SU 19: Prep, Comp, Review and Attest Engagements

Question 1

may perform an agreedupon

procedures engagement on prospective financial statements if what is met

Answer 1

(1) the specified parties agree to the procedures
and take responsibility for their sufficiency, (2) report use is limited to specified parties, and (3) the
statements include a summary of significant assumptions.

Question 2

Statements on Standards for Accounting and Review Services establish standards and procedures for which of the following
engagements

Answer 2

Preparing an individual’s personal financial statement to be used to obtain a mortgage
ARC
70 describes the accountant’s responsibilities for preparation services. A preparation of financial
statements includes preparation of personal financial statements for presentation with a financial plan.

Question 3

When a practitioner examines projected financial statements include a separate paragraph that

Answer 3

Describes the limitations on the usefulness of the presentation.
According to AT 301, when the presentation is a projection, the practitioner’s report should include a
separate paragraph that describes the limitations on the usefulness of the presentation.

Question 4

The practitioner’s report on an examination of pro forma financial information (PFFI)

Answer 4

May state an unmodified, qualified, or adverse opinion.
The report should include an opinion on whether (1) management’s assumptions provide a reasonable
basis for the significant effects attributable to the transaction or event, (2) the pro forma adjustments give
appropriate effect to the assumptions, and (3) the pro forma column reflects the proper application of
those adjustments to the historical data.

Question 5

In a preparation service, management’s omission of substantially all disclosures ordinarily included in the financial statements
should be disclosed

Answer 5

On the face of the financial statements.

Question 6

ARC
80 describes the accountant’s procedures and reporting responsibilities for compilations. The
accountant should obtain an understanding of the applicable financial reporting framework. This
framework may be a special purpose framework

Answer 6

An other basis uses a definite set of logical, reasonable
criteria applied to all material items in the statements. The FASB’s guidance (ASC 27410)
for presenting
personal financial statements apparently meet the criteria of an other basis of accounting

Question 7

Do the SSARSs require that the compilation report be printed on the accountant’s
letterhead and that the report be manually signed by the accountant

Answer 7

The compilation report need not be printed on the accountant’s letterhead or manually signed by the
accountant. However, the report must be signed by the accounting firm or the accountant as appropriate.
Thus, the signature may be manual, printed, or digital.

Question 8

Do theses meet SSARS definition of f/s?
I. Preparing a working trial balance
II. Preparing standard monthly journal entries

Answer 8

No
Standard monthly journal entries and a working trial balance do not meet the definition of a financial
statement. Thus, their preparation is not a service under SSARSs.

Question 9

not be included in an accountant’s report based upon a review of the financial statements of a
nonissuer

Answer 9

A statement that the review was in accordance with GAAS.
The report should include a statement that the review is substantially less in scope than an audit.
GAAS
apply to audits, not reviews. A review is in accordance with SSARSs issued by the AICPA.

Question 10

Comparative financial statements are being presented for Year 2 and Year 1 and the Year 1, report
is not reissued. This separate paragraph should indicate the

Answer 10

The accountant should include an othermatter
paragraph. It should state (1) that the financial statements
of the prior period were audited previously, (2) the date of the previous report, (3) the type of opinion
expressed previously, (4) the substantive reasons if the opinion was other than unmodified, and (5) that no
auditing procedures were performed after the date of the previous report.

Question 11

A practitioner accepted an engagement to report on the entity’s compliance with a contractual agreement. The practitioner
should perform the following

Answer 11

The practitioner should use due care and exercise professional skepticism to achieve reasonable
assurance that material noncompliance will be detected.
1. Obtain an understanding of the specified compliance requirements.
2. Plan the engagement, including the potential use of specialists and internal auditors.
3. Obtain an understanding of the relevant portions of internal control over compliance to plan the
engagement and to assess control risk. If control risk is to be assessed at a low level, tests of
controls must be performed.
4. Perform procedures to provide reasonable assurance of detecting material noncompliance,
including obtaining a written representation letter from the responsible party.
5. Consider subsequent events.
6. Form an opinion.

Question 12

An entity’s income statements were misstated due to the recording of journal entries that involved debits and credits to an
unusual combination of expense and revenue accounts. The auditor most likely could have detected this irregularity by

Answer 12

Analytical procedures may be effective when tests of details do not indicate potential misstatements. For
example, accounts are not likely to be complete when improper journal entries have been made.
Analytical procedures comparing prior amounts with expected amounts would likely disclose unexpected
differences

Question 13

comparative f/s Yr 1 audited and Yr 2 reviewed. CPA includes separate paragraph to indicate

Answer 13

No auditing procedures were performed after the date of the Year 1 auditor’s report.
A continuing accountant who performs a lower level of service should include a separate paragraph
describing the responsibility assumed for the financial statements of the prior period or reissue the
previous report. The paragraph included in the review report should indicate that no auditing procedures
were performed after the date of the original auditor’s report.

Question 14

A practitioner’s report on agreedupon

procedures related to an entity’s compliance with specified requirements should contain

Answer 14

A statement of restrictions on the use of the report.
The fourth attestation standard of reporting indicates that a report should be restricted to specified parties
“when the report is on an attest engagement to apply agreedupon
procedures to the subject matter

Question 15

Which prospective financial statement for general use upon which a practitioner may appropriately report

Answer 15

Financial forecast
Prospective financial statements are for general use if they are for use by persons with whom the
responsible party is not negotiating directly, e.g., in an offering statement of the party’s securities. Only a
report based on a financial forecast is appropriate for general use

Question 16

Comfort Letter - Capsule Information

Answer 16

Capsule information is unaudited summarized interim information for subsequent periods used to supplement the audited financial statements or unaudited interim financial information in a securities offering

Question 17

Comfort Letter - Management’s discussion and analysis.

Answer 17

Comments that attestations are in accordance with AT-C 395, Management’s Discussion and Analysis, may be made. No comments on the compliance of the MD&A with the forms required by SEC rules should be made. Furthermore, no comments should be made on nonfinancial data in the MD&A.

Question 18

Which of the following is not a role of the risk assessment in an integrated audit of a nonissuer?

Answer 18

Concluding on the effectiveness of a given control.
Risk assessment underlies the examination process, including the determination of (1) significant accounts and disclosures, (2) relevant assertions, (3) controls to test, and (4) the evidence necessary to assess the effectiveness of a given control. When an examination of internal control is integrated with an audit of financial statements, the same risk assessment process supports both engagements. But the auditor must test the effectiveness of the design and operation of a control before concluding on its effectiveness.

Question 19

Cook, CPA, Service Auditor is engaged to issue a report on PDC’s internal controls implemented as of a specific date.

Answer 19

Contain a disclaimer of opinion on the operating effectiveness of PDC’s controls
Service auditors may report (1) on the fairness of management’s description of the controls and whether the controls have been implemented and are suitably designed (type 1 report) or (2) additionally on operating effectiveness (type 2 report). The type 1 report should include a disclaimer of opinion related to operating effectiveness of the controls.

Question 20

When reporting to the audit committee on conditions relating to an entity’s internal control observed during an audit of a nonissuer’s financial statements, the auditor should include a

Answer 20

Restriction on the use of the report.
The report is a by-product of the engagement. It is intended solely for the information and use of those charged with governance, management, and others within the organization (or specified regulatory agency) and is not intended to be and should not be used by anyone other than these specified parties (AU-C 905). But law or regulation may require the report to be given to governmental authorities. For issuers, the auditor must express an opinion on whether the client maintained, in all material respects, effective internal control over financial reporting. This report is not restricted as to use.

Question 21

To ensure that the audit report for an issuer is prepared in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the report must

Answer 21

Attest to and report on the internal control assessment made by the management of the issuer.
Section 404(a) requires an issuer to include in its annual report an internal control report (1) stating the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting and (2) an assessment of the effectiveness of the internal control structure and procedures for financial reporting. Section 404(b) requires the issuer’s auditor to report on the effectiveness of internal control over financial reporting. [But the requirement in 404(b) does not apply to nonaccelerated filers (issuers with market equity of less than $75,000,000).]

Question 22

A practitioner may perform agreed-upon procedures on prospective fin statements provided which are met.

Answer 22

The prospective statements contain a summary of significant assumptions
Criteria for agreed-upon procedures for PFS is if practitioner is independent and
1.) the parties agree on procedures and take responsibility for their sufficiency
2.) report use is limited to specified parties
3.) statements include summary of significant assumptions