Engagements Updated

Question 1

Financial Info Other Than F/S

Answer 1

• 800
  
  • High assurance
  • To audit special purpose F/S
• 805
  
  • High assurance
  • to audit single F/S or specific elements or accounts
  • Can leverage audit work of financial statement audit
  • Requires reassessed materiality, may require more audit work
• 2400
  
  • Moderate assurance
  • Similar to 805 but review level
• HB 9100
  
  • No Assurance
  • May be engaged to report on the results of applying specified auditing procedures
  • Practitioner will only perform procedures that have been requested by the client.
  • Procedures should be specific and should not give the practitioner any flexibility in determining how to perform the procedure.
  • Allows user to provide input
  • Less costly as there is no assurance
• 810
  
  • To audit summary of F/S
  • Should only accept if performed audit of complete F/S
  • Assurance - High

Question 2

Non-financial Info

Answer 2

• 5400
  
  • Performed to determine whether an entity is using its resources economically
    
    • Obtaining the best possible resources at the lowest cost (economy) — Is the company not overspending to obtain the necessary resources to meet its objectives?
    • Maximizing the output derived from its resources (efficiency) — Are the company’s processes, staff and other assets being used to maximize productivity?
    • Actually achieving its objectives with the resources in place (effectiveness)
• 3001 - Direct
  
  • Report on results of testing the specific criteria
• 3000 – Attest
  
  • Report on validity of another party’s test of the criteria

Question 3

Agreements

Answer 3

• 5815 – Audit
  
  • Request this report when seeking assurance on compliance
  • Report would be addressed to the user and would include
    
    • Reference to the agreement
    • Description of the responsibilities of management and firm
    • Criteria against which company is being evaluated.
    • Conclusion with respect to compliance with requirements.
  • This report provides the highest level of assurance and often has the highest cost given that more procedures are often required to obtain the higher level of assurance.
• 8600
  
  • Similar to 5815 but provides lower assurance
  • Provides negative assurance that nothing has come to our attention to indicate that they are not in compliance
  • Scope of work is often less
  • Costs are lower

Question 4

Application of Accounting Principles

Answer 4

• 7600
  
  • No assurance
  • Obtain in writing
  • Will express conclusion on appropriate accounting principles or type of opinion rendered on F/S
  • Report will state the responsibility of accounting treatment rests with preparers of F/S

Question 5

Financial Forecasts

Answer 5

• Aug-16
  
  • No assurance
    
    • Collect info from management that is used in assembly of financial forecast
    • Inquire as to how management developed the assumptions
    • Performing limited procedures such as inquiries and considering whether prepared in accordance with GAAP

Question 6

Internal Controls

Answer 6

• 3416
  
  • Controls at a service organization
  • Must relate to internal control over financial reporting
  • Type 1
    
    • At specific date
    • opinion on design of controls only
  • Type 2
    
    • Throughout specified period
    • Opinion on design and effectiveness during

Question 7

Offering Documents

Answer 7

• 7150
  
  • Auditor’s Consent to the Use of a Report of the Auditor Included in an Offering
  • Document provides guidance for this consent letter
  • Review for material inconsistencies and accurate reproduction
  • Perform procedures over intervening period events
    
    • Between date of issuance of report and inclusion in offering document
• Aug-6
  
  • Whether assumptions suitably supported and consistent with plans of entity
  • Used for forecasts included in prospectus or other public offering documents
  • Disclaimer that actual results may vary materially from forecast
  • The practitioner must give consent in writing prior to the use of the report in an offering document.
  • Therefore, we are not providing assurance over the offering document
  • Read prospectus and other info like minutes
  • Perform review procedures such as inquiry and analytics
  • If pro-forma statements
    
    • Verify historical information
    • Make inquiries about basis management used
    • Recalculate pro-forma using basis
    • Verify that statements are accurately reproduced
    • No assurance
  • Subject to specific independence rules contained in rules of professional conduct

Question 8

Interim F/S

Answer 8

• 7060
  
  • Moderate assurance
  • Purpose to assist audit committee to discharge responsibility interim F/S issued under securities legislation
  • Must read interim MDA and ensure consistency with interim F/S
  • Must issue interim quarterly
  • Review required for unaudited financial statements
  • Inquiry analytic and discussion

Question 9

Compilation

Answer 9

• When engaged to perform a compilation engagement, the practitioner receives information from the client and compiles the information into a set of financial statements.
• The practitioner ensures that the statements are arithmetically correct.
• Although no assurance is provided on the compiled financial statements, the practitioner remains associated with the information provided.
• A communication called a Notice to Reader is attached to the compiled financial statements.

Question 10

Forensic Audits

Answer 10

• involves the examination of an entity or detailed financial information to decipher the facts of the situation being investigated
• The findings from a forensic audit may be used as evidence in court.
• There are a number of reasons to conduct a forensic audit, ranging from investigating fraud or embezzlement to determining income available for child or spousal support.
• A forensic audit may also be used in determining fraudulent insurance claims. Ultimately, forensic audits involve disputes over allegations of fraud, unethical conduct or illegal actions.
• To provide proof that evidence was not tampered with, the practitioner must:
  
  • Document the audit team’s control system used to prevent and detect the misuse of audit evidence
  • Verify and certify documents added to the audit file
  • Securely label evidence, with appropriate descriptions
  • Maintain adequate records of who had the information and when during the engagement, and document appropriate sign-offs
  • Maintain copies of all documents and materials
  • Thoroughly document any oral information received
• The procedures that a practitioner will perform depend on the objectives of the forensic audit engagement. The practitioner may perform, but is not limited to, the following procedures:
  
  • Determining financial damages, likely through calculation
  • Summarizing and/or breaking down large amounts of transactions and data
  • Demonstrating what has happened to specific items of property
  • Analyzing large amounts of data to determine anomalies or unusual transactions
  • Performing other analytical procedures to determine reasonableness or unusual items

Question 11

Environmental Audit

Answer 11

• Environmental audits evaluate how well an entity is protecting the environment.
• These audits are common in specialized sectors where there is higher risk related to matters such as pollution of the atmosphere, climate change and waste management
• Environmental audits help to demonstrate environmental awareness, protect the environment, verify compliance with laws and regulations, proactively deal with problems and minimize waste.
• Planning considerations
  
  • Audit criteria are established based on legislation and regulations, risk assessments, policies and procedures, and best practices.
  • Once audit criteria are established, the public accountant gains an understanding of the client, identifies the environmental risks faced by the entity, develops and executes audit procedures, gathers evidence and concludes on the findings.
• Reporting considerations
  
  • In addition to concluding on the findings of the environmental audit, the practitioner provides value to the entity through recommendations on how the entity can better protect the environment
  • Level of assurance - High

Question 12

Public Sector Auditing

Answer 12

• Each provincial and federal jurisdiction in Canada has either a provincial auditor or an auditor general.
• These auditors are mandated to assist the governing body in obtaining credibility regarding management reports, practices and other information provided.
• Generally, elected officials oversee how hired management uses government resources to provide public services to meet various social and economic goals. In a public sector context, financial statements only provide a partial indication of performance.
• Public sector auditors audit financial statements as well as determine whether management is fulfilling all its responsibilities. These auditors act and report within their provided mandates. This mandate can be provided through either legislation or contract but is usually through legislation. The mandates vary by jurisdiction, but most require the auditor to conduct the following audits:
  
  • Financial statement
  • Compliance with legislative and related authorities (reports on compliance with agreements, statutes and regulations)
  • Value for money (comprehensive audits)