Other Engagements Flashcards

1
Q

Audit and Reviews of Special Purpose F/S

A

CAS 800 - Audit

  • High Assurance
  • High Cost

CSRE 2400 - Review

  • Moderate Assurance
  • Lower Cost

Created for a limited set of users

  • Special purpose financial statement examples
    • Statement of profit distribution for joint venture
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2
Q

Audits and Reviews of F/S Prepared in Accordance with Special Purpose Frameworks

A

CAS 800 - Audit

  • Assurance - High
  • Cost - High

CSRE 2400 - Review

  • Assurance - Moderate
  • Cost - Moderate

Designed to meet the financial information needs of specific users.

  • F/S for tax purposes
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3
Q

Audits of Single F/S and Specific Elements of a F/S

A

CAS 805

  • Client may request an audit of a specific element or account or just the income statement
  • Assurance - High

Pros

  • Can leverage audit work of financial statement audit

Cons

  • Requires reassessed materiality, may require more audit work
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4
Q

Engagement to Report on Summary F/S

A

CAS 810

  • Should only accept if performed audit of complete F/S
  • Assurance - High
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5
Q

Reporting on Controls at a Service Organization

A

CSAE 3416

There are two types of reports that can be provided:

  • Type 1 report attests to the design and implementation of the service organization’s system of controls at a specific point in time. This is often for one day (a point in time), when the auditors actually review the design and implementation of the system.
  • Type 2 report attests to the design, implementation and ongoing operating effectiveness of the organization’s system of controls. This assurance would be provided over a period of time, such as six months or a year.
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6
Q

Audits and Reviews of Compliance with Agreements, Statutes and Regulations

A

Section 5815 - Audit

Section 8600 - Review

  • 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
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7
Q

Compilation Engagements

A
  • 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.
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8
Q

Compilation of a Financial Forecast or Projection

A

AuG-16

  • No Assurance
  • While a practitioner can prepare these compilations, the practitioner cannot provide assurance as to the achievability of the financial forecast or projection because actual results may vary from those forecasted or projected.
  • A compilation of a financial forecast or projection includes:
    • collecting financial information from management that is used in the assembly of the financial forecast or projection
    • inquiring as to how management developed the assumptions used in the financial forecast or projection, and determining whether the assumptions are appropriate for the circumstances and that there are no obvious omissions and inconsistencies
    • performing limited procedures consisting primarily of inquiry related to the information supplied to the practitioner, and considering whether the financial forecast or projection is prepared in accordance with GAAP
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9
Q

Reports on the Application of Accounting Principles

A

Section 7600

  • No assurance
  • Management of an entity may consult with a practitioner, other than the incumbent accountant, on the application of accounting principles on which the incumbent accountant has already provided guidance.
  • The incumbent accountant is the public accountant engaged to report on the financial statements of the entity.
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10
Q

Reports on the Results of Applying Specified Auditing Procedures to Financial Information Other than Financial Statements

A

Section 9100

  • A practitioner may be engaged to report on the results of applying specified auditing procedures to financial information other than financial statements
  • No Assurance
  • 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
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11
Q

Auditor’s Involvement with Offering Documents

A

AuG-6

  • Once the practitioner has obtained some confidence regarding the assumptions, he or she will need to examine the preparation and presentation of the financial forecast.
  • This includes determining whether assumptions are properly reflected, computations are arithmetically accurate and accounting policies used are consistent with the historical financial statements.
  • The practitioner must give consent in writing prior to the use of the report in an offering document.
  • Section 7150 Auditor’s Consent to the Use of a Report of the Auditor Included in an Offering Document provides guidance for this consent letter.
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12
Q

Comprehensive Audits

A

PS 5400

PS 6410

  • 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)
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13
Q

Forensic Audits

A
  • Forensic auditing, also known as forensic accounting, 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
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14
Q

Environmental Audits

A
  • 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.
  • The frequency of environmental audits has grown due to the increased risk of environmental accidents.
  • This has resulted in more regulation, legal action and public awareness in better safeguarding the environment.
  • 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

  • An environmental audit follows the same process used in comprehensive auditing, where 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

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15
Q

Public Sector Auditing

A

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)
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