NINJA AUD - Accounting and Review Services Engagements Flashcards
When agreeing to change engagement to a compilation, the following should be considered:
- the reason given for the client’s request.
- the additional audit or review effort required to complete the audit or review.
- the estimated additional cost to complete the audit or review.
The phrase “substantially less in scope than an audit”:
is found ONLY in a review report.
Engaged to submit unaudited financial statements that are reasonably expected to be used by a third party?
A compilation report must be issued!
The procedure, “The accountant should modify the accountant’s report if there is a change in accounting principles that is adequately disclosed,” is:
required for both a compilation and review.
The procedure, “The accountant should request written representation from members of management who have appropriate responsibilities for the financial statements..,” is:
required for a review only.
Hiring and advancement of engagement personnel are under the quality control element of:
human resources, NOT engagement performance.
NOTE: watch out for this on exam day.
The procedure, “The accountant should send a letter of inquiry to the entity’s attorney to corroborate the information furnished by management concerning litigation,” is:
not required for either a compilation or a review.
A standard compilation report implies that:
substantially all disclosures required by GAAP are included in the F/S.
Before reissuing a compilation report, the predecessor accountant should:
- read the financial statements of the current period and the successor’s report,
- compare the prior year’s financial statements with those of the current period, and
- obtain a letter from the successor accountant that indicates whether he is aware of any matter that might have a material effect on the financial statements, including disclosures, reported on by the predecessor.
When an independent CPA assists in preparing the F/S of an issuer,
he does have a responsibility of reading the F/S for obvious material misstatements.
When a CPA engaged in a compilation is not independent,
A compilation report with special wording that notes the accountant’s lack of independence may be issued.
When comparative F/S are presented and Year 1 has modified opinion while Year 2 has a review, the auditor should include:
substantive reasons for the prior year’s qualified opinion.
The standard report issued by an accountant after reviewing the financial statements of a nonissuer should state that:
we are not required to perform any procedures to verify the accuracy or completeness of the information.
When an accountant is engaged to report on subject matter or presentation based on measurement or disclosure criteria contained in contractual agreements or regulatory provisions, he or she should:
Restrict the report because it may be misunderstood by those who are not adequately informed of the basis, assumptions, or purpose of the presentation
