Other Engagements (Acctg Services) Flashcards
Special Purpose Framework
- 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)
Auditor Report in Special Purpose Framework
The auditor report should describe the purpose for which the financial statements were prepared or refer to a note that contains that information.
Restrict Use of Auditor Report
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.
Emphasis of the Matter and Other Matter Paragraph
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.
Single Financial Statement Audit (Account or Items)
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
Modified Opinion Relevant to Single Audit
Issue adverse opinion if complete set is due to material misstatement
Issue a disclaimer if complete set is due to scope limitation.
Unmodified Opinion on Single Audit with Modified on Complete Set
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
Compliance Engagement related to contractual agreement
The auditor must have done the FS audit and may only issue a negative assurance on compliance
Negative Assurance
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
Summary Financial Statement Engagement
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
Levels of Service
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.
Compilation
No assurance; Attest Engagement; Objective is to present in the form of FS without expressing an opinion/assurance.
Review
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.
Analytical Procedures in a Review
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.
Accountant Independence
Not required in a Compilation but should be disclosed if lack of independence.
Required in a Review
Auditing Procedures
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
Comfort Letter
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
Attest Engagement
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.
Attestation Engagements
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.
Examination Engagement (Attestation)
Positive opinion, high level of assurance based on variety of procedures. (you want a positive, high mark on an exam) - written assertion obtained
Review Engagement (Attestation)
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
Agreed Upon Engagement (Attestation)
No assurance, procedures and findings are listed. Engaged to report findings based on specific agreed upon procedures, no written assertions required.
Conditions of Agreed Upon Procedures
- 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)
Pro Forma FS
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.
