Chapter 22

Question 1

What type of assurance and related services can be provided.

Answer 1

1. Audit / Reasonable Assurance Engagement.
2. Review / Limited Assurance Engagement.
3. Agreed upon procedures.
4. Compilations.

Question 2

Define Audit / Reasonable Assurance Engagement

Answer 2

Audit is the type of assurance engagement in which reasonable assurance is provided. e.g: Audit of F/S.

Question 3

Define Review / Limited Assurance Engagement.

Answer 3

Review is a type of assurance engagement in which only limited assurance can be provided. e.g: review of F/S, review of Cash Flow Forecast.

Question 4

Define Agreed-upon Procedures.

Answer 4

In this engagement, practitioner carries out procedures of audit nature to which the practitioner and the entity and any appropriate third parties have agreed, and to report on factual findings.
No assurance is provided in this engagement and report is restricted.
Example: regulatory reporting or internal fraud investigation.

Question 5

Define Compilations.

Answer 5

In this engagement, practitioner assists management with preparation and presentation of F/S.
No assurance is provided in this engagement.
Example: An accountancy firm prepares historical F/S, or prospective F/S.

Question 6

Difference b/w Audit and Review.

Answer 6

1. Procedures.
2. Type of assurance provided.
3. Format of report.

Question 7

Preconditions for Review Engagement.

Answer 7

Practitioner shall accept the engagement only if:

1. AFRF is acceptable.
2. MGT agree on the premise on which review is conducted.

Practitioner shall not accept the engagement if:

1. Practitioner is not independent.
2. There are doubts over integrity of MGT.
3. There is no rational purpose for engagement.

Question 7

What are the terms of Review Engagement.

Answer 7

1. Identification of AFRF.
2. Objective and scope of Review Engagement.
3. Responsibilities of the practitioner.
4. Responsibilities of MGT.
5. Reference to expected form and content of report to be issued.
6. Intended use and distribution of F/S.
7. Statement the review is not an audit, so, an audit opinion shall not be expressed on F/S.

Question 7

Procedures that are performed in a review Engagement.

Answer 7

1. Inquires
2. Analytical procedures.
3. Other Procedures:
   i. Use of work performed by others.
   ii. Written Representation.
   iii. Subsequent Events.
   iv. Going Concern.

Question 7

Explain Inquiry procedures in Review Engagement.

Answer 7

1. Significant Accounting Estimates.
2. Related Parties.
3. Subsequent Events.
4. Going Concern.
5. Fraud.
6. Unusual or complex transactions.

Question 8

Explain Analytical procedures in review engagement.

Answer 8

Practitioner shall use Analytical procedures to identify:

1. Unusual relationships b/w items of F/S.
2. Individual items that appear unusal.

Question 9

What are the elements of review report.

Answer 9

1. Title
2. Addressee
3. Introductory Material.
4. Management responsibilities.
5. Practiitoner Responsibilities.
6. Description / Scope of Review.
7. Conclusion.
8. Date of Report.
9. Signature.
10. Place.