Compilation And Review Of Fss

Front 1

Note

Back 1

CPAs can perform two levels of service with respect to unaudited FSs of a nonissuer:
1- Compilation
2- Review

Front 2

What is the objective of the Compilation engagements?

Back 2

To present in the form of FSs, information that is the representation of management without undertaking to express any assurance on the FSs.

Front 3

Note

Back 3

Although a compilation is not an assurance engagement, it is an attest engagement.

Front 4

What is the objective of the Review engagements?

Back 4

To express limited (Negative) assurance that there are no material modifications that should be made to the FSs in order for the statements to be in conformity with the applicable financial reporting framework.

Front 5

Note

Back 5

A review is both an assurance engagement and an attest engagement.

Front 6

Note

Back 6

When an accountant performs more than one service (for example, a compilation and an audit), the accountant generally should issue the report that is appropriate for the highest level of service rendered .

Front 7

Note

Back 7

The Accounting and Review Services Committee of the AICPA is the authoritative body designated to issue pronouncements (Called Statements on Standards for Accounting and Review Services "SSARS") in connection with the unaudited FSs of non issuers.

Front 8

What are the qualifications that should be available in the accountant applying the SSARS?

Back 8

An accountant should:
1- Have sufficient knowledge to identify applicable SSARS.
2- Exercise professional judgment in applying SSARS.
3- Be able to justify departures from SSARS.

Front 9

What are the other guidance that the accountant should consider in applying the SSARS?

Back 9

Applicable interpretive publications such as:
1- SSARS interpretations and appendices
2- AICPA Accounting and Audit Guides
3- AICPA Statements of Position

Front 10

Note

Back 10

Other compilation and review publications (e.g. , AICPA Compilation and Review Alert, articles in professional journals) have no authoritative status but may be helpful to the accountant.

Front 11

Note

Back 11

An accountant who submits unaudited FSs of a non issuer should comply with SSARS.

Front 12

Who is the Nonissuer?

Back 12

A nonissuer is an entity:
1- whose securities are not registered with the SEC
2- who is not required to file reports with the SEC
3- who has not filed a registration statement with the SEC.

Front 13

Note

Back 13

SSARS also apply to engagements in which the accountant is engaged to compile or issue a compilation report on specified elements, accounts, or items of a non issuer's FSs, or on pro forma financial information of a non issuer.

Front 14

What are the other accounting services that SSARS do not apply to ?

Back 14

1- Preparing one or a few adjusting or correcting entries
2- Consulting on financial matters
3- Preparing tax returns
4- Rendering manual or automated bookkeeping or data processing
services
5- Processing financial data for clients of other accounting firms

Front 15

Note

Back 15

If the accountant prepares many adjusting or correcting entries, this could be considered preparation of FSs, and SSARS would apply. The accountant must exercise judgment in making this determination.

Front 16

Note

Back 16

SSARS are not applicable to reviews of interim financial information when Statements on Auditing Standards (SAS) apply

Front 17

Note

Back 17

Accountants should not consent to the use of their name in connection with unaudited FSs unless they have compiled or reviewed them or the FSs are accompanied by an indication that the accountant has not compiled or reviewed them and assumes no responsibility for them

Front 18

What are the elements of compilation and review engagements?

Back 18

1- Three-party Relationship
2- Financial Reporting Framework
3- FSs or Financial Information
4- Sufficient Appropriate Evidence (review only)
5- Written Communication or Report

Front 19

Who are the 3 parties involved in the compilation and review engagements?

Back 19

1- Management
2- CPA
3- Intended users of the FS

Front 20

What are management's responsibilities regarding the compilation and review engagements?

Back 20

1- The identification of an applicable financial reporting FW and individual accounting policies
2- The preparation and fair presentation of the FSs in accordance with that FW
3- The design, implementation , and maintenance of internal control

Front 21

Note

Back 21

The accountant cannot issue an unmodified compilation or review report when management is unwilling to accept its responsibilities.

Front 22

Note

Back 22

The accountant has no responsibility to identify the intended users.

Front 23

What is the Financial Reporting FW?

Back 23

It is the financial accounting standards established by an authorized or recognized standards setting body.

Front 24

Give me examples on the Financial Reporting FW

Back 24

1- U.S. GAAP as established by the Financial Accounting Standards Board
2- Governmental Accounting Standards Board
3- Federal Accounting Standards Advisory Board
4- OCBOA

Front 25

When could be the FS prepared in accordance with OCBOA are considered appropriate in form?

Back 25

1- A description of the OCBOA, including a summary of significant accounting policies and a description of the primary differences from GAAP.
2- Disclosures similar to those required by GAAP if the FSs contain items that are similar to those included in FSs prepared in accordance with GAAP.

Front 26

Note

Back 26

An accountant may be engaged to compile or review a complete set of FSs or an individual financial statement.

Front 27

Note

Back 27

The accountant has no responsibility to obtain evidence about the accuracy or completeness of the FSs in a compilation engagement.

Front 28

Note

Back 28

When performing a review engagement, the accountant should perform procedures to accumulate evidence to provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the FSs in order for the statements to be in conformity with the applicable financial reporting framework.

Front 29

Note

Back 29

The accountant should use professional judgment to determine the nature, timing and extent of review procedures, which are limited relative to audit procedures.

Front 30

Note

Back 30

Review evidence is generally obtained through inquiry and analytical procedures.

Front 31

Note

Back 31

Whether in Compilation or Review engagement, a report or written communication is required unless the accountant withdraws from the engagement.

Front 32

Note

Back 32

The accountant's determination of materiality is based on professional judgment and is affected by the needs of the users of the FSs.

Front 33

Note

Back 33

A compilation of FSs is a service, the objective of which is to present in the form of FSs information that is the representation of management without undertaking to express any assurance on the FSs.

Front 34

Note

Back 34

Compilation of FSs is performed for non issuers only

Front 35

Note

Back 35

The accountant should establish an understanding with management and, when appropriate, those charged with governance, regarding the services to be performed for the compilation engagement and should document the understanding in an engagement letter.

Front 36

What are the issues that the accountant should understand with management or those charged with governance?

Back 36

1- The objectives of the engagement
2- Management’s responsibilities
3- The accountant’s responsibilities
4- The limitations of the engagement
5- A description of other accounting services to be performed

Front 37

Note

Back 37

When the FSs are not expected to be used by a third party and the accountant does not expect to issue a compilation report, an engagement letter containing an acknowledgment of management's representation and an agreement that the FSs are not to be used by a third party should be issued.

Front 38

What are the matters that should be addressed when an engagement letter is issued instead of a compilation report?

Back 38

1- Material departures from the applicable financial reporting framework may exist, and the effects of those departures, if any, on the FSs may not be disclosed.
2- Substantially all disclosures (and statement of cash flows, if applicable) required by the applicable financial reporting framework may be omitted.
3- Reference to supplementary information.

Front 39

What are the compilation requirements?

Back 39

1- Knowledge of Industry Accounting Principles and Practices
2- Understanding of Client's Business
3- Reading the FSs
4- Considering effects of Fraud and Illegal Acts, Going Concern, and Subsequent Events on the FSs

Front 40

What are the accounting principles and practices that an accountant performing compilation is required to understand of the client's business?

Back 40

1- Staff qualifications
2- Transaction types and frequency
3- Accounting basis used to prepare the FSs
4- Form of the accounting records
5- FSs’ form and content
STAFF

Front 41

Note

Back 41

Before issuing a compilation report, accountants should read the compiled FSs and consider whether they are appropriate in form and free from obvious material errors.

Front 42

Note

Back 42

The term error refers to mathematical and clerical mistakes, as well as to mistakes related to the applicable financial reporting framework.

Front 43

What are the actions that an accountant performing compilation services to a client should undertake if he becomes aware that fraud or an illegal act may have occurred , that there is a going concern uncertainty, or that a subsequent event has occurred?

Back 43

1- He or she should request management to consider the effect on the FSs,
2- Evaluate management conclusions,
3- Consider the effect of the matter on the compilation report.

Front 44

Note

Back 44

Accountants are not required to, but may, make inquiries or perform other procedures to verify, corroborate, or review the information supplied by the client. However, if they discover the information is incorrect, incomplete, or unsatisfactory, they should obtain additional or revised information from the client. If the client refuses to provide such information, the accountants should withdraw from the compilation engagement.

Front 45

Note

Back 45

Documentation provides the support that the accountant complied with SSARS when performing the compilation engagement.

Front 46

Note

Back 46

Documentation should provide clear detail of the work performed.

Front 47

Note

Back 47

The form and content of the documentation depends on the engagement, the methodology and tools, and the accountant's professional judgment.

Front 48

What are the documents that should be prepared in the compilation engagement?

Back 48

1- The engagement letter.
2- Any significant findings or issues,
3- Oral or written communications with management regarding fraud or illegal acts that came to the accountant's attention.

Front 49

What are the significant findings that an accountant should include in the documents prepared in the compilation engagement?

Back 49

1- Results of compilation procedures indicating that the FSs could be materially misstated and the actions taken to address these findings.
2- The resolution of questions and concerns raised during compilation procedures.

Front 50

What is the compilation report?

Back 50

The report is the method by which the accountant communicates the extent of the responsibility assumed for the FSs.

Front 51

What are the items that should be included in the compilation report?

Back 51

1- Title
2- Addressee
3- Introductory Paragraph
4- Management's Responsibility Paragraph
5- Accountant's Responsibility Paragraph
6- Signature of Accountant
7- Date of the Accountant's Report

Front 52

What does the compilation report include in its title?

Back 52

1- Accountant's Compilation Report
OR
2- Independent Accountant's Compilation Report

Front 53

What does the introductory paragraph in a compilation report should include?

Back 53

1- Identify the entity.
2- State that the FSs have been compiled
3- Identify the FSs.
4- Specify the date or period covered by the FSs.
5- State that the accountant has not reviewed or audited the FSs and does not express an opinion or provide any assurance about whether the FSs are in accordance with the applicable financial reporting framework.

Front 54

What does management's responsibility paragraph of the compilation report should state?

Back 54

It should state that management is responsible for the preparation and fair presentation of the FSs in accordance with the applicable financial reporting framework, and for designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the FSs.

Front 55

What does accountant's responsibility paragraph of the compilation report should state?

Back 55

It should state the following:
1- The accountant's responsibility is to conduct the compilation in accordance with SSARS issued by the AICPA,
2- The objective of a compilation is to assist management in presenting financial information in the form of FSs without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the FSs.

Front 56

Note

Back 56

Date of the compilation report should be the date of the completion of the compilation report

Front 57

Note

Back 57

Each page of the FSs should be marked
1- See Accountant's Compilation Report
OR
2- See Independent Accountant's Compilation Report.

Front 58

Note

Back 58

SSARS does not require that the compilation report be printed on the accountant's letterhead .

Front 59

Note

Back 59

At the accountant's discretion , a separate paragraph of the report may be used to emphasize any matter already disclosed in the FSs, such as going concern issues or subsequent events.

Front 60

CAR MR ARSOM

Back 60

Front 61

Note

Back 61

If an accountant is asked to compile FSs included in a prescribed form that calls for a departure from the applicable financial reporting framework, an alternative form of standard report is used. An additional paragraph is added stating that the FSs are presented in accordance with requirements not consistent with the applicable financial reporting framework, and that the FSs are not designed for those who are uninformed about the resulting differences.

Front 62

Note

Back 62

If requested by the client, an accountant may compile FSs that omit substantially all disclosures required by the applicable financial reporting framework (but are otherwise in conformity with the financial reporting framework).

Front 63

When the compiled FSs that omit GAAP disclosures is acceptable?

Back 63

1- If FSs are otherwise in conformity with GAAP.
2- If reason for omission was not to deceive the user.
3- If compilation report warns the user of missing disclosures.

Front 64

What did the accountant should state in the compilation report on FSs that omit substantially all disclosures?

Back 64

1- If the disclosures were included, they might influence the user's conclusions,
2- Indicate that the FSs are not designed for those who are uninformed about the omitted disclosures
3- The omission is not intended to mislead any person who might be expected to use such FSs.

Front 65

What is the statement that should be included in the compilation report on FSs that omit substantially all disclosures?

Back 65

In a 4th paragraph the accountant should state the following:
Management has elected to omit substantially all the disclosures required by [the applicable financial reporting FW]. If the omitted disclosures were Included in the FSs, they might influence the user's conclusions about the company's financial position, results of operations, and cash flows. Accordingly, these FSs are not designed for those who are not informed about such matters.

Front 66

What is the statement that should be included in the compilation report on FSs if there is limited disclosure instead of omitting all disclosure?

Back 66

Selected Information-Substantially All Disclosures Required by [the applicable financial reporting framework] are Not Included.

Front 67

Note

Back 67

Departures from the applicable financial reporting framework should be disclosed in a separate paragraph of the report and should include disclosure of the effects of the departure on the FSs (if known).

Front 68

Note

Back 68

If the accountant believes disclosure in the report would not be adequate to indicate the deficiencies in the FSs, he or she should withdraw from the engagement and provide no further services with respect to those FSs.

Front 69

Note

Back 69

An accountant who is not independent with respect to an entity may compile FSs for such an entity and issue a report if he disclosed this lack of independence in the last paragraph of the report.

Front 70

Note

Back 70

The accountant is permitted, but not required, to disclose the reason(s) for the independence impairment in the report, but All reasons must be included in the disclosure.

Front 71

When did compilation of personal FSs can be permitted?

Back 71

1- If the client agrees and the accountant states in the report that the personal FSs will not be used to obtain credit or for any purpose other than developing the financial plan
2- If nothing comes to the accountant's attention indicating that the FSs will be used to obtain credit.

Front 72

Note

Back 72

An accountant who submits unaudited FSs to the client that are not expected to be used by a third party may use an engagement letter rather than a compilation report.

Front 73

Note

Back 73

If the FSs are expected to be used by third parties then:
1- A compilation report is required instead of engagement letter
2- Reporting requirements should be applied

Front 74

Note

Back 74

If the FSs are not expected to be used by third parties then:
1- Engagement letter instead of Compilation report can be used
2- Restricting the use of 3rd parties on each page of the FSs

Front 75

Note

Back 75

Review of FSs means limited assurance

Front 76

Note

Back 76

Limited assurance needs independence of the reviewer

Front 77

Note

Back 77

Review of FSs service is performed to non issuers using SSARS, but Review of FSs for issuers is performed using SASs

Front 78

What are the factors that may affect the Review procedures performed?

Back 78

1- The nature and materiality of financial statement items.
2- The likelihood of misstatement.
3- Knowledge from current and previous engagements.
4- Qualifications of the entity's accounting personnel.
5- The extent to which an item is affected by management's judgment.
6- Inadequacies in the entity's underlying financial data.

Front 79

What are the review of FSs steps for Non-issuers?

Back 79

1- Understanding with client should be established
2- Learn and/or obtain sufficient knowledge of the entity's business
3- Inquiries should be addressed to appropriate individuals
4- Analytical procedures should be performed
5- Review-other procedures should be performed
6- Client representation letter should be obtained from management
7- Professional judgment should be used to evaluate results
8- Accountant (CPA) should communicate results
U Liar CPA

Front 80

Note

Back 80

The review of FSs steps are the same for issuers as for non issuers

Front 81

Note

Back 81

In order to reduce the likelihood of misunderstanding , the accountant should establish an understanding with management and, when appropriate, those charged with governance regarding the services to be performed and should document the understanding in the form of an engagement letter.

Front 82

What does the accountant should take into consideration in the engagement letter of the Review service with the client?

Back 82

1- The objectives of the engagement.
2- Management's responsibilities.
3- The accountant's responsibilities.
4- The limitations of the engagement.

Front 83

Note

Back 83

As in a compilation, the accountant must be familiar with the accounting principles common to the client's industry.

Front 84

Note

Back 84

The accountant should possess an understanding of the client's business and the accounting principles and practices used by the client.

Front 85

What are the issues that the accountant should understand about the client's business?

Back 85

1- Client's organization
2- Its operating characteristics
3- Nature of its assets, liabilities, equity, revenues, and expenses.

Front 86

What are the procedures that the accountant is not required to perform during the Review service to the client?

Back 86

1- Test Internal Control
2- Perform Audit Tests
3- Assess Fraud Risk
4- Communicate with the Predecessor Accountant

Front 87

Note

Back 87

The successor accountant may decide (but is not required) to communicate with the predecessor accountant regarding acceptance of the engagement and matters of continuing accounting significance.

Front 88

What are the factors that may affect the design of the analytical procedures and the inquiries of management review procedures ?

Back 88

1- The accountant's understanding of the industry
2- The accountant's knowledge of the client
3- The risk that the accountant may unknowingly fail to modify the accountant's review report on FSs that are materially misstated.

Front 89

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Back 89

The accountant's inquiries WITHIN (not outside) the client's organization should be directed to members of management with financial and accounting responsibilities, to assure that adequate responses are obtained.

Front 90

Note

Back 90

The accountant is generally not required to corroborate management's responses with other evidence.

Front 91

Note

Back 91

The inquiries are of internal personnel, not of external people or entities.

Front 92

What are the issues that the accountant should inquiry?

Back 92

1- Accounting principles and practices used, and the method of applying them
2- Procedures for recording, classifying , and summarizing transactions, and for accumulating information for disclosure in footnotes
3- Whether the FSs have been prepared in conformity with the applicable financial reporting FW
4- Whether there have been changes in the entity's business activities or accounting principles and practices
5- Matters as to which questions have arisen during the course of the review
6- Material subsequent events
7- Unusual or complex situations that may affect the FSs
8- Significant transactions near the end of the period
9- The status of uncorrected misstatements from previous engagements
10- Material fraud or suspected fraud
11- Significant journal entries and adjustments
12- Communications from regulatory agencies
13- Actions authorized by the stockholders, BOD, or other management groups
14- Other items, such as the existence of related party transactions

Front 93

What is the "Analytical procedures" step?

Back 93

It is developing an expectation and comparing recorded amounts or ratios based on recorded amounts to that expectation.

Front 94

Note

Back 94

While expectations are not as encompassing as those developed during an audit, analytical procedures in a review should still be designed to detect relationships and individual items that appear to be unusual and may indicate material misstatement.

Front 95

What does the analytical procedures consist of?

Back 95

Comparing the following:
1- Current FSs with prior period FSs, or current ratios with prior period ratios
2- Actual FSs with budgets or forecasts, if available
3- Financial and relevant nonfinancial information
4- Entity's ratios and indicators with those of other entities in the industry
5- Relationships among elements in the FSs within the period and with corresponding prior period relationships.

Front 96

Note

Back 96

Analytical procedures may be performed at the financial statement level or at the detailed account level.

Front 97

Note

Back 97

If the results of analytical procedures identify fluctuations or relationships are inconsistent with other relevant information or that differ significantly from expected values, the accountant should investigate these differences by inquiring of management and performing other procedures as necessary.

Front 98

What are the other procedures that the accountant is required to do during performing the Review services?

Back 98

1- Read the FSs for conformity with the applicable financial reporting FW.
2- Obtain reports of other accountants who have been engaged to audit or review significant components of the reporting entity.
3- If appropriate, request management to consider the effects of any going concern uncertainties or any subsequent events.
4- If during the performance of review procedures the accountant becomes aware of information that is incorrect, incomplete, or otherwise unsatisfactory, the accountant should request that management consider the effect of these matters on the FSs. The accountant should consider management's assessment of the matter and determine the effect, if any, on the accountant's review report.

Front 99

Note

Back 99

The accountant is required to obtain a representation letter from management for all FSs and periods covered by the review report, even if current management was not present during all such periods

Front 100

Note

Back 100

Management representation letter should be dated as of the date of the accountant's report which is the date of the completion of the review procedures performed

Front 101

Note

Back 101

Management representation letter should be addressed to the accountant and signed by the members of management responsible for and knowledgeable about the matters in the letter (generally the CEO and CFO).

Front 102

Note

Back 102

Management's failure to provide a representation letter results in an incomplete review, which means that the accountant will have to consider withdrawal from doing the review

Front 103

What are the contents of the management representation letter?

Back 103

1- Management's responsibility for the preparation and fair presentation of the FSs and their belief that they are fairly stated.
2- Management's acknowledgment of its responsibility for designing, implementing , and maintaining internal control relevant to the preparation and fair presentation of the FSs.
3- Management's full and truthful responses to all inquiries.
4- Representations about the completeness of information.
5- Information concerning subsequent events.
6- Acknowledgement of management's responsibility to prevent/detect fraud.
7- Knowledge of any material fraud or suspected fraud.
8- Additional representations related to matters specific to the entity's business and industry.

Front 104

When may the accountant request updating the Management representation letter?

Back 104

1- When a significant amount of time has passed between the procedures performed and the issuance of the report.
2- When there has been a material subsequent event between completion of the procedures and issuance of the report.
3- When a former client requests the accountant to reissue a prior period report.

Front 105

Note

Back 105

An updating letter should state:
1- If any previous representations should be modified
2- If any subsequent events requiring adjustment to or disclosure in the FSs have occurred.

Front 106

Note

Back 106

The engagement letter is before the review service being performed but the management representation letter is after

Front 107

Note

Back 107

A review that is incomplete will prevent the issuance of a review report (Accountant will not withdraw), but the accountant may issue a compilation report if the circumstances permit

Front 108

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Back 108

In a compilation engagement the accountant don't need the management representation letter

Front 109

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Back 109

Documentation provides the support that the accountant complied with SSARS when performing the review engagement.

Front 110

Note

Back 110

Documentation of the review engagement should be sufficient to provide a clear understanding of the work performed, including:
1-The nature, timing, and extent of review procedures performed, 2-The review evidence obtained and its source,
3-The engagement conclusions.

Front 111

Note

Back 111

The form and content of documentation in a review should be designed to meet the needs of the particular engagement.

Front 112

Note

Back 112

Written documentation from other types of engagements may be used to support the review report.

Front 113

Note

Back 113

Oral explanations may be used to supplement or clarify documentation, but should not be the primary support for the report.

Front 114

What are the documents that should be prepared in the review engagement?

Back 114

1- The engagement letter
2- Significant findings, actions taken, and the basis for conclusions reached.
3- Matters about which the accountant has made inquiry and responses thereto.
4- Analytical procedures performed,
5- Unusual matters and their disposition.
6- Communications (oral or written) to management regarding fraud and illegal acts.
7- The management representation letter.

Front 115

What are the documents that are NOT included in the review engagement documentation?

Back 115

1- Test of internal controls
2- Audit test work

Front 116

What are the items that should be included in the review report?

Back 116

1- Title
2- Addressee
3- Introductory Paragraph
4- Management's Responsibility Paragraph
5- Accountant's Responsibility Paragraph
6- Engagement Results Paragraph
7- Signature of Accountant
8- Date of the Accountant's Report

Front 117

Note

Back 117

An appropriate title that includes the word independent, such as "Independent Accountant's Review Report. "

Front 118

What are the items that should be included in the introductory paragraph?

Back 118

1- Identify the entity.
2- State that the FSs have been reviewed.
3- Identify the FSs.
4- Specify the date or period covered by the FSs.
5- Include a statement that a review includes primarily applying Analytical procedures to Management's financial data and making Inquiries of company management.
6- Include a statement that a review is Substantially less in scope than an Audit, the objective of which is the expression of an opinion regarding the FSs as a whole, and that, accordingly, the accountant Does not express such an opinion.
AM I SAD

Front 119

Note

Back 119

Management's Responsibility paragraph of the Accountant's review report should state that management is responsible for the preparation and fair presentation of the FSs in accordance with the applicable financial reporting framework and for designing, implementing, and maintaining Internal control relevant to the preparation and fair presentation of the FSs.
MRFI

Front 120

What did the accountant should state in the Accountant's responsibility paragraph of the Review report?

Back 120

1- State that the accountant's Responsibility is to conduct the review in accordance with SSARSs issued by the AICPA.
2- State that those standards require the accountant to perform procedures to obtain Limited Assurance that there are no material modifications that should be made to the FSs.
3- State that the accountant believes that the results of the engagement procedures provide a reasonable basis for the report.
RSALA

Front 121

Note

Back 121

In the Engagement results paragraph the accountant should state that he is not aware of any material modifications that should be made to the FSs in order for them to be in conformity with the applicable financial reporting framework, other than those modifications, if any, indicated in the report.

Front 122

Note

Back 122

The date of the accountant's report should be the date of the completion of the review.

Front 123

Note

Back 123

Each page of the statements should be marked , "See Independent Accountant's Review Report. "

Front 124

Note

Back 124

Uncertainties (such as those involving going concern issues) and inconsistencies in the application of accounting principles do not require modification of the review report as long as the FSs include adequate disclosure.

Front 125

Note

Back 125

At the accountant's discretion, a separate paragraph of the report may be used to discuss uncertainties or inconsistencies, or to emphasize any matter already disclosed in the FSs, such as going concern issues, subsequent events, significant related party transactions, or changes in accounting principle.

Front 126

Note

Back 126

An accountant must be independent of the client to issue a review report on the FSs of such a client. Note that any direct ownership of a company, no matter how small, will impair independence.

Front 127

Note

Back 127

If the accountant become aware of a material departure from the applicable financial reporting FW and he asked management to revise the FSs and they refused, he might modify his report or withdraw from the engagement

Front 128

Note

Back 128

In case of report modification the accountant should add a separate paragraph disclosing the effects of the departure on the FSs

Front 129

What is the wording that should be added to the 4th paragraph of the accountant review or compilation report?

Back 129

Based on our review, with the exception of the matter(s) described in the following paragraph, I am not aware of any material modifications that should be made ...

Front 130

Note

Back 130

If the accountant believes that disclosure in the report would not be adequate to indicate the deficiencies in the FSs, he or she should withdraw from the engagement and provide no further services.

Front 131

Note

Back 131

An opinion, even qualified or adverse, requires an audit. When an accountant performing a compilation or review becomes aware of a GAAP departure, the report would be modified or the accountant would withdraw. An opinion would not be expressed.

Front 132

Note

Back 132

In a review or compilation engagement, if an accountant becomes aware that fraud or an illegal act may have occurred , he should obtain additional or revised information from management, If they will not provide him with additional or revised information the accountant should withdraw from the engagement.

Front 133

Note

Back 133

Immaterial matters need not be communicated with management

Front 134

Note

Back 134

Communication may be made in writing or orally, but oral communications should be documented.

Front 135

Note

Back 135

The accountant should consider withdrawing or consulting legal counsel if fraud or illegal acts involve an owner of the business.

Front 136

Note

Back 136

Obligations of confidentiality preclude disclosure outside the entity except in certain limited circumstances (e.g., legal/regulatory requirements, successor accountant, subpoena).

Front 137

Note

Back 137

Upon discovering , after issuance of the report, information that materially affects the report and other persons' reliance on it, the accountant should advise the client to immediately disclose the new information and its impact on the FSs to persons currently relying or likely to rely on the FSs.

Front 138

What are the disclosure ways that the accountant should advise the client to follow to disclose the subsequent events that may occur?

Back 138

1- Issuing revised FSs (along with a new compilation or review report) describing the reasons for revision
OR
2- Making the necessary disclosures and revisions to any imminent FSs (accompanied by the accountant's report for a subsequent period)
OR
3- If the effect on the FSs cannot be determined on a timely basis, the client should provide notification that the FSs and report should not be relied upon.

Front 139

Note

Back 139

If the client refuses to proceed as above, the accountant should notify the appropriate entity personnel, such as the manager (owner) or BOD, of such refusal, and of the fact the accountant will take additional steps to prevent further reliance on the accountant's report and the FSs.

Front 140

What are the additional steps that should be taken by the accountant in case of the refusal of the client to disclose material subsequent events?

Back 140

1- Notify the client that the accountant's report must no longer be associated with the FSs.
2- Notify, if applicable, any regulatory agencies having jurisdiction over the client that the accountant's report should no longer be relied upon.
3- Notify persons known to be relying or likely to rely on the FSs that the accountant's report should no longer be relied upon.

Front 141

Note

Back 141

Any notification to parties other than the client should be as precise and factual as possible, and should contain a description of the effect the discovered information would have had on the accountant's report and on the FSs.

Front 142

Note

Back 142

If the client has refused to cooperate, and as a result the accountants were unable to conduct an adequate investigation of the information, the accountants' disclosure need only state that information has come to their attention and that, if the information is true, their report should no longer be relied on or be associated with the FSs, The accountants should use their professional judgment in these circumstances and it may be advisable to consult legal counsel.

Front 143

Note

Back 143

When the FSs are accompanied by supplementary information for analysis purpose, the accountant should indicate the degree of responsibility he or she is taking with respect to the information.

Front 144

What are the options available for the accountant to disclose the supplementary information related to the compilation engagement?

Back 144

1- The compilation report should refer to the supplementary information,
OR
2- The accountant can issue a separate report.

Front 145

If a separated report has been issued, what are the disclosure statements related to the compilation supplementary information will involve?

Back 145

1- The supplementary information is presented only for the purpose of additional analysis,
2- The content has been compiled from information that is the representation of management, without audit or review,
3- The accountant does not express an opinion or provides any assurance on such data.

Front 146

What are the options available for the accountant to disclose the supplementary information related to the review engagement?

Back 146

1- The review report should explain the supplementary information,
OR
2- The accountant can issue a separate report.

Front 147

If a separated report has been issued, what are the disclosure statements related to the review engagement supplementary information will involve?

Back 147

1- The review has been made for the purpose of expressing a conclusion that no material modifications should be made to the FSs in order for them to be in conformity with the applicable financial reporting framework,
2- The supplementary information is presented only for the purpose of additional analysis
3- The supplementary information has been subjected to the inquiry and analytical procedures applied in the review of the basic FSs, and that the accountant is not aware of any material modifications that should be made to the data
OR
3- The supplementary information has not been subjected to the inquiry and analytical procedures applied in the review of the basic FSs, but were compiled from information that is the representation of management without audit or review, and the accountant does not express an opinion or any other form of assurance on the data.

Front 148

Note

Back 148

During the course of an engagement, a client may ask the accountant to change an audit to a compilation or review, or a review to a compilation.

Front 149

What are the considerations that the accountant is required to consider before agreeing to change the engagement?

Back 149

1- Reason for the request, especially if there are scope limitations
2- Effort required to complete the engagement
3- Estimated additional cost to complete the engagement.

Front 150

What is the accountant's action if he decides that the change in the engagement is justified?

Back 150

1- He or she must comply with the standards for a compilation or review,
2- Issue an appropriate report.

Front 151

What are the issues that the report shouldn't refer to?

Back 151

1- The original engagement
2- Any procedures performed as part of the engagement
3- Any scope limitation

Front 152

What are the reasons that the accountant can accept for changing the engagement?

Back 152

1- Change in client requirements.
2- Misunderstanding as to the nature of the service to be rendered.

Front 153

What are the reasons that the accountant can refuse changing the engagement for ?

Back 153

1- The engagement would uncover errors or fraud.
2- The client is attempting to create misleading or deceptive FSs.
3- The client refuses to allow correspondence with legal counsel.
4- The client refuses to provide a signed representation letter.

Front 154

Note

Back 154

In case of refusing changing the engagement by the accountant he should withdraw from the engagement

Front 155

Note

Back 155

Management representation letter is required only in case of Review engagement, but not in case of a Compilation engagement, so if the client refuses to provide a signed representation letter the accountant can only perform a compilation services and not a review one

Front 156

When should the accountant been precluded from issuing a compilation report or a review report?

Back 156

When:
1- The accountant has been engaged to audit the entity's FSs and has been prohibited by the client from corresponding with the entity's legal counsel.
2- The accountant has been engaged to audit or review the entity's FSs and the client does not provide the accountant with a signed representation letter (But may became able to issue a compilation report in that case)

Front 157

What are the audit procedures that are generally not performed in a review engagement?

Back 157

"1- Tests of the accounting records.
2- Tests of management's assertions regarding continued existence.
3- Inquiries of the entity's attorney concerning contingent liabilities."