Chapter 19 -- SSAE Flashcards
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What is the purpose of SSAEs?
- SSAEs are for issuers
- They related to services that are beyond the financial statements.
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What are the components of SSAE?
“EAR”
* Examinations
* Agreed-Upon Procedures
* Reviews
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What is the criteria for an attestation engagement?
The criteria is:
* Relevant
* Objective
* Capable of reasonably consistent measurement
* Complete
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What documentation is required for an Examination under SSAE?
- A description of the nature, timing and extent of the procedures performed.
- Specific items or matters tested are identified
- Who performed the work
- The date the work was completed
- Who reviewed the work
- The date and extent of the review
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What are the preconditions for all attestation engagements?
- Independence is required for all attestation engagements
- Have unresticted access to information that the practitioner considers necessary
- Determine that the subject matter is appropriate
- Expect to prepare a written report
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What is the difference between an engagement party and a responsible party?
- Engagement party is the party who engages the practioner.
- The responsible party is the party responsible for the subject matter.
Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)
What action does the practitioner take when the responsible party, who is not the responsible party, refuses to provide a written assertion?
- The practitioner will disclose the refusal in the report.
- Restrict the use of the report to the engaging party
Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)
What type of report is issued in an examination engagement under SSAE?
An opinion is created on whether the subject matter is presented in accordance with specified criteria.
Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)
What is the objective of an examination engagement under SSAE?
- Obtain reasonable assurance about whether the subject matter, as measured or evaluated by certain criteria, is free from material misstatement.
- Expresses an opinion about whether the subject matter is accordance with certain criteria, or the responsible party’s assertion is fairly stated.
- Communication is further required.
- Independence is required for all attestation engagements
Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)
What is the difference between a direct or assertion-based examination under SSAE?
- For an assertion-based examination, the subject matter is based on responsible party’s assertion.
- For a direct examination, the practitioner’s conclusion will evaluate directly, using suitable criteria, the subject matter for which the accountable party is responsible.
Section 19.3: Review Engagements Under SSAE (AT-C 210)
What is included in report for a review attestation engagement under SSAE?
- Limited assurance about whether any material modifications were made to the subject matter to conform to specific criteria
- Identification or description of the subject matter being reported on
- The moment or period in time that relates to the measurement or evaluation of the subject matter
Section 19.3: Review Engagements Under SSAE (AT-C 210)
What should the responsible party provide to the practitioner in a attestation review engagement?
A written assertion about the measurement or evaluation of the underlying subject matter against the criteria.
Section 19.3: Review Engagements Under SSAE (AT-C 210)
In an attestation review engagement, which party is responsible for the representation letter?
- The responsible party is responsible for the written letter of representations.
- If the engaging party is not the responsible party, then the practitioner should obtain written representations from both parties.
Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)
What should be included in a practitioner’s report on Agreed-Upon Procedures?
- The auditor is independent
- A statement referring to the standards established by the AICPA
- All findings based on specific procedures performed on subject matter.
- The procedures performed were agreed to by the engaging party
- A statement that the report may be not suitable for othe purposes
- The subject matter is the responsibility of the responsible party.
- Any exceptions identified based on the procedures performed.
Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)
When can a practitioner accept and engagement to apply agreed-upon procedures?
- The engagement party agrees that the procedures performed.
- The engagement party acknowledges that the procedures performed are appropriate before a report is issued.
- The subject matter is reasonably consistent
- Evidence is expected to exist in order to provide a reasonable basis for the findings.
- Other conditions are met
Section 19.5: Prospective Financial Information (AT-C 305)
What should be included in a practitioner’s report of projected financial statements?
- The presentation conforms with the AICPA guidelines
- The assumptions provide a reasonable basis for the presentation.
- A separate paragraph should be included in the report that states:
- The difference between forecasted and projected results
- Actual results frequently occur
- Events and circumstances are often not as expected
- Differences may be material
Section 19.5: Prospective Financial Information (AT-C 305)
What may cause an adverse opinion when issuing an examination on forecasted presentation?
- Several significant assumptions do not provide a reasonable basis for the forecast.
- Significant assumptions, including the summary of assumptions, are not disclosed in the presentation.
- A practitioner should not examine a presentation that omits all disclosures
Section 19.5: Prospective Financial Information (AT-C 305)
What parties can be given a report on prospective financial statements?
Projection
* The practitioner may perform an examination.
* The examination is for limited use by the enity and the party that is negotiating directly with the entity.
Financial Forecast
* General Use
Section 19.5: Prospective Financial Information (AT-C 305)
What is the difference between a financial projection and a financial forecast?
- A financial projection is based on estimates of conditions that are be based on one or more hypothetical assumptions.
- A financial forecast is based on assumptions based on conditions that are expected to exist and courses of action expected to be taken.
Section 19.5: Prospective Financial Information (AT-C 305)
What are the components used to prepare prospective financial statements?
- Financial forecasts or projections.
- Summaries of significant assumptions
- Summaries of accounting policies
Section 19.5: Prospective Financial Information (AT-C 305)
What types of reports can be generated on prospective financial statements.
- Examination
- Agreed-upon procedures
Section 19.5: Prospective Financial Information (AT-C 305)
What consists of a partial presentation of prospective financial statements?
A presentation omits:
* Sales or gross revenues
* Gross profit or cost of sales
* Unusual or infrequently occurring items
* Provision for income taxes
* Discontinued Operations
* Income from continuing operations
* Net income
* Basis or diluted EPS
* Significant changes in financial position
Section 19.5: Prospective Financial Information (AT-C 305)
What are the conditions that a practitioner must meet to perform an engagement of agreed-upon procedures?
- The practitioner determines that the procedures can be designed, performed and reported in accordance with the established guidelines.
- The engaging party agrees to the procedures
- The engaging party acknoweldges the appropriateness of the procedures.
- The procedures are expected to result in reasonable findings
- The practitioner agrees to the engaging party’s thresshold of exceptions.
Section 19.5: Prospective Financial Information (AT-C 305)
What is included in an agreed-upon procedure report for financial projection and forecasts?
- The report includes both a disclosure and a conclusion
- Includes a statement that the report may suitable for an intended use and not for general use.
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What are the objectives of performing an examination or review of pro forma financial statements?
- Whether management’s assumptions provide a reasonable basis for presenting significant effects directly attributable to the transaction or event being reported on.
- Whether the pro forma adjustments are appropriate and properly applied to the historical amounts.
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What is the objective of pro forma financial information?
Pro Forma financial information uses historical financial information to show what might have been reported if the transaction or event occurred at an earlier date.
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What are examples of pro forma financial transactions?
- Business combination
- Disposal of a segment
- Change in the status of an entity
- Change in capitalization
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What is included in a review report of pro forma financial information?
- Identification of pro forma information
- Reference to the financial statements that were used
- If the financial statements were audited or reviewed
- That the review was made in accordance with AICPA standards
- A review is substantially less in scope than an audit
- No opinion is expressed
- The objective of PFFI and its limitations
- The practitioner’s conclusion providing limited assurance
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What are the conditions that must be met in regard to the historical financial statements when reporting on pro forma financial information?
- For an examination, which is similar to an audit, the related historical financial statements must have been audited.
- For a review, the related historical financial statements must have been either audited or reviewed.
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What is the objective of a compilation?
To apply accounting and financial expertise to assist management in the presentation of the financial statements without providing any assurance on the finanacial statements.
Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310)
What are the requirements of an accountant in a compilation?
- Independence
- Report on the financial statements
- Disclaim any assurance
- Disclose any lack of independence
- Associate their name with the statements
Section 19.7: Compliance Attestation (AT-C 315)
What is included in a compliance attestation engagement?
- Compliance with specified requirements (i.e. laws, regulations, rules, contracts, grants, etc.)
- In an compliance engagement for agreed-upon procedure, effective of internal control over compliance with specified requirements.
- Performance of procedures to provide reasonable assurance of detecting material noncompliance.
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
What reports may be generated for attestation services on MD&A?
- Examination
- Agreed-upon Procedures
- Reviews
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
How is the MD&A information presented?
MD&A may be presented in an annual report or other documents filed with the SEC.
MD&A explains the actions, activities and intentions of management
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
What is the completeness assertion with respect to MD&A?
Descriptions of transactions and events in order to understand the entity’s:
* Financial condition
* Changes to the transactions or events
* Results of operations
* Capital committments included in the MD&A
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
What is the consistency assertion releated to MD&A?
- The MD&A is a written assertion that may be examined or reviewed by the practitioner.
- Whether the historical financial statement amounts are accurately derived from statements and related records.
- Reported transactions, events and explanations are consistent with the statements.
- Nonfinancial data have been accurately derived from related records.
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
What are the assertions related to MD&A?
- Occurrence
- Consistency with the financial statements
- Completeness
- Presentation and disclosure
Section 19.8: Management’s Discussion and Analysis (AT-C 395)
What is MD&A Control Risk?
In relation to MD&A, control risk is the risk that material misstatements may occur because the entity’s internal control did not detected the MD&A misstatement in a timely manner.
