Other Professional Services

Question 1

List the three types of attestation engagements.

Answer 1

1. Examinations. 2. Reviews. 3. Agreed-Upon Procedures.

Question 2

What level of attestation risk does an examination provide?

Answer 2

An examination provides a positive expression of opinion and, therefore, a low level of “attestation risk.”

Question 3

What is the First General Attestation Standard?

Answer 3

Training - The practitioner must have adequate technical training and proficiency to perform the attestation engagement.

Question 4

What level of attestation risk does a review provide?

Answer 4

A review provides negative assurance and, therefore, a moderate level of “attestation risk.”

Question 5

List the two categories of requirements applicable to attestation engagements.

Answer 5

Unconditional requirements - indicated by “must” or “is required;” and Presumptively mandatory requirements - indicated by “should”, which permit rare departures.

Question 6

What is the Second General Attestation Standard?

Answer 6

Knowledge - The practitioner must have adequate knowledge of the subject matter.

Question 7

What is the First Attestation Standard of Reporting?

Answer 7

Nature of engagement - The practitioner must identify the subject matter or the assertion being reported on and state the character of the engagement in the report.

Question 8

What is the Fifth General Attestation Standard?

Answer 8

Due professional care - The practitioner must exercise due professional care in the planning and performance of the engagement and the preparation of the report.

Question 9

What is the Second Attestation Standard of Reporting?

Answer 9

Conclusions - The practitioner must state the practitioner’s conclusion about the subject matter or the assertion in relation to the criteria against which the subject matter was evaluated in the report.

Question 10

What is the Fourth General Attestation Standard?

Answer 10

Independence - The practitioner must maintain independence in mental attitude in all matters relating to the engagement.

Question 11

What is the Third Attestation Standard of Reporting?

Answer 11

Reservations - The practitioner must state all of the practitioner’s significant reservations about the engagement, the subject matter, and, if applicable, the assertion related thereto in the report.

Question 12

What is the Second Attestation Standard of Field Work?

Answer 12

Evidence - The practitioner must obtain sufficient evidence to provide a reasonable basis for the conclusion that is expressed in the report.

Question 13

List the hierarchy of attestation standards and guidance.

Answer 13

Statements on Standards for Attestation Engagements (SSAE) - compliance is enforceable by Rule 202 of the AICPA Code of Professional Conduct, Compliance With Standards; Attestation interpretations - consist of interpretations and appendices) of the SSAEs, etc.; and “Other attestation publications” - such publications have no authoritative status and the practitioner is not required to take them into consideration.

Question 14

Define “responsible party.”

Answer 14

The person(s) responsible for the subject matter, or a party who has a reasonable basis for making a written assertion about the subject matter. Being able to identify a responsible party is a prerequisite for an attest engagement.

Question 15

Define “attest engagement.”

Answer 15

An engagement where a CPA practitioner is engaged to issue (or does issue) an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter that is the responsibility of another party.

Question 16

What is the Third General Attestation Standard?

Answer 16

Criteria - The practitioner must have reason to believe that the subject matter is capable of evaluation against criteria that are suitable and available to users.

Question 17

Describe an Agreed-upon procedures attestation engagement.

Answer 17

An engagement whereby the practitioner and the “specified parties” agree upon the specific procedures to be performed and the specified parties take responsibility for the sufficiency of the procedures for their purposes.

Question 18

What is the First Attestation Standard of Field Work?

Answer 18

Planning and supervision - The practitioner must adequately plan the work and must properly supervise any assistants.

Question 19

What do projections represent?

Answer 19

Projections represent the financial statement outcome based on certain specified hypothetical assumptions, which may or may not be likely.

Question 20

What is the only type of prospective financial statement for which an examination report can have general unrestricted distribution?

Answer 20

Forecast can have unrestricted distribution (any report on a projection must have restricted distribution).

Question 21

What do forecasts represent?

Answer 21

Forecasts represent the predicted financial statement outcome - the “best guess.”

Question 22

What is meant by a partial presentation of a forecast?

Answer 22

A forecast that does not meet the requirements of the AICPA’s minimum presentation guidelines and which is, therefore, inappropriate for general distribution.

Question 23

Describe the structure of an examination report on a projection.

Answer 23

Examination report on a projection typically includes the following four paragraphs: Introductory paragraph; Scope paragraph - reference attestation standards established by the AICPA; and Opinion paragraph; Restricted distribution - limit the distribution to the specified parties.

Question 24

List the two types of prospective (forward-looking) financial statements.

Answer 24

1. Forecasts 2. Projections.

Question 25

List the three types of engagements that are permitted by AICPA attestation standards that are directly related to “prospective” financial statements.

Answer 25

Examination - positive assurance is expressed; Agreed-upon procedures - assurance is provided as “procedures, findings;” or Compilation - no assurance is expressed. Note that a “review” is not permitted!

Question 26

List the two types of engagements related to pro forma information.

Answer 26

1. Examination 2. Review.

Question 27

An examination report on pro forma financial information involves expressing an opinion on three matters. List the three matters.

Answer 27

Whether management’s assumptions provide a reasonable basis for presenting the significant effects attributable to the transaction/event; Whether the adjustments appropriately reflect those assumptions; and Whether the pro forma column reflects the proper adjustments of the historical financial statements.

Question 28

What is the purpose of pro forma financial information?

Answer 28

To show the significant effects on historical financial information that might have resulted from a transaction consummated after the balance sheet date.

Question 29

Describe the structure of the examination (or review) report on pro form financial information.

Answer 29

Introductory paragraph; Second paragraph - reference attestation standards established by the AICPA; Third paragraph - identify the objective of pro forma information; Fourth paragraph - express an opinion for an examination report or negative assurance for a review report.

Question 30

What conditions are required to be present when reporting on pro forma financial information?

Answer 30

1. The document containing the pro forma information includes or references the complete historical financial statements; and 2. The accountant has audited or reviewed the related historical financial statements.

Question 31

A review report on pro forma financial information involves expressing negative assurance on three matters. List the three matters.

Answer 31

That management’s assumptions do not provide a reasonable basis for presenting the significant effects attributable to the transaction/event; That the adjustments do not appropriately reflect those assumptions; and That the pro forma column does not reflect the proper adjustments of the historical financial statements.

Question 32

Describe the structure of the examination report on compliance attestation.

Answer 32

Very similar to the structure of an audit report: Introductory paragraph - list specific compliance requirements; Scope paragraph - reference attestation standards established by the AICPA; and Opinion paragraph.

Question 33

List the two types of engagements related to compliance attestation.

Answer 33

1. Examination 2. Agreed-Upon Procedures. 3. Note that a “review” is not permitted!

Question 34

When do AICPA’s attestation standards apply to “Compliance Attestation”?

Answer 34

When reporting on compliance with requirements of laws, regulations, or contracts or effectiveness of internal controls related to such compliance.

Question 35

What is the accountant’s responsibility regarding management representations in compliance attestation?

Answer 35

Accountant must obtain management’s written representations letter for an examination or agree-upon procedures engagement related to compliance attestation.

Question 36

What is the effect of material non-compliance on the examination report?

Answer 36

The accountant should express a qualified or adverse opinion and report directly on the subject matter, not management’s assertion.

Question 37

What considerations should be given by the auditor when determining to write a separate or combined audit report when reporting on internal controls under Statement on Standards for Attestation Engagements (SSAE) 15?

Answer 37

The auditor may choose separate reports on the financial statements and on internal control or issue a combined report applicable to both. If issuing separate reports, the auditor should add a paragraph to each report referencing the other report.

Question 38

Describe the basic auditor responsibilities under Statement on Standards for Attestation Engagements (SSAE) No. 15.

Answer 38

The auditor should plan and perform the integrated audit to achieve the objectives of both engagements simultaneously. The auditor should obtain sufficient appropriate evidence to support the auditor’s opinion on internal control as of the period end; and Obtain sufficient appropriate evidence to support the auditor’s control risk assessments for purposes of the audit of the financial statements.

Question 39

What is the auditor reporting on in an integrated audit?

Answer 39

The auditor is reporting on both the entity’s financial statements and on the entity’s internal control over financial reporting. The study and evaluation of internal control is applicable to both purposes.

Question 40

What is the purpose of the American Institute of Certified Public Accountants’ (AICPA) Statement on Standards for Attestation Engagements (SSAE) No. 15, “An Examination of an Entity’s Internal Control Over Financial Reporting That is Integrated With an Audit of Its Financial Statements”?

Answer 40

The AICPA issued SSAE No. 15 to supersede an earlier SSAE and, thereby, more closely align AICPA standards when an auditor is reporting on internal control over financial reporting for a nonissuer with the standards of the PCAOB applicable to audits of issuers (Auditing Standard No. 5).

Question 41

When one or more material weaknesses exist, what considerations should the auditor give regarding the internal controls over financial reporting?

Answer 41

Internal control over financial reporting cannot be considered effective; The auditor should express an adverse opinion on internal control and consider the implications to the audit of the entity’s financial statements.

Question 42

Describe the structure of a separate report on internal control when reporting on internal control under Statement on Standards for Attestation Engagements (SSAE) 15.

Answer 42

Introductory paragraph; Scope paragraph - reference AICPA attestation standards; Definitions paragraph - regarding internal control concepts; Inherent limitations paragraph; Opinion paragraph; Audit of financial statements paragraph - cross reference other report.

Question 43

List the two types of engagements associated with an entity’s Management Discussion & Analysis (MD&A) presentation that are addressed by the American Institute of Certified Public Accountants (AICPA) attestation standards.

Answer 43

Examination - resulting in positive assurance; or Review - resulting in negative assurance.

Question 44

List the three matters that a practitioner must express an opinion on in relation to an examination report on an entity’s Management Discussion & Analysis (MD&A).

Answer 44

Whether the MD&A presentation includes the three elements required by the SEC; Whether the historical amounts included have been accurately derived from the entity’s financial statements; and Whether the underlying information, determinations, estimates, and assumptions provide a reasonable basis for the disclosures contained in the MD&A presentation.

Question 45

List the three matters that a practitioner must express an opinion on in relation to a review report on an entity’s Management Discussion & Analysis (MD&A).

Answer 45

That the entity’s MD&A presentation does not include the elements required by the SEC; That the historical financial amounts included in the MD&A presentation have not been accurately derived from the Company’s financial statements; and That the underlying information, determinations, estimates, and assumptions of the entity do not provide a reasonable basis for the disclosures in the MD&A presentation.

Question 46

List the four assertions that are implicitly embodied in the Management Discussion & Analysis (MD&A) presentation.

Answer 46

Occurrence; Consistency with the financial statements; Completeness of the explanation; and Presentation and disclosure.

Question 47

List the three specific elements required by the Securities and Exchange Commission (SEC) in the Management Discussion & Analysis (MD&A) presentation.

Answer 47

Discussion of financial condition - regarding liquidity and capital resources; Discussion of changes in financial condition; and Discussion of results of operations.

Question 48

What preconditions must exist for an auditor to accept an engagement to report on an entity’s Management Discussion & Analysis (MD&A) presentation?

Answer 48

Practitioner must have audited the annual financial statements for the latest period covered by the MD&A presentation; and Any other financial statements involved must have been audited, or at least reviewed if they are interim financial statements, by the practitioner or a predecessor auditor.

Question 49

List the five “principles” and categories of criteria associated with “Trust Services” consisting of SysTrust and WebTrust.

Answer 49

Security; Availability; Processing integrity; Confidentiality; and Privacy.

Question 50

What is PrimePlus (formerly called ElderCare)?

Answer 50

The AICPA’s assurance service directed at the needs of aging persons.

Question 51

What is the Assurance Services Executive Committee?

Answer 51

The AICPA committee responsible for overseeing the ongoing development of assurance services.

Question 52

What is SysTrust?

Answer 52

The AICPA’s assurance service regarding systems reliability.

Question 53

What is WebTrust?

Answer 53

The AICPA’s assurance service intended to facilitate e-commerce activities.

Question 54

Define “assurance services.”

Answer 54

Independent professional services that improve the quality or context of information for decision makers.