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27 Cards in this Set
- Front
- Back
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(COMPILATION AND REVIEW:LEVELS OF SERVICE)
What are the levels of service a CPA can perform with respect to unaudited financial statements of a nonissuer and how much assurance accompanies that service? |
1. Compilation (no assurance)
2. Review (limited assurance) |
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(COMPILATION AND REVIEW:LEVELS OF SERVICE)
When a CPA performed more than one service (i.e. a compliation and an audit) which report should he issue? |
The report that is appropriate for the highest level of serfvice rendered (in this case an audit)
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(COMPILATION AND REVIEW:PROFESSIONAL STANDARDS)
Which professional standards govern compliations and reviews? |
Statements on Standards for Accounting and Review Services (SSARS)*(COMPILATION AND REVIEW:PROFESSIONAL STANDARDS)
Do SSARS apply to issuers?*No! SSARS are issued by the Accounting and Review Services Committee (ARSC) of the AICPA and only apply to the unauditing financial statements of non-issuers. |
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(COMPILATION AND REVIEW:PROFESSIONAL STANDARDS)
Do SSARS apply to other accounting services such as preparing correcting journal entries, consulting on financial matters, preparing tax returns, etc? |
No - just on compilation and review engagements
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(COMPILATION AND REVIEW:PROFESSIONAL STANDARDS)
What guidance do issuers follow when they are required to obtain a quarterly financial statement review? |
SAS (statements on auditing standards) just like on regular engagements
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(COMPILATION AND REVIEW:ELEMENTS OF COMPILATION AND REVIEW ENGAGEMENTS)
What are the five elements of a compilation or review engagement? |
1. Three-party relationship
2. Financial reporting framework 3. Financial statement or financial information 4. Sufficient appropriate evidence 5. Written communication or report |
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(COMPILATION AND REVIEW:ELEMENTS OF COMPILATION AND REVIEW ENGAGEMENTS:ELEMENT 1)
With regards to the first element of compilation and review engagements (three-party relationship:management) what are the three things that management is responsible for? |
1. the identification of an applicable financial reporting framework
2. The preparation and fair presentation of the financial statements 3. The design, implementation, and maintenance of internal control |
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(COMPILATION AND REVIEW:ELEMENTS OF COMPILATION AND REVIEW ENGAGEMENTS:ELEMENT 1)
With regards to the first element of compilation and review engagements (three-party relationship:accountant and intended user) Is the CPA responsible for identifying the intended user of the report? |
no
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(COMPILATION AND REVIEW:ELEMENTS OF COMPILATION AND REVIEW ENGAGEMENTS:ELEMENT 2)
What are the authorized financial reporting frameworks related to compilations and reviews? |
1. US GAAP
2. IFRS 3. OCBOA |
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(COMPILATION AND REVIEW:MATERIALITY)
How is materiality determined in a compilation/review? |
By auditor judgment and is affected by the needs of the users of the FS
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(COMPILATION AND REVIEW:COMPILATIONS)
What are the various forms of assurance an accountant could issue as a result of a compilation |
No assurance is rendered on a compilation engagement
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(COMPILATION AND REVIEW:COMPILATIONS)
Where should an accountant document the understanding between the accountant and the client on a compilation engagement? |
In the engagement letter
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(COMPILATION AND REVIEW:COMPILATIONS)
Are engagement letters required on a compilation engagement? |
Yes - they are preemptively mandatory. In the old days this use to be only a recommendation.
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(COMPILATION AND REVIEW:COMPILATIONS)
What are the three compilation requirements? |
1. Knowledge of the industry and principles and practices
2. Understanding the client's business 3. Reading the FS |
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(COMPILATION AND REVIEW:COMPILATIONS)
With regards to item 2 of the three compliation requirements (understanding the client's business) what are the five aspects of the client's business the accountant should understand? (STAFF) |
Staff qualifications
Transaction types and frequencies Accounting basis used to prep the FS Form of the accounting records Financial statements' form and content. |
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(COMPILATION AND REVIEW:COMPILATIONS)
What should an auditor do if the client refuses to provide requested support for FS disclosure? |
Withdraw from the engagement.
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(COMPILATION AND REVIEW:COMPILATIONS)
What documentation is required for a compilation? |
1. engagement letter
2. significant issues or findings 3. written or oral communications with management regarding fraud or illegal acts that came to the accountant's attention |
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(COMPILATION AND REVIEW:COMPILATIONS)
Is independence required in a compilation? |
No because no assurance is being provided. However, if there is a lack of independence that should be disclosed in an explanatory paragraph in the third paragraph.
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(COMPILATION AND REVIEW:COMPILATIONS)
What are the components of a compilation report? (pg A2-24 - 25) (CAR MR ARSOM) |
INTRO PARAGRAPH
Compiled Accountant has not Reviewed or audited MANAGEMENT'S RESPONSIBILITY PARAGRAPH Management is Responsible ACCOUNTANT'S RESPONSIBILITY PARAGRAPH Accountant's Responsibility is to conduct the compilation in accordance with SSARS issued by the AICPA and the Objective of a compilation is to assist Management in presenting the financial information |
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(COMPILATION AND REVIEW:COMPILATIONS)
What happens if the client doesn't want to include required disclosures or statements (ie no footnotes and no statement of cash flows) |
Add a fourth paragraph to the compilation report disclosing the omissions and a statement that if the omitted disclosures had been included they might have influenced the readers conclusions. Also, to the knowledge of the accountant the omission isn't intended to be false, fraudulent, or misleading.
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(COMPILATION AND REVIEW:COMPILATIONS)
Is it okay if a client wants to leave out required disclosures or statements? Three items. What if it's restricted use. |
If it's restricted use an explanatory 4th paragraph is not required. If it's general use the three things need to be true:
1. FS are otherwise in conformity with GAAP 2. Reason for omission is not to deceive 3. Compilation report warns user of missing disclosures |
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(COMPILATION AND REVIEW:COMPILATIONS)
What reporting requirements are there if there is no third party relying on the compiled FS? |
None - can only issue an engagement letter and a set of FS. In this instance the accountant should include a reference on each page of the FS restricting their use to the client only.
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(COMPILATION AND REVIEW:REVIEWS)
What kind of assurance is provided for a review? Is independence required? |
Limited assurance - and since we're providing assurance we also need independence
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(COMPILATION AND REVIEW:REVIEWS)
What are the review requirements? (U LIAR CPA) |
U - Understanding with the client
L - Learn/obtain knowledge of the entity's business I - Inquiries should be addressed to appropriate individuals A - Analytical procedures R - Review - other procedures performed C - Client rep letter P - Professional judgement to evaluate results A - Accountant (CPA) should communicate results |
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(COMPILATION AND REVIEW:REVIEWS)
How does an auditor establish an understanding with a client for a review? |
Engagement letter
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(COMPILATION AND REVIEW:REVIEWS)
Name four things that are required for audits which are not required for reviews |
1. Test internal controls
2. Perform audit tests 3. Assess fraud risk 4. Communicate with the predecessor auditor |
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(COMPILATION AND REVIEW:REVIEWS)
What if the accountant believes a modification of the report is appropriate |
The accountant should include a separate paragraph disclosing the departure at the end of the report,
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