Addthis Arens Chapter25

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Other Assurance Services

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Learning Objective 1

Understand the level of assurance

and evidence requirements for

review and compilation services.

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The standards for compilations and reviews of financial statements are called Statements on Standards for Accounting and Review

Services (SSARS).

Review and Compilation

Services

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Relationship Between Evidence

Accumulation and Assurance Attained

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A review service (SSARS review) engagement is designed to allow the accountant to express limited assurance that the financial statements are in accordance with GAAP.

Review Services

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Procedures Suggested

for Reviews

_{Obtain knowledge of the accounting}

principles of the client’s industry

_{Obtain knowledge of the client}

_Make _{inquiries of management}

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1. Discover the company’s procedures for recording, classifying, and summarizing transactions and disclosing information in the statements.

2. Inquire into actions taken at meetings of stockholders and the board of directors. 3. Ask if each account on the financial

statements was prepared in conformity with GAAP.

Make Inquires of Management

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Compilation Services

A compilation service engagement is defined in SSARS as one in which accountants present

to a client or third party, financial statements that the accountant has prepared.

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_{Possess knowledge about the accounting}

principles and practices of the client’s industry

_{Know the client, including the nature of its}

business transactions, accounting records, and content of its financial statements

Requirements for Compilation

_{Establish an understanding with the client about}

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_{Make inquiries to determine whether}

the client’s information is satisfactory

_{Read the compiled financial statements}

and be alert for any obvious omissions or errors in arithmetic and GAAP

Requirements for Compilation

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1. Compilation with full disclosure

2. Compilation that omits substantially all disclosures

Form of Compilation Report

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Learning Objective 2

Describe special engagements

to review interim financial

information for public

companies.

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Like reviews under SSARS, a public company interim review includes five requirements for review service engagements.

Review of Interim Financial

Information for Public Companies

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The review is conducted according to the standards of the PCAOB and there is no reference to the SSARS in a review report.

Review of Interim Financial

Information for Public Companies

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Learning Objective 3

Distinguish AICPA attestation

standards from auditing

stan-dards and know the type of

dards and know the type of

engagements to which they apply.

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_{Attestation standards}

_{Types of attestation engagements}

_{Levels of service}

Attestation Engagements

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Types of Engagements and

Related Reports

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Learning Objective 4

Understand the nature of

WebTrust

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In a WebTrust attestation engagement, a client engages a CPA to provide reasonable

assurance that a company’s Web site complies with certain Trust Services principles and criteria for one or more aspects of e-commerce activities.

WebTrust

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Five

Trust

_Trust

Services

_Services

Principles

_Principles

Security The system is protected against

unauthorized access

Availability The system is available for operation

and use as committed or agreed Processing

integrity

System processing is complete, accurate, timely, and authorized Online

privacy

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Learning Objective 5

Understand the nature of

SysTrust

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In a SysTrust engagement, the SysTrust

licensed CPA evaluates a company’s computer system using Trust Services

principles and criteria.

SysTrust

Services

_Services

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Learning Objective 6

Describe special engagements

to attest to prospective financial

statements.

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Prospective Financial

Statements

_{Forecasts and projections}

_{Use of prospective financial statements}

_{Types of engagements}

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Learning Objective 7

Describe agreed-upon procedures

engagements.

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The audit is limited to certain specific audit procedures.

Agreed-Upon Procedures

Engagements

These are referred to as procedures and findings engagements.

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Learning Objective 8

Describe other audit and limited

assurance engagements related

to historical financial statements.

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Other Audits or Limited

Assurance Engagements

_{Other comprehensive basis of accounting}

_{Specified elements, accounts, or items}

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Other Comprehensive

Basis of Accounting

_{Cash or modified cash basis}

_{Basis used to comply with the}

requirements of a regulatory agency

_{Income tax basis}

_{A definite set of criteria having}

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Auditors are often asked to audit and issue reports on specific aspects of financial

statements.

Specified Elements,

Accounts, or Items

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1. Materiality is defined in terms of the elements, accounts, or items being audited rather than for the overall statements.

Specified Elements,

Accounts, or Items

2. The first standard of reporting under GAAS does not apply.

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The engagement and report should be limited to compliance matters the

auditor is qualified to evaluate.

The auditor should provide a debt compliance letter only for a client for whom the auditor has done an

Debt Compliance Letters

and Similar Reports

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The auditor’s opinion is in the form of a

negative assurance, stating that nothing came to the auditor’s attention that would lead the auditor to believe there was