During a Review engagement the auditor is aware that the entity has an issue as a going concern. The issue is properly disclosed in the notes to the FS. What is the auditor’s responsibility regarding the Review Report for this item?
The Review Report does not need a modification
During a Review engagement the auditor is aware that the entity has several inconsistencies in the application of accounting principles. The issues are properly disclosed in the notes to the FS. What is the auditor’s responsibility regarding the Review Report for this item?
The Review Report does not need a modification and does require an Emphasis-of-matter paragraph (it is optional)
Name 4 issues that, if not properly disclosed in the notes to the FS, the auditor must address in a Review Report.
A description of the special purpose framework
** IF the framework is regulatory or contractual basis, include a description of the purpose
An adequate description about how the special purpose framework differs from GAAP
A summary of significant accounting policies
Informative disclosures similar to those required for GAAP when the FS contain items that are the same as, or similar to, those prepared in accordance with GAAP
When is an emphasis-of-matter paragraph used vs an other-matter paragraph?
Emphasis: when the items are properly disclosed, but the accountant wants to highlight the item
Other: when the items are not properly disclosed
True / False: If the accountant expects to include an emphasis-of-matter or other-matter paragraph in the Review Report, the accountant should first communicate with and provide a draft copy of the paragraph to management.
True
The accountant on a Review engagement uses the work of another accountant and decides not to assume responsibility to audit the other accountant’s review. How is this situation best handled?
The accountant makes reference to any or all other accountants’ significant components and which portion of the FS statement this affects. The statement is included in the Accountant’s Responsibility paragraph
The accountant on a Review engagement becomes aware of a material departure from the applicable financial reporting framework. He properly informs mgmt to reconsider the effect on the FS, and mgmt refuses to make a change. How is this situation best handled?
The accountant should modify the Review Report or withdraw
If modifying the report, a separate paragraph AFTER the conclusion paragraph is added titled Known Departure from Accounting Principles
True / False: The accountant on a Review engagement becomes aware of a material departure from the applicable financial reporting framework. He properly informs mgmt to reconsider the effect on the FS, and mgmt refuses to make a change. The accountant should add a statement that the FS are not in accordance with the applicable financial reporting framework.
False
This would give the impression of an opinion
The accountant can only state the facts – what departure occurred and its effect
True / False: The accountant on a Review engagement becomes aware of a material departure from the applicable financial reporting framework. He is not satisfied with mgmt’s response. The auditor may place a limitation of use on the Review Report.
True
True / False: When comparative FS are presented, a report (compilation, review, audit) for each period presented must be attached to the FS.
True
A comparative statement for 2 years will be used on a Review engagement. The continuing accountant performed last year’s Review. How is the previous year’s information reported?
Since both years are Reviews, and this is a continuing accountant should update the report on the prior period and issue it as part of the current report.
A comparative statement for 2 years will be used on a Review engagement. The continuing accountant performed a compilation last year. How is the previous year’s information reported?
The prior period’s report should be updated and issued as the last paragraph of the current period’s report.
A comparative statement for 2 years will be used on a Compilation engagement. The continuing accountant performed last year’s Review. How is the previous year’s information reported?
In this year’s Compilation Report, state the date of the Review Report, that no further review procedures were performed after that date, OR
Reissue the prior period’s report
A comparative statement for 2 years will be used on a Preparation engagement. The continuing accountant performed last year’s Review. How is the previous year’s information reported?
There is no requirement to reference the prior period.
A comparative statement for 2 years will be used on a Preparation engagement. The FS have never been audited, reviewed, or compiled. Is it appropriate to use the standards columnar form to present the comparative information.
No
A comparative statement for 2 years will be used on a Review engagement. The appropriate disclosures are included in last year’s notes, but all disclosures are omitted for this year. How is this situation handled?
The accountant should not issue a report on comparative FS when statements for one or more, but not all, of the periods presented omit substantially all of the disclosures required by GAAP.
During the current Review engagement, the accountant becomes aware of information that would have affected the report on the prior periods. How is this situation handled?
An other-matter paragraph should be added to the prior period report that states the (1) date of the original report, (2) that the statements of the prior period have been changed, and (3) the reason for the change in the original report.
A comparative statement for 2 years will be used on a Preparation engagement. A predecessor accountant performed last year’s Review. How is the previous year’s information reported?
The predecessor accountant is not obligated to reissue their report.
IF they agree to reissue, they must read the new FS and obtain a representation letter from the new accountants stating that they are not aware of any relevant info that might have a material effect on the prior period statements.
ELSE the current accountant provides a statement that the previous periods were compiled or review by other accountants (who are generally not named), and the new accountant should perform that level of service themselves.
A comparative statement for 2 years will be used on a Review or Compilation engagement. The prior period was audited. How is this situation handled in the Review Report?
Add an other-matters paragraph stating that the prior periods were audited, the date(s) of the previous report(s), the opinion expressed, and that no auditing procedures have been performed since then.
A comparative statement for 2 years will be used on an Audit engagement. The prior period was unaudited (compiled or reviewed). How is this situation handled in the Review Report?
Add an other-matters paragraph stating that the prior periods were unaudited, the date(s) of the previous report(s), a description of any material modifications, and a statement that the service was less in scope than an audit.
