Study Unit 18 - SSARSs - Preparation, Compilation, And Review Engagements

Question 1

Do SSARSs apply to issuers?

Answer 1

No, SSARSs apply only to engagements involving unaudited financial statement of nonissuers.

Question 2

To which three levels of engagements do the SSARSs apply?

Answer 2

• Preparations
• Compilations
• Reviews

Question 3

Compare the engagements under SSARSs and an audit engagement in terms of (1) assurance provided, (2) requirement for engagement letter, (3) requirement for independence, (4) requirement for report, and (5) requirement for disclosure.

Answer 3

Issue Preparation, Compilation, Review, Audit

Is assurance provided? No, No, Negative (limited), Positive (Reasonable)

Is an engagement letter required? Yes, Yes, Yes, Yes

Is independence required? No, No*, Yes, Yes

Is a report required? No, Yes, Yes, Yes

May the financial statement omit disclosures (notes)? Yes, Yes, No, No

*Lack of independence needs to be indicated and the report is modified absent independence.

Question 4

What notation should be included on each page of the financial statements and notes for a preparation engagement under SSARSs?

Answer 4

A preparation provides no assurance on the financial statement, and the accountant should include on each page (including notes) of the financial statements a notation that no assurance is provided.

Question 5

What is the documentation in connection with a preparation engagement under SSARSs?

Answer 5

• A clear understanding of the work performed, including
  
  • The engagement letter
  • A copy of the financial statements
• Significant consultations or professional judgements made during the engagement

Question 6

What is the title of the heading of a compilation report under SSARSs?

Answer 6

A compilation report does not have a heading.

Question 7

According to SSARSs, what are the types of prospective financial information that an accountant should not issue a compilation report on?

Answer 7

An accountant should not issue a compilation report on prospective financial information that omits
- The summary of significant assumptions
- The hypothetical assumptions of the limitations of the information for a projection

Question 8

What is the documentation in connection with a compilation engagement under SSARSs?

Answer 8

A clear understanding of the work performed, including
- The engagement letter or other written documentation
- A copy of the financial statements
- A copy of the accountant’s report

Question 9

What are the two types of procedures performed in a review engagement under SSARSs?

Answer 9

• Analytical procedures
• Inquiry of those having responsibility for financial and accounting matters

Question 10

When should the representation letter in a review engagement under SSARSs be dated?

Answer 10

It should be dated as of the date of the review report.

Question 11

In a review engagement under SSARSs, what type of fraud or noncompliance, if discovered, requires communication of the matter directly to those charged with governance?

Answer 11

The accountant should communicate the matter directly to those charged with governance if the fraud or noncompliance
- involves senior management
- Results in material misstatement.

Question 12

What is the documentation in connection with a review engagement under SSARSs?

Answer 12

Review documentation (working papers or workpapers) is the record of
- Review procedures performed
- Relevant review evidence obtained
- Conclusions reached

In addition, review documentation includes
- The engagement letter
- Communication with management
- A copy of the reviewed statements
- The accountant’s review report

Question 13

If an accountant’s engagement letter changes from an audit to a review under SSARSs, what should the review report not refer to?

Answer 13

• The original engagement
• Any audit procedures that may have been performed
• Scope limitations that resulted in the change

Question 14

When the prior-period statements are audited and the auditor’s report is not reissued, what should be disclosed in the review report on the current statements under SSARSs?

Answer 14

The review report should include an other-matter paragraph indicating
- That the statements of the prior period were audited
- The date of the auditor’s report
- The type of opinion expressed
- The substantive reasons for any modification of opinion
- That no auditing procedures were performed after the date of the previous report