AUDIT 2.txt

  1. Six elements of quality control
    • H - Human resources
    • E - Engagement/client acceptance and continuance
    • L - Leadership responsibilities
    • P - Performance of the engagement
    • M - Monitoring
    • E - Ethical requirements
  2. What is a quality control system
    Policies and procedures designed, implemented and maintained to ensure the firm complies with professional standards and appropriate legal and regulatory requirements
  3. Quality control - Human resources
    • - Reasonable assurance that those hired have appropriate characteristics
    • - Engagement partners possess competencies necessary
    • - Personnel have degree of technical training/proficiency, and participate in continuing professional education
    • - Qualifications necessary to advance
  4. Quality control - Engagement/client acceptance and continuance
    • - Minimize likelihood of association w/ client whose mgmt lacks integrity (reputation, attitude, nature of operations)
    • - Undertakes job we can complete professionally (consider deadlines, personnel)
    • - Need to document issues and have policies/procedures for withdrawal
    • - Obtain understanding with client about services
  5. Quality control - Leadership responsibilities for quality within firm
    • - Firm leadership bears responsibility for creating culture of quality
    • - Resources should be devoted to quality control
  6. Quality control - Performance
    • - Ensure staff is supervised and there's a high level of performance
    • - Sufficient engagement documentation and maintaining it
    • - Ask for help when you need it (outside consultant)
    • - Follow guidelines for quality control (reviewer, procedures, etc)
  7. Quality control - Monitoring
    • - Ongoing consideration and evaluation of design and effectiveness of quality control system
    • - A partner should bear responsibility for this
    • - Procedures include reviews, inspections, and make sure these are documented and action's taken
    • - "Wrap up" review by second partner focuses on compliance with GAAP
  8. Peer review of CPA
    CPA firm reviews another CPA firm's compliance with quality control system. If a firm's a member of the AICPA, then it's required every 3 years. Report's issued after it's done
  9. Quality control - Ethical requirements
    • - Goal: to maintain public confidence in profession
    • - Independence means impartiality and freedom from any obligation (should be communicated)
    • - Annually all firm personnel should confirm independence in writing
    • - SOX prohibits other services for audit clients, while tax prep for corp. audit client is ok (except aggressive/confidential or corp officers/family members)
    • - 1 year cooling off period between CFO/CEO going to CPA
    • - Partner rotation every 5 years
    • - No: contingent fees, commissions or referral fees
  10. GAAS vs. Quality control standards
    • GAAS: conduct of each individual audit engagement
    • Quality control standards: conduct of all professional activities of the firm's practice as a whole
  11. 5 types of special reports
    • - OCBOA - other comprehensive basis of accounting financial statements
    • - Specified elements, accounts, or items in an F/S
    • - Compliance w/ contractual or regulatory requirements related to audited F/S
    • - Financial presentations to comply with contractual agreements or regulatory provisions
    • - Financial information presented in prescribed forms/schedules that require a prescribed form of auditor's report
  12. Types of OCBOA
    • - Cash basis
    • - Income tax basis
    • - Governmental requirements of a governmental regulatory agency
    • - Price-level adjusted F/S (definite set of criteria applied to all material items)
  13. Significant differences between standard auditor's report and OCBOA report
    • - Non-GAAP titles
    • - Scope paragraph is the SAME
    • - Explanatory paragraph states about OCBOA basis (refer to describing footnote), and that it's non-GAAP
    • - OCBOA opinion paragraph if it's fair on the "OCBOA basis"
  14. Additional requirement for OCBOA report prepared for regulatory agency
    Restrictive paragraph included that's limiting use of report to management, directors and regulatory agency - even if the report may be public record
  15. What standards must be followed for specific elements, accounts or items of a F/S?
    The GAAS with the possible exception of the first (that F/S are presented in conformity with GAAP) if items aren't meant to be in conformity
  16. When is an audit required when doing a special report for specific elements, etc?
    When element/account/item is far-reaching or pervasive (e.g. net income, stockholder's equity or any item based thereon), the auditor must audit complete set of F/S
  17. When are piecemeal opinions okay and not okay to be issued?
    • Not allowed: major item, and adverse/disclaim opinion
    • Allowed: minor item, and not accompanying adverse/disclaimer
  18. If an auditor has disclaimed an opinion on F/S as a whole, when can an auditor express an opinion on just the A/R?
    If presented separately from disclaimer of opinion of the F/S
  19. When are special report for specific elements need a restricted use paragraph?
    If the specified item is meant to comply with contract/agreement than GAAP or OCBOA, then use of report must be restricted to only involved parties
  20. When can an auditor issue a special report on a client's compliance with contractual agreements/regulatory requirements?
    Auditor must have audited the client's F/S and can only issue a negative assurance (if opinion was not adverse or disclaimed on F/S as a whole)
  21. Requirements for special report on client's compliance with contractual agreements/regulatory requirements
    • - Negative assurance in a separate report (state connection to audit and compliance with GAAS) , or included as addt'l paragraph following opinion in audit report
    • - Reference to specific agreement
    • - Restriction on use of report
  22. Difference between International and US standards for entity's compliance with certain aspects of contractual agreements
    • US: negative assurance
    • Int'l: opinion is expressed
  23. Two types auditor may be requested to report on for special report - special purpose F/S to comply with contractual agreement/regulatory provisions
    • - Incomplete financial presentation that is prepared in conformity with GAAP or an OCBOA
    • - Special-purpose financial presentation that isn't in conformity with GAAP or OCBOA
  24. Incomplete financial presentation
    Restricted use, except when presentation and report are filed with regulatory agency and included in a document distributed to the general public (e.g. registration statement)
  25. Financial information presented in prescribed forms or schedules
    Auditor should pay special attention to type/wording. It may be necessary to reword the form or attach a separate report
  26. In what situations might there be modifications to an unqualified special report (add explanatory paragraph)
    • - Lack of consistency
    • - Going concern uncertainties
    • - Other auditors
    • - Change of prior opinion on comparative F/S
    • - Emphasis of a matter
  27. What can CPA perform with respect to unaudited F/S of a non-issuer?
    • - Compilation (no assurance given) - just presenting information (an attest)
    • - Review (limited assurance) - make sure no material modifications need to be made (assurance and attestation)
  28. What standards do an auditor use for working with non-issuers?
    SSARS (statements on standards for accounting and review services)
  29. What do SSARS apply to, and what do they not apply to?
    • Apply to: engagements to compile/issue compilation report on specified elements/accounts/items, or proforma financial information of nonissuer
    • Doesn't apply to: other accounting services (consulting, tax returns, bookkeeping, financial data processing, etc). But if many entries are adjusted -> prep of F/S -> SSARS apply
    • Doesn't apply to: SAS (reviews of interim financial information)
  30. Five elements of compilation and review engagements of non-issuers
    • 1) Three-party relationship (management, accountant, intended users)
    • 2) Financial reporting framework (FASB, GASB, IFRS, OCBA (must have description/disclosures))
    • 3) Financial statements or financial information (complete or individual)
    • 4) Sufficient appropriate evidence (review only, need inquiry and analytical procedures to accumulate evidence)
    • 5) Written communication or report (written review report req. for review)
  31. What is materiality based on?
    Professional judgement, influence on economic decisions, and circumstances that are impacted by size/nature
  32. What should a compilation engagement letter (mandatory) include?
    • - Objectives
    • - Management's responsibilitys and accountant's responsibilities
    • - Limitations of engagement and description of any other acct services performed
    • - If F/S aren't used by a third party, issue plain paper report
  33. Performance requirements for compilation
    • - Knowledge of industry accounting principles and practices
    • - Understanding of client's business
    • - Reading financial statements (don't associate w/ fraud/false)
  34. Components of understanding a client's business (STAFF) for compilation engagement
    • S - staff qualifications
    • T - transaction types and frequency
    • A - accounting basis used to prepare F/S
    • F - form of the acct records
    • F - F/S's form and content
  35. What happens if F/S for compilation are inaccurate/incomplete?
    • - No audit work, so don't need to look for info
    • - But if incorrect, then should get addt'l or revised info from client
    • - If client refuses, then withdraw
  36. Required documentation in a compilation engagement
    • - Engagement letter
    • - Any significant findings/issues (results of procedures that indicate material misstatement and actions taken, and resolution of questions/concerns from compilation procedures)
    • - Oral or written communications with mgmt regarding fraud/illegal acts
  37. Requirements for compilation report (CAR MR ARSOM)
    • - Title, Addressee
    • - Introduction (state (identified entity/date) F/S have been Compiled, and accountant hasn't Audited or Reviewed F/S)
    • - Management's Responsibility paragraph
    • - Accountant's Responsibility paragraph (in accordance with SSARS by AICPA, and Objective of compilation was to assist Management in presenting F/S)
    • - Signature, date (of compilation completion)
  38. When are compiled F/S that omit GAAP disclosures acceptable?
    • - F/S are otherwise in conformity with GAAP
    • - Reason for omission was not to deceive user
    • - Compilation report warns user of missing disclosures in separate paragraph
  39. What's required when, in a compilation, the accountant is not independent?
    Accountant should disclosure this lack of independence in the last paragraph of the report (and can include reasons)
  40. How should departures from framework (GAAP) be treated
    Disclosure in separate paragraph and the effects of it (and modify report w/ paragraph at end), but if disclosure's not sufficient, then withdraw from engagement (since can't issue 'adverse' or 'except for' opinion since we didn't audit them)
  41. For compilations of personal financial statements, when is SSARS use not required?
    If personal F/S aren't going to be used to obtain credit (if client agrees, accountant states, and nothing indicates)
  42. When unaudited compiled F/S are not expected to be used by a third party...
    • - May use engagement letter rather than compilation report
    • - Restrict use on each page of F/S
    • - Written communication is still required
  43. Performance requirements for a review
    • U - Understanding with client established (engagement letter)
    • L - Learn and/or obtain sufficient knowledge of entity's business
    • I - Inquiries should be addressed appropriately
    • A - Analytical procedures should be performed
    • R - Review (other procedures should be performed)
    • C - Client representation letter should be obtained
    • P - Professional judgement should be used to evaluate results
    • A - Accountant (CPA) should communicate results
  44. In learning/obtaining sufficient knowledge of an entity's business for a review, what is NOT required?
    • - Testing internal controls
    • - Performing audit tests
    • - Assessing fraut risk
    • - Communicating with predecessor accountant (can, up to judgement)
  45. Inquiries made for a review engagement
    • - Made within client's organization
    • - Assure that adequate responses are obtained
    • - Accountant doesn't need to corroborate mgmt's responses w/ other evidence
  46. Analytical procedures performed during a review
    • - Compare recorded amounts/ratios with expectations
    • - Designed to detect relationships and unusual/materially misstated individual items
    • - Ratios/comparisons with prior periods, budgets, relevant nonfinancial information, to others in industry)
  47. What other procedures should be done during a review other than inquiries and analytical procedures?
    • - Read F/S for conformity with framework
    • - Obtain reports of other accountants who have been engaged to audit/review significant components of the reporting entity
    • - Consider effects of going concern uncertainties
    • - Consider effects of incorrect/incomplete/unsatisfactory information
  48. What should the required client representation letter from management contain?
    • - Dated as of accountant's report, addressed to them and for all F/S and periods covered by review
    • - Management's responsibility, acknowledgement of responsibility for internal control
    • - Management's full/truthful responses to all inquiries
    • - Knowledge of any material fraud or suspected fraud and management's responsibility to detect/prevent fraud
    • - Representations about the completeness of information
    • - Information concerning subsequent events
    • - Addt'l representations related to matters specific to entity's business/industry
  49. When should an updated management representation letter be requested?
    • - Significant amount of time has passed
    • - Material subsequent event between procedure completion and report issuance
    • - Former client requests accountant to reissue and prior period report
    • - Updated letter should state if any reps should be modified or if any subsequent events have occurred
  50. Professional Judgement to evaluate results of Review
    • - If review's incomplete, then issuance is presented (maybe do compilation)
    • - Documentation should support and provide clear understanding (include engagement letter and significant findings/actions taken/basis for conclusions reached, communications, management representation letter, important/unusal matters, inquiries and analytical procedures)
    • - Remember, no tests of internal control or audit work
  51. Review report should include...
    • - Title, Addressee
    • - Introduction (AM I SAD): Analytical procedures to Management's F/S and Inquiries of mgmt. Substantially less in scope than an Audit, and accountant Doesn't express an opinion
    • - Management's Responsibility (MR. FI-) is fair presentation of Financial statements and maintaining Internal control
    • - (-RSALA) - accountant's Responsibility is accordance with SSARS by the AICPA, and obtain Limited Assurance of no material modifications, and reasonable basis for report by procedures
    • - Engagement results, Signature, and Date
  52. What happens when fraud or illegal acts have occurred?
    • - Communicate matters to appropriate level of management and how effects are on F/S
    • - Accountant should consider impact on report and ask for addt'l/revised info (if not given, withdraw)
  53. If subsequent discovery of facts existing at date of compilation or review report
    • Accountant should:
    • - If it's material and people rely on it, advise client to disclose new info and its impact (revised F/S, necessary disclosures to imminent F/S, or notify people they shouldn't be relied on)
  54. But if client doesn't do the above:
    • - Notify manager, board of directors, etc
    • - Diassociate, notify regulatory agencies, and relying parties
    • - If client doesn't cooperate and accountant can't investigate, disclosure tells "if it's true"
  55. Supplementary information in compilation or review engagements
    • - Compilation report should refer to supplementary (or separate report) if both F/S and supplementary info was compiled.
    • - Review - explanation should be included or separately that supplementary info's only there for purpose of additional analysis (has been subjected to inquiry/analytical procedures, or hasn't been but compiled from info and there's no opinion)
  56. Reasons for a change in engagement
    • - Acceptable reasons (change in requirements, misunderstanding as to nature of rendered services)
    • - Consider withdrawing if: unacceptable reasons (engagement would uncover fraud, client's trying to create misleading F/S), scope limitations (client refuses correspondence with legal counsel or providing a signed representation letter)
  57. Comparative F/S: both periods compiled or reviewed (no change)
    Update report on prior period and issue it as part of the current period
  58. Comparative F/S: prior period compiled -> current period reviewed (service upgrade)
    Report on prior period(s) should be updated and issued as the last paragraph of the current period's
  59. Comparative F/S: prior period reviewed -> current period compiled (service downgrade)
    • Issue compilation report and add paragraph to report on current period statements (describe responsibility assumed, date of original report and state that no review procedures were performed after that day)
    • OR reissue prior period review report combined with current period compilation report (disclaim review procedures after date), or presented separately
  60. What to do if you become aware of info that would've affected report in prior periods
    • - Previous modification made to disclose GAAP departure may no longer be necessary, or need a new modification to disclose
    • - Separate paragraph that states date of original report, that statements of prior period have been changed (if applicable), and reason for change in original report
  61. Predecessor accountant's compilation or review report reissued unchanged
    Decide if report is still appropriate, and the Old CPA should read statements/report of current period, compare statements, and obtain a letter from successor accountants stating they aren't aware of any relevant info that might have a material effect on prior periods
  62. Predecessor accountant's report is NOT reissued
    • Successor should either make reference to report of predecessor in current report (add paragraph mentioning that prior period reports were done by other accountants, any modifications and description of what happened)
    • OR perform level of service themselves if easier.
  63. Restated prior period financial statements
    Predecessor or successor accountant may report on changed prior period F/S as restated, or successor accountant may report only on restatement adjustment (and indicate predecessor accountant reported on before-restatement)
  64. Unaudited financial statements are presented in comparison with audited financial statements...
    • - Unaudited financial statements should be clearly marked
    • - Accountant should either reissue the prior period report
    • OR, include addt'l paragraph in current report describing responsibility assumed for prior period's statements
  65. Prior period audited -> current period unaudited (service downgrade)
    Addt'l paragraph should indicate that prior period statements were audited, its date, opinions expressed and why, and no auditing procedures have been performed since the previous report date
  66. Prior period unaudited -> current period audited (service upgrade)
    Addt'l paragraph should state service performed in prior period, date, any material modifications, and statement that the service was less in scope than an audit and did not provide the basis of an opinion. For issuer, disclaimer/description of review (interim), for non-issuer, description of compilation/review
  67. Review of interim financial statements if non-issuers
    • - Follow SAS
    • - May be done if latest F/S were audited and uses same basis
    • - Continuing accountant expects to audit C/Y's F/S
  68. Review of interim financial statements if issuer
    • - SEC requires certain entities to file quarterly reports and review them
    • - SEC requires certain entities to include selected quarterly financial data in annual report or other SEC filings, and a review is required
    • - Accountant should review selected quarterly data if included in F/S for initial audit
  69. Procedures for reviewing interim financial statements (same as non-issuers)
    • U - Understanding with client established (engagement letter)
    • L - Learn and/or obtain sufficient knowledge of entity's business
    • I - Inquiries should be addressed appropriately
    • A - Analytical procedures should be performed
    • R - Review (other procedures should be performed)
    • C - Client representation letter should be obtained
    • P - Professional judgement should be used to evaluate results
    • A - Accountant (CPA) should communicate results
  70. Interim F/S review - planning for knowledge
    • - Read documentation of prior audits/reviews to identify affecting matters
    • - Read most recent annual financial information and from recent comparable periods
    • - Inquire of mgmt regarding changes in business activities or internal controls
    • - If not the continuing accountant, should try to know components of internal control
    • - Significant deficiencies in internal control (scope restriction) may make review impractible
  71. Interim F/S review - inquiries not required
    • - Use "but" judgement to decide
    • - Inquiry of client's lawyer
    • - Going concern (really don't need to corroborate mitigating factors)
  72. Interim F/S review - review/other procedures
    • - Read minutes of stockholder meetings, etc.
    • - Obtain reports from other accountants engaged to review interims of subsidiaries/investees
    • - Obtain evidence that interims agrees/reconciles w/ acct records (inquire about reliability)
    • - Read interms for conformity with applicable financial reporting framework
    • - Read other info in documents containing interims for material inconsistencies/misstatements of fact
    • - Extend review procedures to resolve outstanding questions
  73. Interim F/S review - required client representation letter from management
    - Should be related to financial information, completeness, recognition, measurement, disclosure, subsequent events
  74. Additional representations about internal control:
    • - mgmt's acknowledge of responsibility to controls
    • - disclosure of significant deficiencies in internal controls
    • - mgmt's responsibility for design/implementation of controls to prevent/detect fraud
    • - knowledge of fraud or allegations of fraud
  75. Interim F/S review - likely misstatements
    • Likely misstatement is the best estimate of the total misstatement in an account balance or class of transactions. Accountant should:
    • - Accumulate all estimates for further evaluation
    • - Consider aggregated effect of several immaterial misstatements may in fact be material
    • - Evaluate likely misstatements in terms of nature/cause/amount/timing/potential effect on current/future periods
  76. Interim F/S review - communications to management
    If there's a problem -> go to management -> go to audit committee if mgmt doesn't respond --> don't respond, consider withdrawing and consulting legal counsel
  77. Interim F/S review - requirements in review report
    • - Each page should clearly be marked "unaudited"
    • - Statement that interim financial info is responsibility of entity's management
    • - Statement that review was conducted in accordance with standards of AICPA (NOT SSARS), only inquiries/analytical procedures done
  78. Interim F/S review - if going concern or lack of consistency problem exists
    • - Disclosure in F/S is okay (no report modification needed)
    • - If not, modify review report
  79. Interim F/S review - interim info accompanying audited F/S or in registration statement
    • - Should be marked "unaudited" and no need to refer to review since not required. But modifications necessary if interum financials aren't marked "unaudited", quarterly info isn't reviewed or is omitted (required by the SEC for issuers)
    • - Prospectus should clarify that independent's accountant's involvement that report isn't considered part of the registration statement in this context
  80. What is a comfort letter?
    Letter from CPA to named underwriter or other requesting parties just before registration of client's securities that covers period from date of last auditor's report to registration "effective date". Done as due diligence by underwriters who could be held liable for material omissions/misstatements in a registration statement. Requires CPA to perform review, and must give CPA an attorney's opinion or representation letter (prove "due diligence" if other than underwriter)
  81. Limitations of a comfort letter
    • - Financial information expressed in dollars
    • - Financial information derived from accounting records
    • - No comment on MD&A
  82. What is positive assurance?
    • - A CPA's independence
    • - Compliance (as to form) of F/S with the SEC act, assuming they're audited
    • What is negative assurance?
  83. - Unaudited F/S, unaudited condensed interim F/S
    • - Changes in selected F/S items during period subsequent to date/period of latest F/S included in registration statement, assuming an audit/review has recently been performed
    • - Whether certain non-financial statement information included in the registration statement complies as to form in all material respects with regulation S-K
  84. Procedures performed and findings obtained
    List is provided with respect to pro forma financial information and forecasts included in registration statement, or tables/statistics/other financial information included in reg. stmt
  85. When the auditor should not comment or provide assurance on
    • - Market risk sensitive instruments
    • - Qualitative disclosures
  86. Types of attestation engagements result in reports related to
    • - Compliance w/ laws/regulations
    • - Compliance w/ contracts
    • - Internal control
    • - Computer systems and software (security, availability, processing integrity, online privacy, confidentiality for Webtrust engagements (e-commerce) and SysTrust engagements (reliability of any))
    • - Information supplemental to F/S
    • - Prospective information
    • - Performance/physical characteristics, historical events, analyses, etc.
  87. SSAE - Statements on Standards for Attestation Engagements for major attestation services
    • - Agreed-upon procedures
    • - Financial forecasts and projections
    • - Pro forma F/S
    • - Internal control over financial reporting
    • - Compliance
    • - MD&A
  88. What SSAE do NOT apply to
    • - Audits
    • - Compilations and reviews of F/S of nonissuers under SSARS
    • - Return preparation (income tax, franchise, other)
    • - Advocating for the client (litigation services)
    • - Providing consulting/advisory services
    • - Operational audits (normally internal auditors)
  89. Attestation standards
    Provide levels of assurance below that provided by GAAS audit (are broader in scope), and should be tailored to needs of user.
  90. Attestation standards - general standards
    • T - training and proficiency
    • I - independence
    • P - performance/due professional care in planning/performance
    • P - professional, adequate knowledge of subject matter
    • Y - your belief that subject matter is capable of evaluation against criteria that are suitable and available to others (professional judgement)
  91. Attestation standards - fieldwork standards
    • P - planning and supervision
    • A - appropriate, sufficient evidence to provide reasonable basis for conclusion
  92. Attestation standards - reporting standards
    • S - subject matter identified or assertion reported on (character of engagement, nature/scope)
    • S - significant reservations about engagement disclosed
    • E - Express conclusions about subject matter/assertion in relation to established/stated criteria
    • R - restrict use of report to specified parties when needed to
  93. Additional reporting requirements for attestation
    • - Report can be on assertion itself OR on subject matter
    • - If on assertion, it should accompany practitioners report OR assertion should be clearly stated in report
    • - Scope restrictions on examination and review
    • - Concerns about assertion, conformity w/ criteria, adequacy of disclosure = qualified or adverse opinion, or modified conclusion
  94. Examination conclusion for attest engagement
    Positive assurance based on search, verification, inquiry and analysis
  95. Review conclusion for attest engagement
    Negative assurance, based on inquiry and analytical procedures
  96. Agreed upon procedures conclusion for attest engagement
    No assurance, but procedures and findings are listed (report of findings)
  97. Written assertion in attest engagement
    • Obtained in examination/review engagements and usually provided by management
    • - If client is responsible: failure to provide written assertion is scope limitation and should withdraw in review and modify report in examination
    • - If client is not responsible, report may be issued as long as appropriate procedures performed and sufficient evidence is obtains (use should still be restricted)
  98. Conditions of agreed-upon procedures engagements
    • I - Independence of practitioner
    • A - Agreement of the parties
    • M - Measurability and consistency
    • S - Sufficiency of the procedures
    • U - Use of the report is restricted to specified parties
    • R - Responsibility for the subject matter
    • E - Engagements to perform agreed upon procedures on prospective F/S (include summary of significant assumptions)
  99. Required elements in an agreed-upon procedure report
    • - Statement that the procedures performed were those agreed to by the specified parties identified in the report and a description of any agreed-upon materiality limits
    • - Statement of restrictions of use
    • - Certain additional items (assumptions) for prospective financial information
  100. Different uses for financial forecasts and projections
    • Financial forecast = general & limited use (expected conditions/courses of action)
    • Financial projection = limited use only (hypothetical)
  101. What are the 3 allowed types of prospective F/S, and what's not allowed?
    • Allowed: compilation, examination and agreed-upon
    • Not allowed: review
  102. Contents of compilation report of prospective financial statements
    • - Summary of significant assumptions is needed first. For projection, limited use.
    • - Statement that practitioner compiled in accordance with CPA (not that the F/S were)
    • - Statement that compilation is limited in scope, doesn't enable to express an opinion or other forms of assurance
    • - Prospectives results may not be achieved
    • - Practitioner assumes no responsibility to update report
  103. Requirements for examination of prospective F/S
    • Purpose is to express opinion on if statements are presented in conformity w/ AICPA and underlying assumptions provide reasonable basis for prospective statements
    • - Independence required
    • - Evidence required
  104. Agreed-upon procedures applied to prospective F/S
    • - Must include summary of significant assumptions
    • - Disclaimer on AICPA conformity and whether underlying assumptions provide reasonable basis for statements
  105. Modifications to report of examination of prospective F/S
    • - AICPA presentation guidelines are not followed (qualified "except for" or adverse opinion)
    • - Significant assumptions are not disclosed (adverse opinion)
    • - Basis not reasonable
    • - Scope limitation (disclaimer)
  106. Partial presentations of prospective F/S
    Generally not considered appropriate for general use (limited use) because they omit an essential element, unusual/infrequent items, income tax expense, etc etc.
  107. Pro-forma F/S
    • - Not GAAP literature, but demonstrate effect of hypothetical/future event by showing past F/S what might've been
    • - May be examined/reviewed (don't reevaluate internal control but determine if math is correct)
    • - Written repesentations from management and reference to historical F/S from derived (and if they were audited or reviewed)
  108. Compliance attestations
    No review, but generally perform agreed-upon procedure (statement that meant to assist w/ compliance) or examination (statement that it doesn't provide legal determination)
  109. MD&A attest engagement
    • - Requirements established by SEC (CPA must understand them)
    • - CPA may examine or review
Card Set
AUDIT 2.txt