Lec 20 Flashcards
what 3 services fall ONLY under the non-assurance services
- tax
- accounting and bookeeping
- majority of managemnt consulting
can management consulting be both assurance and non-assurance
yes, certain management consulting may be in both
what is the major category that is in assurance services and what 2 services are offered in there
the big category is attestation services
in here there is audits and reviews
what 4 services are offered in attestation enganemnts
- audits
- review engament
- certain managment consulting
- specialized reports
when an assurance engamgnet occurs, immediately there is what kind of accountability
three party acocuntability model
what is the three party accountability model, describes who is accountable to who, and can there be more than three parties
- the auditor provides conclusions, is paid by the accountable party, and is accountable to the users
- the accountable party is accountable to the users
- although the auditor is paid by hte accountable party, it is very distinct from a lawyer as the auditor is not working for the person who paid them
- the subject matter is the financial statement and its notes
- there can be more than 3, and the third party may be an external party who is paying for the audit of the acocuntable prty
what is the difference between attest and direct reporting engaements
- ATTEST engamgent is when the accountable party has made explicit assertions in writting
- DIRECT reporting engagement is when there is no explicit assertions made and the auditor needs to develop the explicit standards of performance
what is an example of assertions made for attest engagement
notes of the financial statements - writen assertions
what is an example of an a direct reporting engagement
government auditors assigned to determine whether goals of environmental protection agency are being met
why do auditors need to develop standards in direct reporting engagements
need to be developed because there are no explicit assertions made
what do financial statement reviews provide in terms of assurnce
they provide limited assurance, also called negative assurance
what clients is a review assurance done for
done for clients that do not require an audit
review engagements can be done for specific financial information, give an example of this and why it is done
done for sales if the lease that is being paid has a direct % corralation to sales, thus are done to determine how much is going to be paid
do compilation exngaments provide assurance? what can you do with compilation engagmentns
no assurance, but can be used by accountants to prepare F/S, or tax returns, or compile other types of financial information
does assurance engamgent have its own standards
yes, they have their own general standards. additionally, audit and review have their own specific standards as well
what are the 5 assurance engament general standards
- there should be reasonable basis for believing that the engagement can be completed in accordance with assurance standards
- management must ackknowledge responsibility for subject matter
- auditors must have adequate proficiency to perform the engagement and of the subject matter
- engagnement is performed with due care and objectivity
- criteria for evaluating subject matter should be identified or developed
what are the 3 general standards of AUDIT engagements
- comepetence
- ibjectivity
- due professional care
review engagements have their own standard, the CSRE 2400, what are three important take aways from it
- it must be distinguished and made clear to users that a review engagment was done rather than an audit engagment because review offers less assurance
- only analytical and inquiry procedures are PRIMARILY done
- if auditor becomes aware of possibly material issues, they may perform additional procedures as seen fit
- provides consluion whether F/S, whether modified or unmodified
- ensure you disclose negative/limited assurance provided
what are the 3 REVIEW engagement general standards
- person must have adequate knwoeldge and training in per forming reviews
- due care
- objective state of mind/independence
what does it mean for an individual that is doing a review engament to be proficient
to have good knowledge of the industry
what are the 3 examination standards for REVIEW engagement
- adequate planning and execution
- possess sufficient knoeledge of business so that meaningful enquiries and assessment can be done
- asses whether information is plausible or meaningful using inquiry and analysis
what are the 2 reporting standards for REVIEW engagements
- indicate scope, nature of review, and distinguish it from an audit
- indicate whether anything causes you not to believe the informaion is in accordance with criteria and explain reservations
what sort of companies are review engamgents common for?
private companies
can review engagments be done for public companies and why
yes, but they may be done ONLY on hte interim statemtns, because the FYE ones require an audit
what 2 procedures is review engagemnt evidence gathered from
enquiry and naalytical
what is the objective in a review engagment
to assess whether the information being reported is plausible or meaningful in the circumstances
when doing enquiry for reviews, what 3 things can be done?
- obtain knowledge of cleints busienss
- make enquiries to personel regarding control systems
- have discussions with management
what are 3 types of reviews
- f/s reviews
- financial infromation reviews
- compliance with agreements and regualtions
what engagemtns may be done on interim f/s
audit, reviews, and compilation
why are interim f/s often made?
to fulfill reporting requiraments of regualtory authoritiesw
what is the difference between usa and canada in terms of F/S reviews
- in usa quarterly reviews are required while in canada it is optional
who is the audit report required by
the stock excahanges and secutirities commissions that ocmpany is listed on
what is assessed during hte financial statement rewie (2)
- most importantly, asses whet ehr the accounting principles have been applied on a consitent basis, i.e. depreciation is applied the same at interim and at FYE
- assess and presume the knowledgability of the accountants
should an interim review be done by the same auditor as an FYE audit?
yes, they shiuld be done by hte same
what are hte 4 aspects of the nature of review procedures
- types - enquiry and analysis
- timing - performed at or near date of interim
- extent - PA needs to acquire sufficient knowledge of client’s business
- reporting - provide ONLY limited/negative assurance and F/S interim should be marked as unaudited
what are compilation engagements
bookkeeping services that lead to the completion of financial statements
what services does compilation engagent also incude
tax services
do comipilation engagments provide assurance?
no
what procedures should be done during a compilation engagement (2)
- assemble information
- ensure that it is arithmetically correct
what is the difficulty for an accountant when providing compilation services, and what can be done
it is difficult to not be associated with false or missleading infromation since they have such limited involvement.
in the case htat this is suspected, they should withdraw from engagement
what are hte 5 professional standards in compilation engagements
- adequate technical training and proficiency in accounting (no need for CPA to do compilation)
- due care
- work is dequately planned and properly executed
- assitants are properly supervised
- have NO need for independence
what are the 4 points in hte compilation report/notice to reader
- assertion that the cmopiled F/S are based on information provided by management
- statement that accountant did not attempt to verify completeness of information
- caution to reader that F/S may not be appropriate
- no expression of any form of opinion or negative assurance
where are the terms of the engagment set out, and must it be done for all engagments?
in the engagement letter and they must be done for all engagments
what does engagment letter help with
clarifying:
- nature of work
- cost
- what work should be completed
