Chapter 20 Additional Assurance Services: Other Information McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

Assurance Services  Independent professional services that “improve the quality of information, or its context, for decision makers”  Assurance service encompass attestation services but are broader  Attestation, a portion of assurance services, are restricted to examination, review or agreed-upon procedures engagements  Assurance services go beyond attestation, may involve analyzing data or putting them in a form to facilitate decision making 20-2

Relationship Between Assurance and Attestation 20-3

Selected Characteristics of Assurance Services 20-4

Subject Matter  Historical or prospective performance or condition  Physical characteristics  Historical events  Analyses  Systems or processes  Behavior 20-5

Assertion  Declaration about whether the subject matter is presented in accordance with certain criteria.  Practitioners generally must obtain appropriate assertion about subject matter  Report can be on either The assertion about the subject matter or The subject matter itself 20-6

Criteria  Suitable Objective Permit reasonable consistent measurements Complete Relevant  Available Publicly available Presented in a summary, the assertion or the practitioners’ report 20-7

Relationships Among Terms Used in Attestation Engagements 20-8

Attestation Risk  Risk that practitioners will unknowingly fail to appropriately modify their report on subject matter that is materially misstated  Consists of Inherent risk Control risk Detection risk  Materiality Difficult because subject matter may not be financial Determine likely needs of intended users 20-9

Types of Attestation Engagements  Examinations Highest level of assurance Attestation risk at low level  Reviews Limited or negative assurance Attestation risk at moderate level  Agreed-upon procedures Restricted use reports 20-10

Prospective Financial Statements  Financial Forecasts Information about the entity’s expected financial position, results of operations and cash flows  Financial Projection Expected results, given one or more hypothetical assumptions  CPAs engaged to examine or perform agreed-upon procedures but no review 20-11

Examinations of Prospective Financial Statements  Practitioners gather evidence relating to the client’s procedures for preparation of the statements  Evaluate the underlying assumptions  Obtain a written representation letter from the client  Evaluate whether statements are in conformity with AICPA guidelines 20-12

Compliance  Types 1. Attesting to an entity’s compliance with specified requirements of laws, regulations, rules, contracts, or grants. 2. Attesting to the effectiveness of an entity’s internal control over compliance with specified requirements

Management’s Discussion and Analysis  Management required to provide narrative explanation of financial results as part of 10-K and 10-Q  Practitioner may examine or review  Objective to provide assurance on (1) the presentation includes, in all material respects, the required elements of the rules and regulations adopted by the SEC; (2) the historical financial amounts included in the presentation have been accurately derived, in all material respects, from the entity’s financial statements; and (3) the underlying information, determinations, estimates, and assumptions of the entity provide a reasonable basis for the disclosures contained in the presentation

Trust Services  Intended to address user and preparer needs regarding issues of security, availability, processing integrity, online privacy and confidentiality within e-commerce and other systems  System consists of Infrastructure Software People Procedures Data 20-15

Trust Services The practitioner (1) performs procedures to determine that management’s description of the system is fairly stated and (2) obtains evidence that the controls over the system are designed and operating effectively to meet the Trust Services Principles and Criteria—the suitable criteria required for an attest engagement 20-16

Types of Trust Services Engagements  Examination or agreed-upon procedures WebTrust Assurance on electronic commerce systems SysTrust Assurance on any system 20-17

Service Organization Control (SOC) Reports  SOC 1: Restricted use reports on controls at a service organization relevant to a user entity’s internal control over financial reporting (presented earlier in Chapter 7).  SOC 2: Restricted use reports on controls at a service organization related to security, availability, processing integrity, confidentiality, and/or privacy.  SOC 3: General use SysTrust reports related to security, availability, processing integrity, 20-18

PrimePlus/ElderCare Services  Financial Goal setting, funding analysis, needs assessment  Nonfinancial Interpersonal and interrelationship management Management of interaction between service providers and client  Target market Older clients of CPA Children of older adults Other professionals that deal with older adults 20-19

XBRL  eXtensible Business Reporting Language is an international information format designed for business information.  Accounting profession is in process of developing guidance for CPAs to provide assurance on XBRL-Related Documents