Other Engagements (Acctg Services)

Question 1

Special Purpose Framework

Answer 1

• a financial reporting framework other than GAAP that is:
• -Cash Basis, Tax Basis, Regulatory Basis and Contractual Basis.
• The cash, tax and regulatory basis of accounting is known as OCBOA (other comprehensive basis of accounting)

Question 2

Auditor Report in Special Purpose Framework

Answer 2

The auditor report should describe the purpose for which the financial statements were prepared or refer to a note that contains that information.

Question 3

Restrict Use of Auditor Report

Answer 3

Except when it is prepared on a regulatory basis and intended for general use.

Restrict use to those within the entity, parties to the contract or agreement or the regulatory agencies to which the entity is subject to, when done with contractual basis or regulatory basis.

Question 4

Emphasis of the Matter and Other Matter Paragraph

Answer 4

If the basis is regulatory and intended for general use - then no need for emphasis paragraph

If the basis is regulatory or contractual - then include a other matter paragraph unless its regulatory with general use.

Question 5

Single Financial Statement Audit (Account or Items)

Answer 5

The auditor should obtain an understanding of:

• the purpose on why its been prepared
• the intended user
• the steps taken by management to determine that the applicable financial reporting framework is acceptable

Question 6

Modified Opinion Relevant to Single Audit

Answer 6

Issue adverse opinion if complete set is due to material misstatement
Issue a disclaimer if complete set is due to scope limitation.

Question 7

Unmodified Opinion on Single Audit with Modified on Complete Set

Answer 7

Auditor may issue unmodified only if the unmodified opinion is not published with and does not accompany the auditor’s report, and if the single audit element does not constitute a major portion of the entity’s complete set

Question 8

Compliance Engagement related to contractual agreement

Answer 8

The auditor must have done the FS audit and may only issue a negative assurance on compliance

Question 9

Negative Assurance

Answer 9

No identified instances of non compliance

No adverse/disclaimer opinion on the FS - if so then report on compliance can only be issued when there are instances of noncompliance

Question 10

Summary Financial Statement Engagement

Answer 10

Should be accepted by auditor only if audited financial statement from which the summary financial statement is derived.

Can issue an unmodified or adverse opinion on summary financial audit - issue adverse if summarized financials are not consistent with the audited FS and management does not make any changes

Auditor should withdraw if from engagement if audit of financial statements includes an adverse opinion or disclaimer

Question 11

Levels of Service

Answer 11

Two levels of service related to unaudited FS of a non issuer- Compilation & Review

Compilation & Review involves three parties - management, the accountant and the intended user.

Question 12

Compilation

Answer 12

No assurance; Attest Engagement; Objective is to present in the form of FS without expressing an opinion/assurance.

Question 13

Review

Answer 13

Limited Assurance (negative); express with limited assurance that there are no material modifications that should be made to the FS; both an assurance engagement and an attest engagement; done with inquiry and analytical procedures. 
The accountant is not required to obtain an understanding of internal control or assess control risk.

Question 14

Analytical Procedures in a Review

Answer 14

Should be designed to detect relationship and individual items that appear to be unusual and may indicate material misstatement.
Involves developing an expectation based on plausible relationship and then comparing recorded amounts or ratios.

Question 15

Accountant Independence

Answer 15

Not required in a Compilation but should be disclosed if lack of independence.

Required in a Review

Question 16

Auditing Procedures

Answer 16

U - Understanding with the client - engagement letter
L - Learn the company's environment
I - Make inquires
A - Perform analytical procedures
R - Review work - perform other procedures
C - Client Rep Letter
P - Use professional judgment
A - Auditor communicates results

Question 17

Comfort Letter

Answer 17

Letter from the CPA to the named underwriter just before the registration of the client’s securities.

Review engagement is required when issuing a comfort letter.

Provide negative assurance when FS is unaudited

Question 18

Attest Engagement

Answer 18

CPA is engaged to issue an examination, review, compilation or an agree upon procedures report on a subject matter or on an assertion on a subject matter.

Provides services tailored to the needs of the user.

Question 19

Attestation Engagements

Answer 19

Are a natural extension of GAAS but differ because they make no reference of financial statements, no reference to GAAP, and provides level of assurance below a GAAS audit.

Question 20

Examination Engagement (Attestation)

Answer 20

Positive opinion, high level of assurance based on variety of procedures. (you want a positive, high mark on an exam) - written assertion obtained

Question 21

Review Engagement (Attestation)

Answer 21

Negative assurance, Moderate level of assurance, based on inquiry and analytical procedures. (you don’t want them to find any mistakes when reviewing) - written assertion obtained

Question 22

Agreed Upon Engagement (Attestation)

Answer 22

No assurance, procedures and findings are listed. Engaged to report findings based on specific agreed upon procedures, no written assertions required.

Question 23

Conditions of Agreed Upon Procedures

Answer 23

• independent accountant.
• agreement of parties
• be able to measure the subject matter and be consistent
• procedures must be sufficient
• restricted use of report
• client responsible for subject matter
• prospective FS must include assumptions (review engagement of prospective FS not allowed - only compilation, examination, and agreed upon procedures)

Question 24

Pro Forma FS

Answer 24

Past financial results of an expired period would have been if something had been different. - if we had changed something, this is how it would have looked - may be examined or reviewed.

Question 25

Financial Forecast

Answer 25

Expected results of a future period - plans to do, not “what ifs” - general and limited use.

Question 26

Financial Projection

Answer 26

Based on hypothetical assumptions - “what ifs” - limited use only