Other Flashcards
Pro forma
shows the effects on historical FS that might have resulted from a transaction that occurred after the BS date had the tranx occurred at an earlier date. Ex. effects of a business combo., disposal of a segment of a biz, issuance of securities or changes in capitalization.
Requirements for reporting on pro forma FS
must have audited/reviewed the FS. (the level on of assurance on the pro forma cannot exceed the FS)
Should have an approp. level of knowledge of the acct practices of the entity involved.
The doc containing the pro forma info ref/includes the complete FS
What is the obj of pro forma
to provide some degree of assurance as to:
- whether mgmts assumptions provide reasonable basis for presenting the effects of the tranx
- whether the pro forma adj reflect those assump
- whether the historical FS are approp. adj.
Agreed upon procedures report
should include a statement of limitations on the use of the report. Intended to be used solely by the specified users and restrictions on distribution need to be clearly stated.
What pro services are subject to SSAE
reporting on an entitys compliances with statutory requirements
What type of opinion given on prospective FS
disclaimer of opinion.
restrict the distribution to the specified parties.
Not required to be independent
what does a compilation report on projection include?
- a paragraph describing the limitations on the presentations usefulness
- statement that a compilation is limited in scope and does not allow the expression of any assurance
- disclaimer of resp for updating the report for event occurring after the report date.
- also provides a caveat that the prospective might not be achieved
Which prospective FS are appropriate for general use?
Financial forecast. (projection must have limited use)
What does a projection not provide?
any assurance on the prospective financial info or the underlying assumptions
A financial forecast should include a statement..
There will usually be differences between the forecasted and actual results
what type of opinion should be issued when significant assumptions do not provide a reasonable basis for a financial forecast?
adverse
An accountant should make the client aware that when compiling a financial projection,
the eng does not include an evaluation of the support for the assumptions underlying the projections
What is the purpose of an MD&A review
to express negative assurance as to whether there is reason to believe:
The presentation does not include the elements required by the SEC.
The amounts are not accurately derived from FS
Underlying info does not provide a reasonable basis for the MD&A presentation
What assertions embodies MD&A presentation
Occurrence
Completeness of the explanation
Consistency with FS
Presentation and Disclosure
What type of assurance is an exam of MD&A
positive assurance
What is assurance services
independent prof services that improve the quality or context of info for decision makers
An examination of Internal control over fin reporting can be either
design effectiveness or operating effectiveness
What are the 4 conditions that must be met for the auditor to examine internal control in an integrated audit
- mgmt must accept resp for the effectiveness of the entitys internal control
- mgmt must evaluate the effectiveness of the entitys internal control using suitable and available criteria
- mgmt must support its assertion about the effectiveness of the entitys internal control with sufficient approp evidence
- mgmt must provide its written assertion about the effectiveness of the entitys internal control in a report that accompanies the auditors report
What does it take to be a covered member?
Partners or managers must provide ten or more hours of nonattest services
Bill of lading
a detailed list of a shipment of goods in the form of a receipt given by the carrier to the person consigning the goods
What is the purpose of tests of controls
to provide reasonable assurance that controls are functioning as designed
What would most likely be included in a mgmt rep letter?
a confirmation that the entity has complied with contractual agreements
What happens when the deviation rate in the auditors sample exceeds the tolerable rate
the auditor will assess control risk at a higher level and the pop. deviation rate will be less than the tolerable rate
For SOC reports, whats type 1
report that only addresses the suitability of design
for soc reports, whats type 2
report that provides info on both the suitability of design control and control operating effectiveness
What are goods sold on consignment
goods are sent to an agent (consignee) who sells the goods for the consignor. the consignor cont to own the goods until they are sold, so the goods appear as inventory in the acct records of the consignor
People that commit fraud usually have
incentive or pressure
opportunity
ability to rationalize
if the A believes that the customers are not likley to respond to a confirm what type of confirm should be used
positive
What is a stated control objective
the specific control objective identified by mgmt that if achieved, would result in the material weakness no longer existing
Material weakness
a deficiency in ICFR such that there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis. Must express an adverse opinion
Significant deficiency
a deficiency in ICFR that is less severe than a material weakness, yet important enough to merit attention by those responsible
If there is a scope limitation
Auditor should disclaim or withdraw
