Reports on Application of Requirements of Framework

Question 1

Identify the procedures an auditor should perform when engaged to report on the application of accounting principles to a specific transaction.

Answer 1

1. )Obtain an understanding of the form and substance of the transaction involved.
2. )Consult with the “continuing accountant” (which requires the client’s permission).
3. )Review applicable accounting requirements and consult with others, as necessary.

Question 2

What is meant by the term “hypothetical transaction”?

Answer 2

A transaction or financial reporting issue that does not involve facts or circumstances of a specific entity

Question 3

What is meant by the term “specific transaction”?

Answer 3

A completed or proposed transaction or group of related transactions or a financial reporting issue involving facts and circumstances of a specific entity

Question 4

Under what circumstances would a reporting accountant, who is engaged to provide a written report or provide oral advice on a specific transaction, not be expected to consult with the continuing accountant?

Answer 4

When (1) the reporting accountant is engaged to provide recurring accounting and reporting advice and does not believe that a second opinion is being requested, (2) has full access to management, and (3) believes that the relevant information has been obtained

Question 5

Identify the five paragraphs normally associated with a reporting accountant’s report when engaged to report on the application of the requirements of an applicable financial reporting framework to a specific transaction.

Answer 5

1. )Identify the nature of the engagement and subject matter involved.
2. )Describe the specific transaction(s) involved.
3. )Describe the appropriate accounting principles involved.
4. )Provide concluding comments and reference continuing accountant.
5. )Restrict the distribution of the report to the specified users.

Question 6

What is meant by the term “advisory accountant”?

Answer 6

A reporting accountant who is also engaged to provide accounting advice to a specific entity on a recurring basis

Question 7

When is the AICPA pronouncement titled “Reports on Application of Requirements of an Applicable Financial Reporting Framework” applicable?

Answer 7

When providing a written report or verbal advice on:

1. )The application of accounting principles to specific transactions; or
2. )The type of opinion that might be issued on specific financial statements.

Question 8

What is meant by the term “reporting accountant”?

Answer 8

An accountant, other than a continuing accountant, who prepares a written report or provides oral advice on the application of the requirements of an applicable financial reporting framework to a specific transaction or on the type of report that may be issued on a specific entity’s financial statements