SSARS Flashcards
in a review, an accountant performs
inquiry and analytical procedures
Therefore, he or she would most likely inquire about actions taken by the board
A CPA may accept an engagement to compile pro forma financial information provided
it is in a document that also contains or refers to the historical financial statements on which the pro forma information is based, which were compiled, reviewed, or audited.
intro paragraph of review report:
The introductory paragraph of the review report
- identifies the financial statements reviewed,
- indicates that they were reviewed,
- date/period fs covered
- specifies that a review consists of inquiries and analytical procedures
- that it is substantially less in scope than an audit
- no opinion is expressed
disclaimer of opinion
adverse opinion
qualified opinion
only for audits.
Statements on Standards for Accounting and Review Services (SSARS) relate to
preparation (no independent required)
compilation (independent of not, must disclose in compilation report)
reviews (independent)
the accountant is required to assess the risk of fraud in
audit
An accountant is permitted to report on ONE financial statement so long
as the scope of the work is not limited.
Scope of the inquiry and analytical procedures has not been restricted
procedures of an audit:
- Observing a year-end inventory count
- assessing internal control
- examining subsequent cash receipts
- development of accounting estimates
procedures of a review:
- performing analytical procedures
2. making inquiries of management (including inquiries about actions taken at board meetings)
when fs are not in accordance to GAAP (cash basis) and its not disclosed, what should accountant do
should disclose the basis of accounting used in compilation report
when fs are not in accordance to GAAP (cash basis) and it IS disclosed, what should accountant do
should quantify the effects of the differences between GAAP and the cash basis and disclose them in the notes of the financial statements
management rep letter is required for
and Inquiries and analytical procedures
audits and reviews
testifying as expert witness is
subject to Standards for Consulting Services
compilation of prospective financial statements is
nonattest engagement subject to SSARS
if theres omission of disclosure should CPA still take compilation engagement?
yes
if Omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant’s report
implicit factor in the compilation report
independence
if not independent, must explicitly state in compilation report
compilation report should include paragraph that:
the financial statements have not been audited or reviewed and, accordingly, the accountant does not express an opinion or any other form of assurance on them
compilation: there’s omission of disclosure required by GAAP. accountant report should include
Information alerting readers about omission of the disclosures and notification that the omission may influence the user’s conclusions about the financial statements
Statements on Standards for Attestation Engagements
SSAE
provide guidance for attestation engagements, which include
- examinations,
- reviews, and
- agreed-upon procedures engagements.
ERA
analytical procedures involves
Analytical procedures involve comparing client data to the accountant’s expectations and may be applied to financial and NONfinancial data
comparing ratios developed from recorded amounts to the accountant’s expectations,
limited assurance
the accountant is not aware of any material modifications that should be made to the financial statements for them to conform to accounting principles generally accepted in the U.S
inquires involve
Inquiries will be designed to enable the accountant to determine if the client’s accounting can be relied upon,
steps in a review
- have or obtain an understanding of the client and its industry, including an understanding of the accounting principles and practices that are generally followed
- evaluate review evidence obtained as a basis for providing limited assurance
- perform analytical procedures, comparing client data to expectations, which may be derived from prior periods, and makes inquiries
date of compilation
date the compilation was completed
compilation report should include
statement that accountant did not perform an audit or review and that no opinion, conclusion, or other type of assurance is provided
review of PUBLIC company is regulated by
Auditing standards issued by the Public Company Accounting Oversight Board (PCAOB)
preparation report
there is no preparation report
preparation no assurance
- indicate on every page that no assurance is provided or
2. to allow the accountant to attach a disclaimer so indicating
Each page of the entity’s reviewed financial statements should
make reference to the accountant’s review report.
“See Independent Accountant’s Review Report”
who adds footnote
client
requirement of preparation engagement
- communicate with management regarding any incomplete or incorrect information that does come to the accountant’s attention.
- required to understand the client’s significant accounting policies.
- When financial statements are prepared in accordance with a special-purpose framework (other than GAAP), a description of the framework should be included on the face of the financial statements or in a note to the statements.
how to obtain sufficient knowledge of the industry
By consulting AICPA guides, industry publications, or individuals knowledgeable about the industry
A compilation requires the accountant to
read the financial statements and, using that knowledge, evaluate whether there are obvious mistakes in the application of accounting principles
consider whether the financial statements are free from obvious material mistakes in the application of accounting principles
The compilation report includes the sentence,
“We have performed a compilation engagement in accordance with
Statements on Standards for Accounting and Review Services (SSARS) promulgated by the Accounting and Review Services Committee (ARSC) of the AICPA.”
