Other Professional Services Flashcards
Which of the following is a conceptual difference between the attestation standards and generally accepted auditing standards?
The attestation standards provide a framework for the attest function beyond historical financial statements.
The attestation standards and generally accepted auditing standards differ conceptually in two main areas:
1) the attestation standards provide a framework for the attest function beyond historical financial statements; and
2) the attestation standards provide for the growing number of attest services in which the practitioner expresses assurances in forms other than the positive opinion. (AT introduction)
When an accountant compiles projected financial statements, the accountant’s report should include a separate paragraph that
Describes the limitations on the usefulness of the projection.
The accountant’s compilation report on a projection should include a description of the special purpose for which the projection was prepared, along with a separate paragraph to restrict the use of the report to the specified parties.
An accountant’s standard report on a compilation of a projection should not include a
Statement that the accountant expresses only limited assurance that the results may be achieved.
A compilation report on a projection includes:
1) a paragraph describing the limitations on the presentation’s usefulness;
2) a statement that a compilation is limited in scope and does not allow the expression of any assurance; and
3) a disclaimer of responsibility for updating the report for events occurring after the report date. It also provides a caveat that the prospective results might NOT be achieved. No assurance regarding the achievement of results is provided.
An engagement to express an opinion on a system of internal accounting control will generally
Be more extensive in scope than the assessment of control risk made during the financial statement audit.
In a financial statement audit, consideration is given to internal control in terms of its impact on the fair presentation of the financial statements. In an examination of internal control, the purpose of the engagement is to render an opinion specifically on internal control. As a result, the work performed in an attestation engagement on internal control is more extensive in scope than that performed during the control risk assessment in a financial statement audit.
Which of the following disclosures should prospective financial statements include?
Disclosure requirements for prospective financial statements are included in the AICPA’s Statements of Standards for Attestation Engagements #10 (SSAE #10). That Statement defines prospective financial statements as either financial forecasts or financial projections that include [require disclosure of] summaries of both significant assumptions and significant accounting policies. Disclosure of such summaries is essential for the readers to understand and interpret the prospective statements.
A CPA in public practice is required to comply with the provisions of the Statements on Standards for Attestation Engagements (SSAE) when
Statements on Standards for Attestation Engagements (SSAE) apply to attest and agreed-upon procedures engagements, compilations and examinations of financial forecasts and projections, and pro forma, compliance and internal control engagements.
Thus, they apply to the compilation of a financial projection and they do not apply to expert witness testimony.
Which of the following prospective financial statements is(are) appropriate for general use?
Only a financial forecast is appropriate for general use. Any report on a projection must have limited use (AT 301.09).
An accountant’s standard report on a compilation of a projection should not include a
Statement that the accountant expresses only limited assurance that the results may be achieved.
An accountant’s report on a compilation of a projection includes:
1) a statement that the compilation is limited in scope;
2) a disclaimer of responsibility to update the report;
3) a caveat that the prospective results may not be achieved; and
4) a description of the limitations of the presentation’s usefulness. It would NOT include a statement offering limited assurance that the results may be achieved.
Mill, CPA, was engaged by a group of royalty recipients to apply agreed-upon procedures to financial data supplied by Modern Co. regarding Modern’s written assertion about its compliance with contractual requirements to pay royalties.
Mill’s report on these agreed-upon procedures should contain a(an)
List of the procedures performed (or reference thereto) and Mill’s findings.
An agreed-upon procedures engagement results in the issuance of a report that identifies the procedures performed and the results obtained. The report would include a list of the procedures performed (or reference thereto) and the findings.
Which of the following professional services would be subject to the Statements on Standards for Attestation Engagements (SSAEs)?
An engagement to report on an entity’s compliance with statutory requirements.
Such an engagement is subject to the SSAEs. Specifically, AT Section 601 applies to engagements related to an entity’s compliance with requirements of applicable laws, regulations, or contracts.
An engagement to express an opinion on a system of internal accounting control will generally
Be more extensive in scope than the assessment of control risk made during the financial statement audit.
In a financial statement audit, consideration is given to internal control in terms of its impact on the fair presentation of the financial statements. In an examination of internal control, the purpose of the engagement is to render an opinion specifically on internal control. As a result, the work performed in an attestation engagement on internal control is more extensive in scope than that performed during the control risk assessment in a financial statement audit.
Before an auditor can accept an engagement to examine internal control over financial reporting in an integrated audit of a nonissuer, all of the following conditions must be met, except for
Management must state in the engagement letter that any identified significant deficiencies will be corrected on a timely basis, not to exceed 60 days from the report release date.
There are 4 conditions that must be met for the auditor to examine internal control in an integrated audit under AICPA standards:
Management must accept responsibility for the effectiveness of the entity’s internal control;
Management must evaluate the effectiveness of the entity’s internal control using suitable and available criteria;
Management must support its assertion about the effectiveness of the entity’s internal control with sufficient appropriate evidence; and
Management must provide its written assertion about the effectiveness of the entity’s internal control in a report that accompanies the auditor’s report.
Since the statement associated with A is not included as a condition for accepting the examination of internal control, it is the one exception and, hence, is the correct answer.
A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to
Review management’s discussion and analysis (MD&A) prepared pursuant to rules and regulations adopted by the SEC.
The attestation standards must be followed when reviewing MD&A prepared pursuant to SEC requirements. The standards apply to both an examination and a review of MD&A.
They do not apply to engagements involving the provision of recommendations to improve MD&A.
