Audit 2.4-2.6

SysTrust engagement provides assurance with respect to the reliability of what?

any defined electronic system

Financial projection is the financial results of a future period based on what?

hypothetical assumptions/ "what if"

A compilation of prospective financial statements is not intended to provide what? on the prospective financial statements or the assumptions underlying such statements.

assurance

Trust services are what?

assurance and advisory services used to address the risks and opportunities related to information technology

A sufficient understanding of internal control is not required to be obtained in an what engagement?

attestation

MD&A is required by the SEC for what?

attestation engagements

Preparing future financial statements constitutes a compilation of prospective financial statements, which is considered to be an what?

attestation service.

Interim financial information is not what? but instead what?

audited but instead reviewed

An attest engagement is what?

auditing/examing something other than historical FS

TIPPY =

training, independence, performance/due professional care in planning and performing, professional knowledge, & your judgement

What 4 things are done during an analytical procedure?

trends, ratios, benchmarking (maybe) & budget vs. actual

An accountant's knowledge of an entity's business and its internal control influences the what 2 things?

inquiries made and analytical procedures performed.

Financial projection has what kind of use?

limited only

Since the CPA has not audited the interim financial statements of this publicly-held entity, the CPA should request that the first quarter interim financial statements be what?

marked as unaudited.

Departures from the applicable financial reporting framework means the auditor should do what?

modify the report

review has what kind of assurance?

negative

partial presentation appropriate for general use?

no, only limited

Compilation of prospective financial statements provides what kind of assurance?

none

What kind of assurance is an agreed upon procedure?

none

A review report on the interim financial information of a publicly held company does not provide an what?

opinion on the financial statements.

When a comfort letter is issued, the CPA is required to do what?

perform a review of interim financial information in accordance with auditing standards

Negative assurance may be expressed when an accountant is requested to report on the results of what?

performing a review of management's assertion.

PA =

planning and supervision & appropriate evidence for a reasonable basis

examination has what kind of assurance?

positive

A report on agreed-upon procedures should include a list of the ?

procedures performed (or reference thereto) and the related findings.

Pro forma FS are not what FS?

prospective

A review of what is not allowed?

prospective financial statements

A review of interim financial information under PCAOB standards is conducted for ?

public companies (or companies anticipating going public).

During inquires, is an inquiry of the clients management required? clients attorney? compliance with GAAP?

required, permitted but not required, required

WHen are 2 times where you should withdraw?

scope limitation on examination or review

Letters for underwriters typically give negative assurance on what?

unaudited interim financial information.

For interim financial information accompanying audited FS, when would you disclaim an opinion?

when it is not marked "unaudited"

For going concern and lack of consistency, when would you need to modify the report?

when there is not adequate disclosure

If the client is the responsible party to provide the written assertion & none is provided, then what should happen?

withdraw due to scope limitations

Pro forma requires that what be obtained from management?

written representations

The objective of a review of interim financial information of a public entity is to provide an accountant with a basis for reporting whether:

Material modifications should be made to conform with generally accepted accounting principles.

What should the new wording for a modification of a departure from the framework?

"based on our review, with the of the matter described in the preceding paragraph(s), we are not aware of any material modifications..."

In a typical comfort letter, the accountants express an opinion (i.e., positive assurance) concerning the financial statements' compliance with what?

(as to form) with the pertinent accounting requirements of the SEC.

2 times an auditor should not comment or provide assurance:

1. market risk sensitive instruments 2. qualitative disclosures

I AM SURE=

= Independence of the practitioner Agreement of the parties Measurability and consistency Sufficiency of the procedures Use of the report is restricted to the specified parties Responsibility for the subject matter Engagements to perform agreed-upon procedures on prospective financial statements

2 fieldwork standards of attestation

= PA

5 general attestation standards

= TIPPY

Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:

A bank with which the entity is negotiating for a loan. (limited use)

A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain:

A statement of limitations on the use of the report.

An independent accountant's report is based on a review of interim financial information. If this report is presented in a registration statement, a prospectus should include a statement clarifying that the:

Accountant's review report is not a part of the registration statement within the meaning of the Securities Act of 1933.

An accountant's compilation report on a financial forecast should include a statement that the:

Compilation does not include evaluation of the support of the assumptions underlying the forecast.

When planning a review of an audit client's interim financial statements, which of the following procedures should the accountant perform to update the accountant's knowledge about the entity's business and its internal control?

Consider the results of audit procedures performed with respect to the current-year's financial statements.

For pro forma FS, they may be review or examined, during that, what do and what dont you do?

DO - determine if the math is correct DONT - reevaluate the internal controls

When an accountant compiles projected financial statements, the accountant's report should include a separate paragraph that:

Describes the limitations on the projection's usefulness.

An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided the:

Distribution (use) of the report is restricted to the specified users.

An accountant who accepts an engagement to compile a financial projection most likely would make the client aware that the:

Engagement does not include an evaluation of the support for the assumptions underlying the projection.

An examination of a financial forecast is a professional service that involves: (4)

Evaluating the preparation of the prospective financial statements, Evaluating the support underlying the assumptions, Evaluating the presentation of the prospective financial statements in conformity with AICPA guidelines, and Issuing an examination report.

What management is responsible for what 2 items?

FS and internal controls

Agreed-upon procedures engagements conditions

I AM SURE

Comfort letters ordinarily are signed by the client's:

Independent auditor.

What two types of inquiries under the review process is not required but still may occur based off of the CPA's judgement?

Inquiry of client's lawyers & going concern

When an accountant issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive:

Negative assurance on capsule information.

Is comparing the prospective financial statements with the entity's historical results for the prior year required while compiling prospective FS?

No

A review of the interim financial information of a publicly held company is conducted in accordance with ?

PCAOB standards.

What is the process when the auditor communicates the results to management?

Problem --> mgmt --> board of directors or audit committee --> withdraw (get legal advice)

An accountant's report on a review of pro forma financial information should include a:

Reference to the financial statements from which the historical financial information is derived.

A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to:

Review management's discussion and analysis (MD&A) prepared pursuant to rules and regulations adopted by the SEC.

Public (issuers) use what as a guideline for a review?

SAS or PCAOB

Attest engagements are governed by who?

SSAE

Private (nonissuers) use what as guideline for a review?

SSARS

4 reporting standards of attestation

SSER

When a CPA examines a client's projected financial statements, the CPA's report should:

State that the CPA performed procedures to evaluate management's assumptions.

A review of quarterly financial data included in financial statements of a nonissuer is performed under ?

Statements on Auditing Standards

When issuing letters for underwriters, commonly referred to as comfort letters, an accountant may provide negative assurance concerning:

The conformity of the entity's unaudited condensed interim financial information with generally accepted accounting principles (GAAP).

An accountant's compilation report on a financial forecast should include a statement that:

There will usually be differences between the forecasted and actual results.

In an attest engagement, use of the accountant's report should be restricted to specified parties in all of the following situations: (3)

When reporting directly on the subject matter and a written assertion has not been provided. When the criteria used to evaluate the subject matter are appropriate for only a limited number of parties. When reporting on an agreed-upon procedures engagement.

A positive assurance of a letter for underwriter is provided in respect to what 2 issues?

a CPA's independence & compliance as to form of the financial statements with the SEC act, assuming they are audited

Attestation standards provide levels of assurance below that provided by who?

a GAAS audit

Underwriter =

a company that buys an issue of shares from a corporation and arranges for their resale to the public

partial presentation

a presentation of prospective financial information that excludes certain essential elements

Prospective FS must include what?

a summary of significant assumptions

prospective financial statements must include what?

a summary of significant assumptions

A review of interim financial information is not designed to provide information regarding an entity's ?

ability to continue as a going concern.

When an accountant examines a financial forecast that fails to disclose significant assumptions used to prepare the forecast, the accountant should issue an ?

adverse opinion.

If one or more of the significant assumptions do not provide a reasonable basis for the financial statements, what should be issued?

an adverse opinion would be issued.

"An indication that had the accountants performed additional procedures, other matters might have come to their attention that would have been reported." would be included in what kind of report?

an agreed upon report

How is the report modified when dealing with a departure from the framework?

by adding a Basis for Modification paragraph (preceding the conclusion)

Financial forecast is the financial results of a future period based on what?

expected conditions and expected courses of action

A significant change in control activities would likely result in what?

further inquiry of management.

Whenever an accountant reports on prospective financial statements, the report should include a what?

caveat that prospective results may not be achieved.

Statements on Standards for Attestation Engagements provide guidance with respect to ?

compilation of a financial projection

Financial forecast has what kind of use?

general and limited use

How should an understanding with the client done?

through an engagement letter

Attestation standards provide a framework for the attest function beyond?

historical financial statements.

When may a practitioner not be able to issue a compilation report if the company fails to do what?

disclose a summary of significant assumptions

WebTrust engagements provide assurance related to what?

e-commerce

SSER=

subject matter, significant reservations, express conclusions, & restrict use

If the quarterly data required by SEC Regulation S-K have been omitted, the auditor's report must include a statement indicating?

that the company has not presented such data.

A comfort letter must include a statement that the letter is solely for the information of who? and to assist what?

the addresses & to assist the underwriters in conducting and documenting their investigation

An attestation report should identify what? and state the what?

the assertion being reported on & character of the engagement.

Pro forma FS may be used to demonstrate what?

the effects of a future or hypothetical event by showing how it might have affected the historical FS if it has occurred during the period covered by those FS

A comfort letter is a letter from who? to who? just before the registration of the client's securities.

the independent auditor & the named underwriter

A list of what? is appropriate in a practitioner's report on the results of applying agreed-upon procedures.

the procedures performed, as agreed to by the specified parties in the report,

If the client is NOT the responsible party to provide the written assertion & none is provided, then what should happen?

the report should have the use restricted

During an engagement on projections, Because the user may need to ask the responsible party questions about the underlying assumptions, financial projections are "restricted use" reports, whose use is restricted to who?

the responsible party and those third parties with whom the responsible party is negotiating directly