M4 Agreed-Upon Procedures and prospective financial statements

Question 1

What are the client and practitioners’ responsibilities in an Agreed upon procedure

Answer 1

-Client and practitioner agree on procedures
-Practitioners do not provide an opinion or assurance
-Practitioners report their findings
-Client is responsible for assessing sufficiency of procedures performed

Question 2

What statements are included in the agreed upon procedures report

Answer 2

-A statement that the report may not be suitable for any other purpose and that users are responsible for determining appropriateness
-A statement that the engagement was conducted in accordance with AICPA
-A description of procedures and findings

Question 3

If an auditor of a nonissuer concludes that reasonable justification exists to change an audit engagement to an agreed upon procedures engagement. What should be reported?

Answer 3

-The report should not include a reference to the original audit engagement but may include a reference to procedures that have been performed.

Question 4

Financial forecast

Answer 4

Reflects the expected future results, General use

Question 5

Financial projections

Answer 5

What if scenarios, limited use only by the party or parties negotiating directly with the party.

Question 6

What guidance is used in prospective financial statements

Answer 6

SSARS

Question 7

What guidance is used in Agreed upon procedures

Answer 7

AICPA

Question 8

What should be included in a compilation engagement

Answer 8

-A caveat that the prospective results may not be achieved
-State no responsibility to update the report for future events
-Make inquiry about the accounting principles used in preparation of prospective F/S

Question 9

What should be included in an examination engagement

Answer 9

-Determine compliance with AICPA guidelines
-Perform procedures to evaluate management’s assumptions
-Describe limitations of usefulness

Question 10

What is a partial presentation?

Answer 10

Presentations of prospective financial information which would not ordinarily be appropriate for general use because they omit one or more essential items

Question 11

What is a pro Forma review

Answer 11

-Includes reference to the financial statements from which the historical financial information is derived

-Provides limited assurance about the effect of a future or hypothetical event.