1. Other Public Accounting Services
Module A
Other Public Accounting Services
ACCT 4080
Module A

2. 1. Assurance Services Risk assessment Business performance measurement
Information systems reliability
Electronic commerce
Third party reimbursement maximization
XBRL reporting
Customer satisfaction surveys
ACCT 4080
Module A

3. 2. Preparation, Compilation and Review
Performed by an “accountant”
Levels of assurance
Audit
positive assurance (reasonable assurance)
Review
limited assurance (moderate) (negative)
Compilation (independence not required)
no assurance and report given (Disclaimer of Opinion)
Preparation of Financial Statements (independence not required)
no assurance and no report
Applicable standards
SSARSs (AR-C)
SSARS No. 21 – new clarified standards became effective in late December 2015
ACCT 4080
Module A

4. 2. Compilation & Review (continued)
Preparation of financial statements
Objective
prepare financial statements pursuant to a specified financial reporting framework (FRF)
no report issued
Requirements
not satisfied client understands and can abide by preconditions for accepting engagement – accountant should discuss with management
if changes cannot be made to satisfy accountant –should not accept engagement
engagement letter required
accountant should
obtain understanding of the FRF
significant accounting policies intended to be used in the preparation of f/s
prepare f/s using information provided by management
ACCT 4080
Module A

5. 2. Compilation & Review (continued)
Preparation of financial statements
Requirements
management must accept responsibility for judgments accountant determines necessary to prepare f/s
if accountant becomes aware that information used in preparation of f/s is incomplete, inaccurate, or otherwise unsatisfactory
bring that to attention of management and request additional or corrected information
if accountant prepares financial statements that contain a known departure from applicable FRF (including disclosures)
disclose the material misstatement in the financial statements
if accountant prepares f/s that omit substantially all disclosures required by the FRF
disclose such omission in f/s (unless omission was to mislead users)
ACCT 4080
Module A

6. 2. Compilation & Review (continued)
Compilation of financial statements
A service, the objective of which is to apply accounting and financial reporting expertise to assist management in the presentation of financial statements and report in accordance with this section without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework
ACCT 4080
Module A

7. 2. Compilation & Review (continued)
To compile financial statements, the accountant:
must obtain engagement letter
must obtain understanding of the applicable FRF and significant accounting policies used
read f/s in light of the accountant’s understanding of FRF
if becomes aware that information used in preparation of f/s is incomplete, inaccurate, or otherwise unsatisfactory
bring that to attention of management and request additional or corrected information
ACCT 4080
Module A

8. 2. Compilation & Review (continued)
To compile financial statements, the accountant:
if becomes aware that f/s do not adequately follow FRF or are misleading
propose appropriate revisions to management
should withdraw from the engagement and inform management of the reasons if
accountant is unable to complete the engagement because management has failed to provide records, documents, explanations, or other information, or
management does not make appropriate revisions proposed by accountant or does not disclose such departures in f/s, and accountant determines to not disclose such departures in the accountant’s compilation report
ACCT 4080
Module A

9. 2. Compilation & Review (continued)
Okay if not independent
add statement as last paragraph in report
Okay if financial statements omit disclosures
as long as not done to mislead users
report must include statement that
client elected to omit disclosures
if had been included disclosures might have influenced users
f/s not intended for those who are not informed about such matters
Must issue report
ACCT 4080
Module A

10. Accountant’s Compilation Report
Management is responsible for the accompanying financial statements of XYZ Company, which comprise the balance sheets as of December 31, 20X2 and 20X1 and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America. I (We) have performed compilation engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. I (We) did not audit or review the financial statements nor was (were) I (we) required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, I (we) do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements.
ACCT 4080
Module A

11. 2. Compilation & Review (continued)
Review of financial statements
A service, the objective of which is to obtain limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to f/s for them to be in accordance with the applicable FRF, primarily through performance of inquiry and analytical procedures
ACCT 4080
Module A

12. 2. Compilation & Review (continued)
To review financial statements, the accountant:
must be independent
should not accept engagement if management imposes a limitation on the scope of the accountant’s work
must obtain the agreement that management acknowledges its responsibility for preconditions
must obtain engagement letter
ACCT 4080
Module A

13. 2. Compilation & Review (continued)
To review financial statements, the accountant:
should obtain understanding of the client’s industry and business
knowledge of business must include knowledge of accounting principles and practices
but no evaluation of internal control
no external evidence gathered
should apply analytical procedures
should include comparing f/s to prior year
comparing amounts and ratios to expectations developed by accountant
comparing disaggregated revenue data
investigate fluctuations or relationships that are inconsistent with other information
ACCT 4080
Module A

14. 2. Compilation & Review (continued)
To review financial statements, the accountant:
should inquire of management
inquires include: are f/s in accordance with FRF, any unusual or complex situations, significant transactions during period, status of uncorrected misstatements from last year, subsequent events, any knowledge of fraud, any noncompliance with laws, significant journal entries, any related party transactions, any pending litigation
read the f/s
should reconcile f/s to underlying accounting records
should obtain written management representations
ACCT 4080
Module A

15. 2. Compilation & Review (continued)
To review financial statements, the accountant:
if becoming aware that information used in preparation of f/s is incomplete, inaccurate, or otherwise unsatisfactory
bring that to attention of management and request additional or corrected information
if believing the f/s are materially misstated must perform additional procedures
f/s must contain all disclosures
ACCT 4080
Module A

16. Independent Accountant’s Review Report
I (We) have reviewed the accompanying financial statements of XYZ Company, which comprise the balance sheets as of December 31, 20X2 and 20X1, and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s (owners’) financial data and making inquiries of company management (owners). A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I (we) do not express such an opinion. Management’s Responsibility for the Financial Statements Management (Owners) is (are) responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error. Accountant’s Responsibility My (Our) responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require me (us) to perform procedures to obtain limited assurance as a basis for reporting whether I am (we are) aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. I (We) believe that the results of my (our) procedures provide a reasonable basis for my (our) conclusion. Accountant’s Conclusion Based on my (our) reviews, I am (we are) not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.
ACCT 4080
Module A

17. Review of Interim Fin Stmts
Review of interim financial statements
Required for issuers by the SEC
Reviews of interim statements follow the SASs (AU-C § 930), not SSARSs
Auditor can only perform review if
have audited latest financial statements
or are in process of auditing latest fin stmts
ACCT 4080
Module A

18. 4. Attestation Engagements
Definition of attest engagement
Report on the subject matter, or an assertion about the subject matter, that is the responsibility of another party
Performed by a “practitioner”
Types of services
examinations
reviews
agreed-upon procedures
ACCT 4080
Module A

19. 4. Attestation Engagements
Levels of assurance
examination
similar to an audit
high level of assurance (reasonable assurance)
review
limited (moderate) level of assurance
not allowed on certain engagements
agreed upon procedures
assurance depends on procedures performed
Applicable standards
SSAEs (AT-C)
ACCT 4080
Module A

20. 4. Attestation Engagements
Types of attestation subject matter
Agreed Upon Procedures Engagements (AT 201)
scope less than audit
report – no opinion or negative assurance (list procedures and findings)
limited use report
Financial Forecasts and Projections (AT 301)
definitions
limited use reports (except some forecasts can be general use report)
Reporting on Pro Forma Financial Information (AT 401)
limited use reports
ACCT 4080
Module A

21. 4. Attestation Engagements
Types of attestation subject matter
Reporting on an Entity’s Internal Control over Financial Reporting (AT 501) (moved to SASs)
no reviews
mostly same as PCAOB standards
Compliance Attestation (AT 601)
Management’s Discussion and Analysis (AT 701)
Service Organizations (AT 801)
SOC 1, SOC 2 (security), SOC 3 (trust services)
Type 1 and Type 2 reports
ACCT 4080
Module A

22. 5. Special Reports Follow SASs (auditing standards)
Special Purpose Framework Statements (SPF), AU-C 800
previously called OCBOA statements
regulatory basis
tax basis
cash basis
modified cash basis
Specific elements, accounts, or items in a financial statement, AU-C 805
no piecemeal reports
Reporting on application of accounting principles (opinion shopping), AU-C 915
ACCT 4080
Module A

23. Review Questions for Discussion
A.3
A.5
A.6
A.7
A.9
A.11
A.13
A.12
ACCT 4080
Module A