Chapter 2 Section 6: Attest Engagements Flashcards
What can attest engagements report on?
Compliance with laws and regs Compliance with contracts Internal control Computer systems and software Information supplemental to financials Prospective information Performance, physical characteristics, etc.
What is a webtrust engagement?
Provide assurance related to e-commerce. It assesses a client’s website
What is a systrust engagement?
Provides assurance related to reliability of any electronic system
What standards are used for attest engagements?
Statements on Standards for Attestation Engagements
SSAE
What are the major attestation services?
Agreed-upon procedures Financial forecasts and projections Pro forma financials Internal control over financial reporting Compliance MD and A (required by SEC)
What do the SSAE not apply to?
Audits Comps and reviews of nonissuers Return prep Advocating for client in litigation Consulting and advising Operational audits
How do attest standards compare to GAAS audits?
They are lower. They are a framework for the attest function beyond historical financials.
What are the five general attestation standards?
TIPPY
Traning and proficiency
Independence
Performance/due professional care in planning and performance
Professional, adequate knowledge of subject matter
Your belief that the matter is capable of evaluation against suitable criteria (professional judgment)
What are the two fieldwork standards and four reporting standards?
PA
SSER
Planning and supervision
Appropriate, sufficient evidence to provide a reasonable basis for conclusion
identify the Subject matter
disclose Significant reservations about the engagement
Express conclusions
Restrict the use of the report when needed
When does the use need to be restricted?
When the criteria are only appropriate for or available to a limited number of parties
Reporting on a subject matter and a written assertion has not been provided
Reporting on agreed-upon procedures engagement
How do you handle scope restrictions?
Consider withdrawing
What are the three conclusions available?
Examination: positive opinion, high level of assurance
Review: negative assurance
Agreed upon procedures: no assurance
What is a written assertion?
Obtained in examination and review engagements. It is usually necessary.
What if there is no written assertion and the client is the responsible party?
Scope limitation - you should withdraw
What if there is no written assertion and the client is not the responsible party?
Use should be restricted
What is an agreed-upon procedure engagement?
The practitioner is engaged to issue a report of findings based on specific agreed-upon procedures.
What are the conditions for an agreed-upon procedures engagement to exist?
I AM SURE
Independence of practitioner Agreement of parties Measurability and consistency Sufficiency of the procedures Use of the report is restricted Responsibility for the subject matter Engagements to perform agreed-upon procedures on prospective financials must include a summary of assumptions
What is a financial forecast?
Based on expected conditions and courses of action. For general and limited use
What is a financial projection?
Based on what if scenarios. For limited use only.
What are the three ways a practitioner can be associated with prospective financials?
Comp agreement (no assurance)
Examination agreement (opinion)
Agreed-upon procedures engagement (disclaimer)
never a review
What is the purpose of a comp of prospective financials?
Proper assembling. Provide no assurance and gather no supporting evidence.
Entity does need to disclose a summary of significant assumptions
What goes into a comp report?
Compliance with attestation standards set by AICPA
Limited scope and no opinion or assurance
Caveat that prospective results may not be achieved
You assume no responsibility to update them
What is the purpose of an examination of prospective financials?
Express an opinion on if they’re conforming with AICPA guidelines and the assumptions provide a reasonable bsis.
What is required in an examination of prospectives?
Independence, evidence
What can require the practitioner to modify an opinion on the examination of prospectives?
Guidelines are not followed
Assumptions are not disclosed
Basis is not reasonable
Scope limitation (disclaimer)
What use are partial presentations good for?
Only limited use
What are pro forma financials?
Not prospective. They may be used to demonstrate the effect of a future or hypothetical event by showing how it might have affected the historical financials if it had occurred during the period covered by them.
What engagements can be done on pro formas?
Examination or review. Don’t reevaluate internal control, but do make sure the math and computations are correct.
Who requires MD and A, and for what?
By the SEC for issuers.
