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AUD > Other Professional Services > Flashcards

Other Professional Services Flashcards

1
Q

What is SysTrust?

A

The AICPA’s assurance service regarding systems reliability.

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2
Q

Define “assurance services.”

A

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

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3
Q

What is PrimePlus (formerly called ElderCare)?

A

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

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4
Q

What is WebTrust?

A

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

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5
Q

What is the Assurance Services Executive Committee?

A

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

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6
Q

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”?

A

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).

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7
Q

What is the auditor reporting on in an integrated audit?

A

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.

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8
Q

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

A

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

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9
Q

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

A

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

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10
Q

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

A

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

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11
Q

What is the purpose of pro forma financial information?

A

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

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12
Q

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

A

A forecast can have unrestricted distribution (but any report on a projection must have restricted distribution).

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13
Q

What is meant by the term “projection”?

A

A projection represents the financial statement outcome based on certain specified hypothetical assumptions, which may or may not be likely to occur.

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14
Q

What is meant by the term “forecast”?

A

A forecast represents the predicted financial statement outcome - the “best guess.”

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15
Q

What is meant by a partial presentation of a forecast?

A

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

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16
Q

Define “responsible party.”

A

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.

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17
Q

Define “attest engagement.”

A

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.

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18
Q

What is the First General Attestation Standard?

A

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

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19
Q

What is the Second General Attestation Standard?

A

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

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20
Q

What is the Third General Attestation Standard?

A

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.

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21
Q

What is the Fourth General Attestation Standard?

A

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

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22
Q

What is the Fifth General Attestation Standard?

A

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

23
Q

What is the First Attestation Standard of Field Work?

A

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

24
Q

What is the Second Attestation Standard of Field Work?

A

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

25
Q

What is the First Attestation Standard of Reporting?

A

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.

26
Q

What is the Second Attestation Standard of Reporting?

A

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.

27
Q

What is the Third Attestation Standard of Reporting?

A

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.

28
Q

What level of attestation risk does an examination provide?

A

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

29
Q

What level of attestation risk does a review provide?

A

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

30
Q

Describe an “agreed-upon procedures” attestation engagement.

A

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.

31
Q

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?

A

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.

32
Q

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

A
  1. Security
  2. Availability
  3. Processing integrity
  4. Confidentiality
  5. Privacy
33
Q

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

A
  1. Occurrence;
  2. Consistency with the financial statements;
  3. Completeness of the explanation; and
  4. Presentation and disclosure.
34
Q

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

A
  • 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.
35
Q

List the 3 specific elements required by the Securities and Exchange Commission (SEC) in the Management Discussion & Analysis (MD&A) presentation.

A
  1. Discussion of financial condition - regarding liquidity and capital resources;
  2. Discussion of changes in financial condition; and
  3. Discussion of results of operations.
36
Q

List the 2 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.

A
  1. Examination - resulting in positive assurance; or
  2. Review - resulting in negative assurance.
37
Q

List the 3 matters that a practitioner must express an opinion on in relation to an examination report on an entity’s Management Discussion & Analysis (MD&A).

A
  1. Whether the MD&A presentation includes the three elements required by the SEC;
  2. Whether the historical amounts included have been accurately derived from the entity’s financial statements; and
  3. Whether the underlying information, determinations, estimates, and assumptions provide a reasonable basis for the disclosures contained in the MD&A presentation.
38
Q

List the 3 matters that a practitioner must address in relation to a review report on an entity’s Management Discussion & Analysis (MD&A).

A
  1. That the entity’s MD&A presentation does not include the elements required by the SEC;
  2. That the historical financial amounts included in the MD&A presentation have not been accurately derived from the Company’s financial statements; and
  3. 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.
39
Q

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

A

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.
40
Q

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

A
  • 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.
41
Q

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

A
  1. Introductory paragraph;
  2. Scope paragraph - reference AICPA attestation standards;
  3. Definitions paragraph - regarding internal control concepts;
  4. Inherent limitations paragraph;
  5. Opinion paragraph;
  6. Audit of financial statements paragraph - cross reference other report.
42
Q

List the 2 types of engagements that are permitted for compliance attestation.

A
  1. Examination
  2. Agreed-Upon Procedures.

Note that a “review” is not permitted!

43
Q

A review report on pro forma financial information involves expressing negative assurance on three matters. List the 3 matters.

A
  1. That management’s assumptions do not provide a reasonable basis for presenting the significant effects attributable to the transaction/event;
  2. That the adjustments do not appropriately reflect those assumptions; and
  3. That the pro forma column does not reflect the proper adjustments of the historical financial statements.
44
Q

Describe the structure of the examination report on compliance attestation.

A

Very similar to the structure of an audit report:

  1. Introductory paragraph - list specific compliance requirements;
  2. Scope paragraph - reference attestation standards established by the AICPA; and
  3. Opinion paragraph.
45
Q

An examination report on pro forma financial information involves expressing an opinion on three matters. List the 3 matters.

A
  1. Whether management’s assumptions provide a reasonable basis for presenting the significant effects attributable to the transaction/event;
  2. Whether the adjustments appropriately reflect those assumptions; and
  3. Whether the pro forma column reflects the proper adjustments of the historical financial statements.
46
Q

What conditions are required to be present for a practitioner to issue an examination or review report on pro forma financial information?

A
  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.
47
Q

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

A
  1. Introductory paragraph;
  2. Second paragraph - reference attestation standards established by the AICPA;
  3. Third paragraph - identify the objective of pro forma information;
  4. Fourth paragraph - express an opinion for an examination report or negative assurance for a review report.
48
Q

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

A
  1. Examination
  2. Review
49
Q

List the 2 types of prospective (forward-looking) financial statements.

A
  1. Forecasts
  2. Projections
50
Q

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

A
  1. Examination - positive assurance is expressed;
  2. Agreed-upon procedures - assurance is provided as “procedures, findings;” or
  3. Compilation - no assurance is expressed.

Note that a “review” is not permitted!

51
Q

Describe the structure of an examination report on a projection.

A

Examination report on a projection typically includes the following four paragraphs:

  1. Introductory paragraph;
  2. Scope paragraph - reference attestation standards established by the AICPA; and
  3. Opinion paragraph;
  4. Restricted distribution - limit the distribution to the specified parties.
52
Q

List the hierarchy of attestation standards and guidance.

A
  1. Statements on Standards for Attestation Engagements (SSAE) - compliance is enforceable by Rule 202 of the AICPA Code of Professional Conduct,Compliance With Standards;
  2. Attestation interpretations - consist of interpretations and appendices) of the SSAEs, etc.; and
  3. “Other attestation publications” - such publications have no authoritative status and the practitioner is not required to take them into consideration.
53
Q

List the 2 categories of requirements applicable to attestation engagements.

A
  1. Unconditional requirements - indicated by “must” or “is required;” and
  2. Presumptively mandatory requirements - indicated by “should”, which permit rare departures.
54
Q

List the three usual types of attestation engagements. (This “menu” may change depending upon the specific subject matter involved.)

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

AUD (15 decks)

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