Professional Documents
Culture Documents
The cash, tax, and regulatory bases of accounting are commonly referred to as what?
When applying auditing standards to do an audit of f/s prepared in accordance with a special purpose
framework, the auditor should do what?
1. Obtain an understanding of
o The purpose for which the f/s are prepared
o The intended users
o The steps taken by management to determine if the framework is acceptable in the circumstances
2. Obtain the agreement of management that it acknowledges and understands their responsibility
3. Obtain an understanding of any significant interpretations of the contract that management made in the
preparation of the f/s
The auditor can state an opinion that the f/s are presented fairly
o "There is nothing that came to our attention with..."
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What are the elements of a special purpose framework auditors report? (Describe each component)
10. Signature of the auditor, auditors address and date of the auditors report
When a special purpose framework is being used and the auditor discovers that the f/s is not suitably titled
(they did not use non-GAAP titles), what happens?
When the special purpose f/s are prepared in accordance with a regulatory basis and theyre intended for
general use, the auditor should not include and E-O-M or O-M paragraph. Instead what should they do?
The auditor should express an opinion about whether the f/s are
1. Fairly presented in all material respects in accordance with GAAP
2. Prepared in accordance with the special purpose framework
What should the auditor do when the prescribed specific layout, form, or wording of the auditors report is not
acceptable?
The auditor should reword the report or attach an appropriately worded separate report
Where would a description be located that details how a cash, tax, regulatory, or contractual basis is different
from GAAP?
In the notes to the f/s
SummaryWhat are traits related to the cash basis framework in terms of 1) type of opinion, 2) if a description
of purpose for which special purpose f/s are prepared is needed, 3) if an E-O-M paragraph alerting the readers
about the preparation in accordance with the special purpose framework is needed and 4) if an O-M
paragraph restricting the use of the auditors report is needed?
SummaryWhat are traits related to the tax basis framework in terms of 1) type of opinion, 2) if a description
of purpose for which special purpose f/s are prepared is needed, 3) if an E-O-M paragraph alerting the readers
about the preparation in accordance with the special purpose framework is needed and 4) if an O-M
paragraph restricting the use of the auditors report is needed?
SummaryWhat are traits related to the regulatory basis framework in terms of 1) type of opinion, 2) if a
description of purpose for which special purpose f/s are prepared is needed, 3) if an E-O-M paragraph alerting
the readers about the preparation in accordance with the special purpose framework is needed and 4) if an OM paragraph restricting the use of the auditors report is needed?
SummaryWhat are traits related to the regulatory basis for general use framework in terms of 1) type of
opinion, 2) if a description of purpose for which special purpose f/s are prepared is needed, 3) if an E-O-M
paragraph alerting the readers about the preparation in accordance with the special purpose framework is
needed and 4) if an O-M paragraph restricting the use of the auditors report is needed?
SummaryWhat are traits related to the contractual basis framework in terms of 1) type of opinion, 2) if a
description of purpose for which special purpose f/s are prepared is needed, 3) if an E-O-M paragraph alerting
the readers about the preparation in accordance with the special purpose framework is needed and 4) if an OM paragraph restricting the use of the auditors report is needed?
Can be a separate engagement or in conjunction with an audit of an entitys complete set of f/s
o Single F/S:
Balance Sheet, Statement of Income, Statement of Cash Flows, Statement of assets and liabilities
o Specific Elements/Items
Accounts receivable, allowance for doubtful accounts, inventory, employee bonuses, schedule of
disbursements of leased property, etc.
When auditing a single f/s or a specific element, the auditor should do what?
1. Obtain an understanding of
o The purpose for which the f/s are prepared
o The intended users
o The steps taken by management to determine if the framework is acceptable in the circumstances
These are the exact same items an auditor should do for a special purpose framework
2. Perform procedures on any interrelated items as necessary
o Ex = sales and receivables, inventory and payables, or depreciation and fixed assets
o Ex = If based on the stockholders equity, you need to do that AND the balance sheet accounts
o Ex = If based on net income, you need income statement accounts AND the balance sheet
What type of assurance is given on reports for a single f/s or specific elements, accounts, or items?
Positive
How should materiality be determined on an audit of a single f/s versus a specific element?
Single f/s = determine it based on the single f/s NOT the complete set of f/s
Specific element = determine it for each element NOT for the aggregate of all the elements or compete set of f/s
When auditing both a complete set of f/s AND a single f/s or element what should the auditor do?
Issue a separate auditors report and express a separate opinion for each engagement
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What would be different in the auditors report when auditing a single f/s or item?
Introduction paragraph
o State only the statement or element
Opinion
o State that in their opinion, the schedule, f/s or whatever you referred to above was.
Emphasis-of-Matter or Other-Matter paragraph
o If the auditors report on the complete set of f/s includes an EOM or OM paragraph that is relevant to the
audit of a single f/s or element, include a similar type paragraph.
o If reporting on an incomplete presentation that is accordance with GAAP, state the purpose of the
presentation and indicate that the presentation is not intended to be complete
A piecemeal opinion is when the auditor expresses an adverse or disclaimer opinion on the complete set of f/s,
but an unmodified opinion on a specific element in the same auditors report. What should the auditor do in
this type of situation?
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It is a statement that means nothing came to the auditors attention that caused the auditor to believe that the
entity failed to comply with the specific aspects of the contractual agreement or regulatory requirement.
o There are no instances of noncompliance
An unmodified or qualified opinion is expressed on the f/s
The reason it is negative assurance is because auditors are not lawyers. A lawyers job is
to give assurance if a client is in compliance with a contract.
o When the auditor identifies one or more instances of noncompliance, the report on compliance should
describe noncompliance
An adverse or disclaimer opinion is expressed on the f/s
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Only when they have also been engaged to audit f/s from which the summary f/s are derived
Only if the auditor indicates whether the information is consistent in all material respects with the complete set of
financial statements.
The auditor's report on summary financial statements derived from audited statements should say what?
Introduction paragraph
o Identify the summary f/s and audited f/s and their dates
Managements responsibility
o For the preparation of the summary f/s
Auditors responsibility
o Express an opinion if the information set forth in the summary f/s is consistent, in all material respects,
with the audited f/s from which it was derived.
Opinion
o The type of opinion expressed
An unmodified
A disclaimer
An adverse
What should the accountant do when they perform more than one service, for example a compilation and an
audit?
Issue the report that is appropriate for the highest level of service rendered.
Professional Standards
What is the authoritative body designated to issue pronouncements in connection with the unaudited f/s of
nonissuers (non-public)? What are the pronouncements known as?
What does Statements on Standards for Accounting and Review Services (SSARS) apply to V. doesnt apply to?
They apply to
1. Compilations (generating f/s) and reviews of f/s of nonissuers
when an accountant "submits" f/s
Submission is the presenting of f/s to a client or third party that the accountant has
prepared, either manually or through use of computer software.
Preparing f/s that are in conformity with another comprehensive basis of accounting
constitutes a submission of f/s under SSARS.
2. Engagements to compile or issue a compilation report on specific elements, accounts, or items of a
nonissuers f/s
3. Pro forma f/s of nonissuers
Dont apply to
1. Other accounting services provided by accountants such as
Preparing, adjusting or correcting journal entries
consulting on financial matters
advising type of computer software
preparing tax returns
processing data
reproduction of client-prepared f/s
2. Reviews on interim financial information of nonissuers that are audited (if audited use SAS)
1. Management
2. An accountant in public accounting
3. Intended users of the f/s or info
The accountant is unable to come to an understanding with representatives of the organization (management)
regarding the services to be performed (aka the items in the engagement letter)
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K-RUP
1. Knowledge of industry accounting principles and practices
o If an accountant had no previous experience, theyre responsible for gaining the required level of
knowledge. (they can still accept the engagement) This is the same for a review engagement
2. Understanding the clients business and the accounting principles used by the client including
o Staff qualifications
o Transaction types and frequency
o Accounting basis used to prepare f/s
o Form of the accounting records
o Financial statements form and content
3. Reading the F/S
o Before issuing a report, accountants should read the compiled f/s and consider whether they are
appropriate in form and free from obvious errors
4. Provide documentation for the engagement
o The engagement letter
o Any significant findings or issues
o Oral or written communications with management regarding fraud or illegal acts that came to the
accountants attention
What should an accountant do when they discover info in the f/s that is incorrect, incomplete, or
unsatisfactory?
What should be included in the accountants compilation report which accompanies the compiled f/s?
1. Title: Accountants Compilation Report (note: independent is not used because it is not required)
2. Addressee
3. Introductory paragraph
o Identify the entity
o State that the f/s have been complied
o Identify the f/s
o Specify the date or period covered by the f/s
o State that the accountant has not reviewed or audited the f/s and expresses no opinion/assurance about
whether the f/s are in accordance with financial reporting framework (disclaim an opinion)
4. Managements responsibility: state that responsible for
o Preparation and fair presentation of the f/s in accordance with the applicable financial reporting
framework
o Designing, implementing, and maintaining internal controls relevant to the f/s
5. Auditors responsibility: state that
o Conduct the compilation in accordance with SSARS issued by the AICPA
o The objective of a compilation is to assist management in presenting financial info. in the form of f/s
without undertaking to obtain or provide any assurance that there are no material modifications that
should be made to the f/s
6. If an accountant is not independent, it is okay because no assurance is given. However, they should disclose their
lack of independence in the report. (If they are independent, it is implicitly stated)
7. Signature of accountant (a manual signature is NOT required)
8. Date of the accountants report: the date the compilation is completed
o Each page of the f/s should have a reference about the restriction if not intended for a 3 rd party
When is an accountant allowed to compile f/s that omits substantially all disclosures required by the applicable
financial reporting framework?
1. If the accountants report clearly indicates the omission by including a 4 th paragraph disclosing such omissions.
2. The omission are not intended to mislead any person who might be expected to use the f/s
3. The f/s are in otherwise in conformity with the framework
There is a material departure from the framework and management doesnt revise it
There is a material departure from the framework and additional disclosures are not adequate
Always withdraw when there is fraudulent, misleading, or false f/s
An accountant may submit a written personal financial plan containing unaudited personal financial
statements to a client without complying with requirements of SSARS when what conditions exist?
1. The accountant establishes an understanding with the client that the f/s will be used solely to assist the client in
developing a financial plan and will not be used to obtain credit, and
2. Nothing comes to the accountant's attention indicating that the f/s will be used to obtain credit.
SummaryIf an accountant submits an unaudited f/s to the client that 1) are expected to be used by a third
party versus 2) are not expected to be used by a third party, what are some traits/differences?
As long as the scope of the inquiry and analytical procedures has not been restricted.
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U LIAR CPA
Understanding with the client with what should be established
o Done through the engagement letter
Learn and/or obtain sufficient knowledge of the entitys business
o Do = Understand the clients business, accounting principles used by the client, and their
product/services
This is the first step in reviewing the f/s
o Purpose = This helps the auditor to be able to design analytical procedures and inquiries
o If an accountant had no previous experience in the industry, theyre responsible for gaining the required
level of knowledge. (they can still accept the engagement) This is the same for a compilation engagement
Inquiries should be addressed to appropriate individuals***
Analytical procedures should be performed***
Review- other procedures should be performed
o Read the f/s for conformity with the applicable framework and obtain reports
Client representation letter should be obtained from management (mgmts representation letter)***
Professional judgement should be used to evaluate results
Accountant (CPA) should communicate results
o Done in the Independent Accountants Review Report
What type of people should the inquiries be directed to? What are some examples of inquiries?
Analytical procedures in a review should be designed to do what? What are examples of analytical procedures?
Detect relationships and individual items that appear to be unusual and may indicate material misstatement
o Comparing current with prior f/s
o Comparing actual with budgeted or forecasted f/s
o Comparing financial and nonfinancial data
o Ratio Analysis
o Looking for predictable patterns
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What should be included in the client representation letter from management (mgmts representation letter)?
Management.
1. has responsibility for the preparation and fair presentation of the f/s in accordance with GAAP
2. has responsibility for designing, implementing, and maintaining internal controls for f/s
3. has responsibility to prevent/detect fraud
4. should disclose any knowledge of material fraud or suspected fraud
5. believes significant assumptions used when making accounting estimates are reasonable
6. has appropriately disclosed related parties and transactions
7. has disclosed information concerning subsequent events
8. believes the effect of uncorrected misstatements are immaterial both individually and in aggregate to the f/s
9. has accounted for and disclosed all possible litigation and claims
10. has made available to the auditor all financial records and related data
11. believes all transactions have been recorded and reflected in the f/s (completeness)
12. has disclosed all known instances of noncompliance or suspected noncompliance with laws and regulations
13. Has disclosed any additional representations related to matters specific to the entitys business and industry
An accountant is required to obtain a letter from management for all f/s and periods covered by the review period
o Even if current management was not present during all the periods
The letter can be from the owner, manager, or CEO, and, if appropriate, the CFO
Managements representation letter is required in a review, but not done in a compilation
There is a material departure from the framework and management doesnt revise it
There is a material departure from the framework and additional disclosures are not adequate
Always withdraw when there is fraudulent, misleading, or false f/s
When management fails to provide a signed representation letter (causes an incomplete review)
When there is a going concern issue or inconsistencies in the application of accounting principles in a review,
what is required?
4.
5.
6.
7.
8.
Summary-- If an auditor is NOT independent, what type of service can they provide?
Only compilations
o Any type of direct ownership of a client, even if immaterial, will impair independence for a review
First = recommend that the f/s be revised to conform with the framework
If the f/s are not revised modify the report or withdraw from the review
o Modify = If disclosures in the report would be adequate, then the accountant should include a separate
paragraph disclosing the departure and its effects at the end of the report.
o Withdraw = If disclosures in the report would not be adequate to indicate the deficiencies in the f/s
Change in Engagement
During the course of an engagement, a client might ask to change the audit to a review or compilation. Before
agreeing to the change what should an accountant consider?
1. Reason for the request
2. Effort required to complete the engagement
3. Estimate additional cost to complete the engagement
o If the accountant decides a change in the engagement is justified, they must comply with the standards
for a compilation or review and issue an appropriate report
When an accountant changes the type of engagement what would not be included in the auditors report?
What would be acceptable and unacceptable reasons for a change in engagement type?
Acceptable =
o Change in client requirements
o Misunderstanding as to the nature and services to be rendered
Unacceptable =
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o
o
o
o
The report on the prior period should be updated and issued as the last paragraph of the current periods report
When the continuing accountant performs a lower level of service in the current period (current period is a
compilation and the prior period was review) what should happen?
Issue a compilation report and add a paragraph to describe prior period responsibility assumed.
Or reissue the prior period review report to overall have both a review report and compilation report
Other Requirements
Compiled f/s that omit substantially all of the disclosures required by GAAP are not comparable to f/s that
include such disclosures. What should the accountant do in this type of situation?
Not issue a report on comparative f/s when statements for one or more, but not all, of the periods presented omit
substantially all of the disclosures required by GAAP
If the predecessor accountant decides NOT to reissue their report, what should the successor auditor do?
Make reference to the report of the predecessor accountants in the current report OR
Perform that level of service themselves
When the prior period has been audited, but the current period is not audited (downgraded in service) what
should the report say in an additional paragraph?
When the current period has been audited, but the prior period is not audited (upgraded in service) what
should the report say in an additional paragraph?
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Issuer = PCAOB
Nonissuer = SAS
To determine whether material modifications are necessary for the information to be in conformity with the
applicable financial reporting framework
o This is done through making inquiries and performing analytical procedures
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What should be included in the engagement letter of a report of a review of interim f/s for an issuer?
U LIAR CPA --- these are exactly the same as a review for a nonissuer except some details are a little different
Understanding with the client with what should be established
o Before the engagement: Determine if the reporting framework is acceptable and obtain an agreement of
management that they understand theyre responsible for internal controls and financial information
o Next: Have an engagement letter
Learn and/or obtain sufficient knowledge of the entitys business and their internal controls
o Do = Read prior audits and reviews, read current f/s, inquiry the predecessor auditor and review their
documentation
o Purpose = Determine types and evaluate likelihood of material misstatement. And to help the auditor to
be able to design analytical procedures and inquiries
In a regular review, the auditor doesnt need to have an understanding of internal controls, assess
fraud risk, do audit procedures, or communicate with the predecessor accountant
Inquiries should be addressed to appropriate individuals***
Analytical procedures should be performed***
Review- other procedures should be performed
o Read the f/s, read other info in documents, read minutes of BOD meeting, obtain evidence, obtain reports
Client representation letter should be obtained from management (mgmts representation letter)***
Professional judgement should be used to evaluate results
Accountant (CPA) should communicate results
o Done in the Independent Accountants Review Report on Interim Financial Information
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What type of people should the inquiries be directed to? What are some examples of inquiries?
It the auditor sees that a material modification is required, what is the communication order/chain that the
auditor should use to communicate the problem(s)?
1. Management
2. BOD and audit committee
3. Withdraw and get legal advise
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What should be included in the accountants review report on interim financial information?
An independent accountant's report is based on a review of interim financial information. If this report is
presented in a registration statement, a prospectus should include a statement clarifying what?
The Accountant's review report is not apart of the registration statement w/in the meaning of Securities Act 1933.
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SummaryWhat are the traits for a compilation, review, and audit in terms of 1) standards that apply, 2) the
level of assurance given, 3) type of entities they apply to, 4) knowledge required, 5) if inquiry and analytical
procedures are required, and 6) if having an understanding of internal controls is required.
Standards
Level of assurance
Entities
Knowledge required
COMPILATION
SSARS
REVIEW
SSARS
REVIEW
SAS
REVIEW
PCAOB
AUDIT
SAS/PCAOB
None
Limited
Limited
Limited
Fair as to GAAP
Nonissuers
Nonissuers
Accounting principles
and practices of
industry
Accounting
principles and
practices of
industry
Nonissuers:
Interim F/S
Accounting
principles and
practices of
industry
Issuers: Interim
F/S
Accounting
principles and
practices of
industry
Increased
understanding of
clients business
Increased
understanding of
clients business
Increased
understanding of
clients business
General
understanding of
clients business
None
Nonissuers/Issuers
Extensive
understanding of
economy, industry,
and clients
business
Inquiries of
internal personnel
Inquiries of
internal personnel
Inquiries of
internal personnel
Inquiries of
internal and
external personnel
Analytical
procedures
Analytical
procedures
Analytical
procedures
Analytical
procedures
Audit procedures
Understanding of
internal controls
Not required
Not required
Required
Required
Required
SummaryWhat are the traits for a compilation, review, and audit in terms of 1) if GAAP disclosures are
omitted, 2) if there are GAAP departures, 3) if independence is required, 4) if the engagement letter is required,
and 5) if the management representation letter is required.
GAAP disclosures
omitted
GAAP departures
Independence
Engagement letter
Representation letter
COMPILATION
SSARS
May omit most
without restricting
use, but warn with
ending paragraph
REVIEW
SSARS
REVIEW
SAS
REVIEW
PCAOB
AUDIT
SAS/PCAOB
Required or
modify review
report
Required or
modify review
report
Required or
modify review
report
Required or
modify -qualified/adverse
Disclosure required
Disclosure
required
Disclosure
required
Disclosure
required
Modify report
qualified/adverse
Required
Required
Required
Required
Required if no report
Required
Required
Required
Required
Not required
Required
Required
Required
Required
SummaryWhat are the traits for a compilation, review, and audit in terms of 1) when errors and irregularities
are detected, 2) what type of F/S can be reported on, 3) if communication with the predecessor is required, and
4) if subsequent event inquiries are required.
COMPILATION
SSARS
REVIEW
SSARS
REVIEW
SAS
REVIEW
PCAOB
Error and
irregularities
detection
Only errors
discovered
through inquiry or
analytical
procedures
Only errors
discovered
through inquiry or
analytical
procedures
Only errors
discovered
through inquiry or
analytical
procedures
F/S reported on
1 or more f/s
allowed to be
reported on if the
scope of
inquiries/analytical
1 or more f/s
allowed to be
reported on if the
scope of
inquiries/analytical
1 or more f/s
allowed to be
reported on if the
scope of
inquiries/analytical
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AUDIT
SAS/PCAOB
Must be designed
to provide
reasonable
assurance of
detection of
material
misstatement
1 or more f/s
allowed to be
reported on if the
scope of audit is
not limited and all
procedures are
applied
Not required
Not required
Not required
Required
Required
Not required
Required
Required
Required
Required
A letter from the CPA (signed by independent auditor) to the named underwriter (addressed to)
The accountants express an opinion concerning the f/ss compliance with requirements of the SEC.
o Typically negative assurance is given unaudited interim financial information
When a letter is to be issued, the CPA is required to perform a review of interim financial information in
accordance with auditing standards.
The letter must include a statement to restrict the use of the information to the addressee
Positive Assurance
A comfort letter provides positive assurance regarding what?
CPAs independence
Compliance of the f/s with the SEC Act, assuming the f/s are audited
Negative Assurance
A comfort letter provides negative assurance regarding what?
Unaudited f/s and unaudited condensed interim f/s and capsule financial info
Changes in selected financial information during subsequent period
Whether non-financial data in the registration statement complies with regulation S-K
Attest Engagements
Introduction
What is an attest engagement?
SummaryWhat standards apply to both issuers and nonissuers for audits, compilations, reviews, and attest
engagements?
Audit engagements
o Nonissuers = SAS (Statements on Auditing Standards)
o Issuers = PCAOB (Public Company Accounting Oversight Board)
Compilation engagements
o Nonissuer = SSARS (Statements on Standards for Accounting and Review Services)
Review engagements
o Nonissuer = SSARS (Statements on Standards for Accounting and Review Services)
o Nonissuer Interim F/S = SAS (Statements on Auditing Standards)
o Issuer Interim F/S = PCAOB (Public Company Accounting Oversight Board)
Attest engagements
o SSAE (Statements on Standards for Attest Engagements)
What type of attestation services would follow Statements on Standards for Attestation Engagements (SSAE)?
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1.
2.
3.
4.
5.
6.
7.
Audits
Compilations and reviews of f/s for nonissuers under SSARS (historical f/s)
Advocating for a client
Providing consulting and advisory services
Preparing tax returns
Trust services are assurance and advisory services, that follow SSAE, and are used to address the risk and
opportunities related to information technology. What are the types of engagements related to IT? (describe)
What are some differences and similarities between attestation standards and Generally Accepted Auditing
Standards (GAAS)?
TIPPY PASSER
o General Standards TIPPY
T Training and proficiency
I Independence
P Performance/due professional care in planning and performance
P Professional/adequate knowledge of subject matter
Y Your belief that the assertion and the criteria is objective, measurable, and complete
o Field work Standards PA
P Planning and supervision
A Appropriate and sufficient evidence to provide reasonable basis for the conclusion
o Reporting Standards SSER
S Identify the subject matter or assertion being reported on and the character of the engagement
S Disclose significant reservations about the engagement (unresolved problems or concerns)
E Express conclusions about the subject matter in relation to the established or stated criteria
R Restrict use if the report when necessary
The criteria are appropriate for/available to a limited number of parties
Reporting on subject matter and a written assertion has not been provided
Reporting on an agreed-upon procedures engagement
Restrictions on the scope of an examination engagement may result in the practitioner to do what?
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Restrictions that prevent necessary procedures from being performed result in a withdraw
I AM SURE
I Independence of the practitioner
A Agreement of the parties (procedures to be done, materiality limits, etc.)
M Measurability and consistency (subject matter should be capable of these)
S Sufficiency of the procedures
U Use of the report is restricted to the specified parties
R Responsibility for the subject matter rests with the client
E Engagements to perform agreed upon procedures on prospective f/s must include a summary of
significant assumptions
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What are some required elements that should be included in the practitioners report for agreed-upon
procedures?
1.
2.
3.
4.
5.
6.
7.
8.
General use means that the f/s issued will be used by parties not negotiating directly with the responsible
company (issuer). Limited use means that the f/s will only be used by the responsible party alone or those
negotiating directly with the responsible company (issuer). What type of use applies to financial forecast and
financial projection?
What are the ways that a practitioner is associated with prospective f/s?
1. Compilation = independence not required
2. Examination = independence required
3. Agreed-upon procedures = independence required (talked about above)
o A review is not allowed
When performing a compilation related to a client's prospective f/s, the accountant should do what?
Ensure that the client discloses all significant assumptions that are used for the prospective f/s.
Make inquiries about the accounting principles used in the preparation of the prospective financial statements.
To proper assemble the financial data based on the responsible partys assumption. (no assurance is given)
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We have compiled the statements in accordance with the attestation standards established by AICPA
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We have examined the forecasted statements in accordance with the attestation standards established by AICPA
o Identify the prospective f/s presented
State that the prospective statements are the responsibility of management
State that the practitioners responsibility is to express an opinion on the prospective f/s based on the examination
State the examination included such procedures as we considered necessary to evaluate both the assumptions
used by management and the preparation and presentation of the projection
State that the practitioner believes that the examination provides a reasonable basis for their opinion
State the opinion
State there are usually difference between the forecasted and the actual results
o limitations on the presentations usefulness (scope limitation)
State the practitioner has no responsibility to update the report for events that occur after the report
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What would cause a practitioner to modify their opinion for financial forecasts and projections? What kind of
opinion would go with it?
Partial presentations are those that omit one or more essential items, for example sales, gross profit, net
income, etc. What is another important trait about them?
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They determine that the computations of the pro forma adjustments are mathematically correct
Summary
SummarySummarize the terms learned including 1) attestation, 2) assurance, 3) audit, 4) compilation, 5)
review, and 6) examination
1. Attestation = Attestation is an engagement where a written report is issued on something other than historical f/s.
o Examples: agreed upon procedures, prospective f/s, MD&A, reporting on internal controls, and Pro
Forma f/s.
2. Assurance = Any engagement that improves the quality of information for decision makers.
o Examples: WebTrust and SysTrust
3. Audit = To provide f/s users with positive assurance (an opinion) on whether the f/s are presented fairly, in all
material respects, in accordance with the applicable financial reporting framework
4. Compilation = An engagement in which an accountant presents in the form of f/s information that is the
representation of management
o There are no audit or review procedures
o No assurance
5. Review = An engagement in which an accountant performs inquiry and analytical procedures as a basis for
providing limited assurance that there are no material modifications that should be made to the f/s in order for
them to be in conformity with the applicable financial reporting framework
o The review is based on inquiry and analytical procedures
o Limited assurance
6. Examination = An engagement that provides positive assurance (an opinion) based on procedures such as search,
verification, inquiry, and analysis
R SCCCAMPP
o Reports on the Application of the requirements of an Applicable Financial Reporting Framework (A1)
o Special purpose frameworks (regulatory basis except for general use or contractual basis only) (A2-pg
5)
o Compliance with contractual agreement or regulatory requirements related to audited f/s (A2-pg 19)
o Compilations (nonissuers) if not intended for 3rd party (A2-pg 28)
o Comfort letters for underwriters (A2-pg 69)
o Agreed-upon procedure engagements (A2-78)
o MD&A (A2-89)
o Prospective f/s (projection compilation and projection examination reports)
note: not forecast compilations or forecast examinations
o Partial presentations (A2-85)
Negative/Limited = the auditor is not aware of material misstatements, but we did not do a full audit
o "We are not aware of ..."
Positive = the auditor can state an opinion that the f/s are presented fairly in conformity with GAAP
o "There is nothing that came to our attention with..."
Negative/Limited
o Compliance with contractual agreement or regulatory requirements related to audited f/s
o Review (nonissuers, interim nonissuers and interim issuers)
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SummaryWhat are different engagement that require independence versus the ones that do not require
independence?
Requires independence
o Audits (A1)
o Special purpose frameworks (cash, tax, regulatory, and contractual basis)
o Audits of single f/s or specific elements, accounts, or items
o Compliance with contractual agreement or regulatory requirements related to audited f/s
o Engagements to report on summary F/S
o Reviews (nonissuers, interim nonissuers and interim issuers)
o Letters for underwriters/comfort letters
o Attest engagements (agreed-upon procedures, financial forecasts/projections = examination on
prospective f/s, pro forma f/s, compliance with law/contracts, MD&A, trust services, and internal
controls)
Basically everything except a compilation on prospective f/s
No independence required
o Reports on application of the requirements of an applicable financial reporting framework (A1)
o Compilations (nonissuers)
o Attest engagements financial forecasts/projections = a compilation on prospective f/s
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