What are the 3 levels of service with respect to unaudited FS of a nonissuer
Preparation
Compilation
Review
What is the objective of performing a preparation services engagement? Is assurance provided; why or why not? Is this an attest service; why or why not? Is independence required?
To prepare the FS in accordance with a specified financial reporting framework. Usually for small companies that don’t have their own accounting dept.
No audit or review procedures; thus no assurance
No assurance provide; thus, not an attest service.
Not an attest service; thus, independence isn’t required.
What is the objective of performing a compilation service engagement? Is assurance provided; why or why not? Is this an attest service; why or why not? Is independence required?
To prepare FS and related disclosures, plus a compilation report, in accordance with a specified financial reporting framework.
No audit or review procedures; thus no assurance
No assurance provide, but because a report is created (compilation report); thus, IS an attest service.
No audit or review, but because of the report the auditor should disclose if not independent.
What is the objective of performing a review services engagement? Is assurance provided; why or why not? Is this an attest service; why or why not? Is independence required?
To use inquiry and analytical procedures to offer negative assurance on FS that have not been audited
Assurance is provided; thus, IS an attest service.
Independence is required
For which of the following is a report or opinion required: (1) attest engagement, (2) non-attest engagement, (3) assurance provided, (4) assurance not provided
(1) report required
(2) no report required
(3) opinion required
(4) no opinion provided
SSARS does not apply when an accountant prepares FS for these situations...
Inclusion in written personal financial plans
The accountant is engaged to perform an audit, review, or compilation of those FS
Solely for submission to taxing authorities
In conjunction with litigation services that involve pending or potential legal or regulatory proceedings
In conjunction with business valuation services.
Which standards guide engagements involved in FS preparation, compilation, or review?
SSARS
Define “nonissuer”
An entity (1) for which securities are not registered with the SEC; (2) that is not required to file reports with the SEC, and (3) that has not filed a registration statement with the SEC (even if still pending).
True / False: The accountant prepares several adjusting and correcting entries, thus his involvement is considered preparation of the FS and he must follow SSARS.
Sorta true
There is no bright line regarding how many adjusting entries must be made to cross this line. It is left to the acct’s judgment.
State whether the following are or are not accting services under SSARS: (1) preparing a few adjusting or correcting entries, (2) preparing tax returns, (3) preparing FS, (4) bookkeeping or data processing services.
(1) not
(2) not
(3) SSARS
(4) not
State whether the following are or are not accting services under SSARS: (1) compilation of FS, (2) review of specified elements or accounts of the FS, (3) processing financial data for clients of other accting firms, (4) consulting on financial matters, (5) review of FS
(1) SSARS
(2) SSARS
(3) not
(4) not
(5) SSARS
True / False: SSARS should be used to review interim FS.
False IF the annual financial statements are audited. SAS apply to these engagements.
Who are the three parties involved in a SSARS-related engagement?
Management
The Accountant
The Users
What are management’s responsibilities?
Identification of an applicable financial reporting framework
Creation of individual accting policies within the financial reporting framework
Designing, implementing and maintenance of internal control
Prevention and detection of fraud
Compliance with laws and regulations
Ensuring accuracy and completeness of records and info for the prep of FS
Providing the acctant with access to all info & persons for the engagement
True / False: The accountant has no responsibility to identify the intended users of a SSARS-related engagement?
True
What are the criteria necessary to prepare or compile FS using a special purpose framework?
The FS must include a description of the special purpose framework, including a summary of significant accting policies and a description of the material differences from GAAP
Disclosures similar to those required by GAAP for items similar to those included in FS prepared in accordance with GAAP
True / False: A verbal agreement is all that is necessary to execute a SSARS-related engagement.
False
A written agreement regarding the terms of the engagement is required
True / False: The accountant must perform a review for subsequent events or chg of facts after the report date for a SSARS-related engagement.
False
But, the accountant should respond appropriately should a subsequent event or fact become known.
The accountant becomes aware of a subsequent event which mgmt appropriately reflects in the FS. What is the accountant’s responsibility?
None; management has done its job.
The accountant becomes aware of a subsequent event before the report release date which mgmt does NOT appropriately reflect in the FS. What is the accountant’s responsibility?
Discuss with mgmt how they intend to address the matter.
If they do NOT: The accountant must treat this as a departure from GAAP (other appropriate framework)
If they DO: The accountant should perform addl review procedures and either re-date, or dual-date the report.
The accountant becomes aware of a subsequent event after the report release date which mgmt does NOT appropriately reflect in the FS. What is the accountant’s responsibility?
Discuss with mgmt how they intend to address the matter and mgmt still refuses to change
The accountant must
** Notify the client that the acctant’s report can no longer be associated with the FS
** Notify any applicable regulatory agencies
** Notify persons known or likely to be relying on the FS
If they DO: The accountant should perform addl review procedures and either re-date, or dual-date the report.
If the acctant disagrees with mgmt’s change: State in an Other Matter paragraph the date of the previous report, a description of the revisions, and the reasons for such.
The accountant becomes aware of a subsequent event after the report release date and mgmt refuses to cooperate such that the accountant is unable to conduct an adequate investigation. What is the accountant’s responsibility?
The accountant must treat this as a departure from GAAP (other appropriate framework). The accountant must state “information has come to their attention and that, if the information is true, their report should no longer be relied on.
** Notify the client that the accountant’s report can no longer be associated with the FS
** Notify any applicable regulatory agencies
** Notify persons known or likely to be relying on the FS
