Chapter 6 - 2 Flashcards
In a report what is explicit and what is implicit
E - Accting principles according to GAAP -
E - express and Opinion
I- No new acting principles
I - No new acting procedures
What is Tippicanoe - 10 standards of a PCAOB
T - Training education CPA - adequate training and proficiency
I - Independence
P - Due Professional Care - Professional skepticism, doing a really good job, using correct skills, acting with comp[etence
P - Plan and supervise the audit
I- I/C - must get stuff app. audit evidence to assess RMM and understand I/C
C- must get S, A, Audit evidence - by performing audit procedures to come to an opinion
A - Are acting principle in accordance with GAAP
N - Are there no new accounting principles applied - consistency
O - No omitted disclosures = I
E - Express an Opinion
What is Due Professional Care
This must be exercised in the performance of the audit and in the prep of the report
Critical review - of judgement used at every level
- Due Diligence - operating without negligence
-Professional Skepticism - maintaining a critical eye and objective attitude
What is a good comparison when making an evaluation an entity’s costs and expenses
Compare current year payroll expense with prior year’s payroll expense
When you are doing a review and you become aware of a material departure from GAAP - how should you modify the standard report
Review provide Limited assurance and therefore the accountant is not aware of any “Material Modifications required” for them to be in conformity with GAAP. So when there is a departure - add a separate paragraph to the report.
What is an example of TOC for completeness in the revenue cycle
An invoice is prepared for each shipping document
Audit
Review
Compilation
Prep of F/S
What kind of assurance do you give in each of these
These go up in responsibility
Audit - attest express positive assurance
Review - attest - Give limited or negative assurance - no opinion - but I am not aware of any material modifications that need to be made in order for them to be in compliance with GAAP
Compilations - non attest, no opinion, no assurance
Prep of F/S - no opinion, no assurance
What engagements are governed by SSARS
Review
Compilation
Prep of F/S
Prep of F/S
Non attest, no assurance
- Must get an engagement letter signed by both client and auditor
- has: “expected non GAAP or inadequate disclosure” - meaning that you will indicate and explain in a separate paragraph any incidences of non GAAP or inadequate disclosures
What are the general standards that govern - Reviews, Compilations, and F?S Prep? and what do they cover?
AR C -60 - They cover
F/S - Mgmt resp - F/S - either general purpose framework or special purpose framework
Ethics - need to comply with code of professional conduct -
Professional Judgement - use knowledge and experience
Conduct - need to be familiar with the sections of ARC and explanatory material
Quality Control - partner is in charge to make sure this is done -
OCBOA
These are special purpose frameworks
Cash basis, tax basis, regulatory basis, contractual basis
What are the ethical requirements when performing SSARS?
Responsibilities Public Interest Integrity Confidentiality Not for personal Gain Objectivity Independence No conflict of interest Due Care Scope and Nature
What is in the Engagement letter for a SSARS
Required for F/S Prep, Review, and Compilations.
It includes:
- Objective
- Mgmt responsibility - “SSARS issued by ARSC of the AICPA
- Limitations of the engagement
- Identifiy application framework
If F/S prep - add:
1- indicate and explain expected non-GAAP or Inadequate disclosure
2.- Each Page is signed - “no assurance is provided”
What is you are doing a F/S prep and client refuses to allow you to write “no assurance” on each page
- Can disclaim an opinion or - Can ask to move them up to a compilation or - you have to withdraw
Independence - When must you be
Yes - ERAS Reviews Agrees upon Procedures Examinations Special Report Compilation - yes and no - if no - then must state
NO Consulating Taxes Book Keeping F/S Prep
