Audit Set 2

Front 1

Five Interrelated Elements of Quality Control
AICPA

Back 1

A - Acceptance and continuance of clients and engagements
I - Independence, integrity, objectivity (to maintain public confidence on profession)
C - Continuous monitoring
P - Personnel management
A - Assurance regarding engagement performance (meets applicable professional standards, regulatory requirements, and firms own standards of quality)
* Quality Control relates to the conduct of all professional activities of the firm's practice as a whole (GAAS applies only to conduct of each individual audit engagement)

Front 2

Peer Review

Back 2

Every 3 Years

Front 3

Special Reports

Back 3

Require the auditor to comply with GAAS (not necessarily GAAP)and to obtain a reasonable degree of assurance:
1. OCBOA
2. Specific
3. Compliance Audited FS (only one with negative assurance)
4. Compliance Financial Presentation
5. Forms

Front 4

Special Reports - OCBOA

Back 4

Intro: Non-GAAP titles
Scope: Same
Explanatory: Basis of presentation and that it is non-GAAP
Opinion: Fair on that OCBOA basis
*If to comply with a regulatory agency - restricted use

Front 5

Special Reports - Specified Elements and Piecemeal Opinions

Back 5

- Not allowed when a major item or the auditor has expressed an adverse opinion or disclaimer on overall FS
- Allowed when a minor item
- No explanatory paragraph

Front 6

Special Reports - Compliance with Contract or Regulatory Requirements - Must have Audited the FS

Back 6

Intro: we have audited the entire FS
Opinion: negative assurance (no assurance if adverse or disclaimer on FS), the audit was not directed primarily obtaining knowledge of noncompliance
Last paragraph: restricted use

Front 7

Special Reports - Compliance with Contract or Regulatory Requirements - Special Purpose Financial Presentation

Back 7

- May be incomplete financial presentation in accordance with GAAP or special purpose not in conformity with GAAP
- Include explanatory paragraph
- Both are restricted use

Front 8

Statements on Standards for Accounting and Review Services (SSARs)

Back 8

Apply when:
1. An accountant submits unaudited FS of a nonpublic company
2. An accountant is engaged to compile or issue a compilation report on specified elements or on pro-forma financial information

Front 9

Compilation Requirements
STAFF

Back 9

1. Knowledge of Industry Accounting Principles and Practices
2. Understand clients business:
S - staff qualifications
T - Transaction type/frequency
A - Accounting basis
F - Form of acct. records
F - FS form and content
3. Read FS

Front 10

Reporting on a Compilation
A LARD

Back 10

A - Compilation performed in accordance with SSARS and AICPA
L - Compilation is limited to presenting information that is the representation of mgmt.
A - Have not audited FS
R - Have not reviewed FS
D - Disclaimer of opinion
*Also can be plain paper, and should be marked see compilation report

Front 11

Compiled Financial Statements that omit GAAP

Back 11

Ok if:
- Reason was not to deceive or mislead users
- Report warns user of missing documents in additional 3rd paragraph
- Restricted use not required

Front 12

Miscellaneous Compilation Rules

Back 12

1. If client does not disclose OCBOA, compilation report should
2. Departures from GAAP - either disclose or withdraw if disclosures not adequate
3. If not independent - disclose
4. Personal financial statements - No SSARS if not for obtaining credit
5. If FS are not expected to be used by 3rd parties - plain paper report, restrict use

Front 13

Review Performance Requirements
U-LIAR-CPA

Back 13

U - Understanding with client
L - Learn about entity's business (NO IC, Audit Tests, Fraud Assessment)
I - Inquiries to appropriate individuals (inside)
A - Analytical Procedures
R - Review - other procedures (read FS, obtain reports of other accountants)
C - Client Rep letter
P - Professional judgment to evaluate results
A - Accountant should communicate the results

Front 14

Client Representation Letter -Review Report

Back 14

- Dated at the earliest at the date of the accountant's report
- If management does not provide this --> incomplete review --> no report

Front 15

Review Report - Communicating the Results
AM - I - A - SAD

Back 15

A - Performed in accordance with SSARS established by AICPA
M - FS representation of Mgmt
I - Review consists of Inquiries
A - and Analytical Procedures
S - Susbstantially less in scope
AD - Disclaimer of opinion (only provide limited assurance - conformity with GAAP)

Front 16

Definition of submission for SSARS

Back 16

Submission is defined as: presenting to a client or third parties financial statements the accountant has prepared. An accountant who reproduces client-prepared financial statements has not prepared those statements. Preparation of standard monthly journal entries is a bookkeeping service that also does not involve preparation of financial statements.

Front 17

Comparative FS - Service Upgrade to Review

Back 17

Update report on prior period, issue as the last paragraph of current report

Front 18

Comparative FS - Service Downgrade to Compilation

Back 18

1. Issue compilation report and add a paragraph that describes responsibility assumed, no review procedures performed after review report OR
2. Reissue prior period review report combined or presented separately from compilation report

Front 19

Predecessor Review Report Issued - Unchanged

Back 19

Old CPA should read the new FS and obtain a rep letter from the new accountant

Front 20

Comparative FS - audited last year, unaudited this year

Back 20

State that no auditng procedures have been performed since the previous report date (For a downgrade, state that service last year was less in scope and had no opinion)

Front 21

Differences between review of public vs. private company

Back 21

Public:
- PCAOB not SSARS of AICPA
- Must communicate if significant deficiencies in IC are noted

Front 22

Client Rep Letter for Review of Interim FS - Public

Back 22

1. Completeness of information, recognition, measurement, disclosure, and subsequent events
2. Disclosure of significant deficiencies in IC
3. Mgmt responsibility for design and implementation of IC
4. Knowledge of fraud

Front 23

Response to problem with communications to management - Interim FS Review for Public

Back 23

First discuss with management, then those charged with governance, then withdraw and seek legal advice

Front 24

Interim FS Review Report Modifications for GAAP departures, Going Concern, Lack of Consistency

Back 24

GAAP departure - modify the report by adding explanatory paragraph BEFORE concluding and modifying concluding to read "based on our review, with the exception of..."
Going Concern - Disclosure in FS is ok
Lack of consistency - Disclosure in FS is ok

Front 25

GAAP Disclosure Omitted - Compilation vs. Review vs. Audit Engagement

Back 25

Compilation - may omit most without restricting use, must warn users in ending paragraph
Review - all are required or modify report
Audit - all are required or qualified/adverse opinion

Front 26

GAAP Departures - Compilation vs. Review vs. Audit

Back 26

Compilation - disclosure required
Review - disclosure required
Audit - modify report, qualified/adverse

Front 27

Representation Letter - Compilation vs. Review vs. Audit

Back 27

Compilation - not required
Review - required
Audit - required

Front 28

Letters for Underwriters

Back 28

- Comfort Letter
- Review of interim financial information
- Limited to financial info in $ and from accounting records
- Restricted Use

Front 29

Letters for Underwriters - Positive vs. Negative Assurance

Back 29

Positive - a CPA's independence, assurance and compliance with SEC act if audited
Negative - unaudited FS, changes in FS, whether info in registration statement complies with regulation S-K

Front 30

Attest Engagement

Back 30

- Examining something other than historical FS:
1. Compliance with laws
2. Compliance with contracts
3. Internal control
4. Computer systems and software
5. Supplemental information
6. Prospective information
7. Performance, physical characteristics, historical events, etc.

Front 31

Statements on Standards for Attestation Engagements

Back 31

Address:
1. Agreed-upon procedures
2. Financial forecasts and projections
3. Pro-forma financial statements
4. IC over financial reporting
5. Compliance
6. MD&A

Front 32

Attestation - 5 general standards
TIPPY

Back 32

T - Training and proficiency
I - Independence
P - Performance/due professional care
P - Profesional adequate knowledge of subject matter
Y - Your belief that the subject matter is capable of evaluation against critera (measurable, complete, relevant)

Front 33

Attestation - 2 fieldwork standards
PA(SSER)

Back 33

P - Planning and supervision
A - Appropriate, sufficient evidence

Front 34

Attestation - 4 Reporting Standards
(PA)SSER

Back 34

S - Identify Subject matter of assertion being reported on and character of engagement
S - Disclose significant reservations about the engagement
E - Express conclusions about subject matter in relation to criteria
R - Restricted use (Criteria appropriate for limited # of parties, reporting on subject matter not been provided, reporting on agreed-upon procedure engagement)

Front 35

Attestation - 3 types of conclusions

Back 35

1. Examination - positive assurance
2. Review - negative assurance
3. Agreed Upon Procedures - no assurance

Front 36

Attest Engagement - Written Assertions

Back 36

If no written assertion is obtained:
If client is responsible - scope limitation (examination - modify report, review - withdraw)
If client is not responsible - report may be issued if procedures are performed, restrict its use

Front 37

Agreed Upon Procedures Requirements
I - AM - SURE

Back 37

I - Independence
A - Agreement of parties
M - Measurability and Consistency
S - Sufficiency of Procedures
U - Use of report is restricted
R - Responsibility for subject matter is with client or 3rd party
E - Engagement to perform on Prospective FS must include summary of significant assumptions

Front 38

Financial Forecast

Back 38

- General and Limited Use
- Based on expected conditions and expected courses of actions

Front 39

Financial Projection

Back 39

- Limited use only
- What if type scenario

Front 40

Prospective Financial Statements - Types of Engagements

Back 40

1. Compilation
2. Examination
3. Agreed upon procedures
*No review

Front 41

Compilation of Prospective FS

Back 41

- May not be issued if the entity fails to disclose a summary of significant assumptions
- Report must include caveat that the prospective results may not be achieved and the practioner has no responsibility to update the report and no statement that prospective FS are in conformity with AICPA guidlines (just that they were compiled in accordance with them)

Front 42

Examination of Prospective FS

Back 42

- Issue an opinion on whether the statements are in conformity with AICPA or assumptions provide reasonable basis for prospective statements
- For a projection the report should also include a description of the projection's purpose and a restrictive use paragraph

Front 43

Examination of Prospective FS - Modifications to the Opinion

Back 43

1. AICPA guidelines not followed - qualified or adverse
2. Assumptions not disclosed - adverse
3. Basis not reasonable - adverse
4. Scope limitation - disclaimer

Front 44

Pro-Forma FS

Back 44

Used to demonstrate the effect of a future hypothetical event by showing how it might have affected historical FS
- May be examined or reviewed, do not re-evaluate IC, determine if math is correct
- Reference FS and whether audited or reviewed