Other conditions are met

Question 17

What is an agreed upon procedure engagement?

Answer 17

An attestation engagement in which a practitioner is engaged by a client to issue a report of findings based on specific procedures performed on the subject matter.

Question 18

What is included in all attestation engagements practitioners report?

Answer 18

A statement referring to the standards established by the AICPA

Question 19

How do practitioners report on findings when engaged in agreed upon procedures?

Answer 19

Practitioners report should be in the form of procedures and findings.

Practitioner does NOT express an opinion or limited assurance when engaged to apply agreed upon procedures.

Question 20

What is an examination report on prospective financial statements that is appropriate for general use?

Answer 20

Financial forecast.

Financial forecast is based on conditions the responsible party expects to exist, and the course of action it expects to take.

Question 21

The practitioner may accept an engagement to examine a financial projection if:

Answer 21

The responsible party agrees to:

1. Disclose the significant assumptions
2. Identify in the presentation which assumptions are hypothetical.
3. Describe the limits on the use of the projections.

Question 22

Relative to the prospective financial statements, a practitioner may accept an engagement to:

Answer 22

Examine the prospective financial statements.

ATC-305 does nor provide a review of PFS, but does allow examinations.

Question 23

What is a partial presentation?

Answer 23

Prospective financial information presented in the format of historical financial statements that omits either:

1. Sales or gross revenue
2. gross profit or cost of sales
3. unusual or infrequently occurring items
4. Provision for income taxes
5. Discontinued operations
6. Income from continuing operations
7. Net income
8. Basic and diluted earnings per share
9. Significant changes in financial position

Question 24

MD&A is most often presented as a

Answer 24

Further explanation of the activities of management.
MD&A may be presented in an annual report or other documents filed with the SEC.

It explains actions and intentions of management.

Question 25

What best defines control risk in an engagement to examine MD&A?

Answer 25

The risk that material misstatements in the MD&A will not be prevented or detected on a timely basis by the entity’s internal control.

Question 26

MD&A must be in accordance with the rules and regulations adopted by the

Answer 26

SEC, a federal governmental regulator.