Chapter 19 -- SSAE

Question 1

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the purpose of SSAEs?

Answer 1

• SSAEs are for issuers
• They related to services that are beyond the financial statements.

Question 2

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What are the components of SSAE?

Answer 2

“EAR”
* Examinations
* Agreed-Upon Procedures
* Reviews

Question 3

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the criteria for an attestation engagement?

Answer 3

The criteria is:
* Relevant
* Objective
* Capable of reasonably consistent measurement
* Complete

Question 4

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What documentation is required for an Examination under SSAE?

Answer 4

• A description of the nature, timing and extent of the procedures performed.
• Specific items or matters tested are identified
• Who performed the work
• The date the work was completed
• Who reviewed the work
• The date and extent of the review

Question 5

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What are the preconditions for all attestation engagements?

Answer 5

• Independence is required for all attestation engagements
• Have unresticted access to information that the practitioner considers necessary
• Determine that the subject matter is appropriate
• Expect to prepare a written report

Question 6

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What is the difference between an engagement party and a responsible party?

Answer 6

• Engagement party is the party who engages the practioner.
• The responsible party is the party responsible for the subject matter.

Question 7

Section 19.1: Concepts Common to All Attestation Engagements (AT-C 105)

What action does the practitioner take when the responsible party, who is not the responsible party, refuses to provide a written assertion?

Answer 7

• The practitioner will disclose the refusal in the report.
• Restrict the use of the report to the engaging party

Question 8

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What type of report is issued in an examination engagement under SSAE?

Answer 8

An opinion is created on whether the subject matter is presented in accordance with specified criteria.

Question 9

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What is the objective of an examination engagement under SSAE?

Answer 9

• Obtain reasonable assurance about whether the subject matter, as measured or evaluated by certain criteria, is free from material misstatement.
• Expresses an opinion about whether the subject matter is accordance with certain criteria, or the responsible party’s assertion is fairly stated.
• Communication is further required.
• Independence is required for all attestation engagements

Question 10

Section 19.2: Examination Engagements (AT-C 205 and AT-C 206)

What is the difference between a direct or assertion-based examination under SSAE?

Answer 10

• For an assertion-based examination, the subject matter is based on responsible party’s assertion.
• For a direct examination, the practitioner’s conclusion will evaluate directly, using suitable criteria, the subject matter for which the accountable party is responsible.

Question 11

Section 19.3: Review Engagements Under SSAE (AT-C 210)

What is included in report for a review attestation engagement under SSAE?

Answer 11

• Limited assurance about whether any material modifications were made to the subject matter to conform to specific criteria
• Identification or description of the subject matter being reported on
• The moment or period in time that relates to the measurement or evaluation of the subject matter

Question 12

Section 19.3: Review Engagements Under SSAE (AT-C 210)

What should the responsible party provide to the practitioner in a attestation review engagement?

Answer 12

A written assertion about the measurement or evaluation of the underlying subject matter against the criteria.

Question 13

Section 19.3: Review Engagements Under SSAE (AT-C 210)

In an attestation review engagement, which party is responsible for the representation letter?

Answer 13

• The responsible party is responsible for the written letter of representations.
• If the engaging party is not the responsible party, then the practitioner should obtain written representations from both parties.

Question 14

Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)

What should be included in a practitioner’s report on Agreed-Upon Procedures?

Answer 14

• The auditor is independent
• A statement referring to the standards established by the AICPA
• All findings based on specific procedures performed on subject matter.
• The procedures performed were agreed to by the engaging party
• A statement that the report may be not suitable for othe purposes
• The subject matter is the responsibility of the responsible party.
• Any exceptions identified based on the procedures performed.

Question 15

Section 19.4: Agreed-Upon Procedures Engagements (AT-C 215)

When can a practitioner accept and engagement to apply agreed-upon procedures?

Answer 15

• The engagement party agrees that the procedures performed.
• The engagement party acknowledges that the procedures performed are appropriate before a report is issued.
• The subject matter is reasonably consistent
• Evidence is expected to exist in order to provide a reasonable basis for the findings.
• Other conditions are met

Question 16

Section 19.5: Prospective Financial Information (AT-C 305)

What should be included in a practitioner’s report of projected financial statements?

Answer 16

• The presentation conforms with the AICPA guidelines
• The assumptions provide a reasonable basis for the presentation.
• A separate paragraph should be included in the report that states:
• The difference between forecasted and projected results
• Actual results frequently occur
• Events and circumstances are often not as expected
• Differences may be material

Question 17

Section 19.5: Prospective Financial Information (AT-C 305)

What may cause an adverse opinion when issuing an examination on forecasted presentation?

Answer 17

• Several significant assumptions do not provide a reasonable basis for the forecast.
• Significant assumptions, including the summary of assumptions, are not disclosed in the presentation.
• A practitioner should not examine a presentation that omits all disclosures

Question 18

Section 19.5: Prospective Financial Information (AT-C 305)

What parties can be given a report on prospective financial statements?

Answer 18

Projection
* The practitioner may perform an examination.
* The examination is for limited use by the enity and the party that is negotiating directly with the entity.

Financial Forecast
* General Use

Question 19

Section 19.5: Prospective Financial Information (AT-C 305)

What is the difference between a financial projection and a financial forecast?

Answer 19

• A financial projection is based on estimates of conditions that are be based on one or more hypothetical assumptions.
• A financial forecast is based on assumptions based on conditions that are expected to exist and courses of action expected to be taken.

Question 20

Section 19.5: Prospective Financial Information (AT-C 305)

What are the components used to prepare prospective financial statements?

Answer 20

• Financial forecasts or projections.
• Summaries of significant assumptions
• Summaries of accounting policies

Question 21

Section 19.5: Prospective Financial Information (AT-C 305)

What types of reports can be generated on prospective financial statements.

Answer 21

• Examination
• Agreed-upon procedures

Question 22

Section 19.5: Prospective Financial Information (AT-C 305)

What consists of a partial presentation of prospective financial statements?

Answer 22

A presentation omits:
* Sales or gross revenues
* Gross profit or cost of sales
* Unusual or infrequently occurring items
* Provision for income taxes
* Discontinued Operations
* Income from continuing operations
* Net income
* Basis or diluted EPS
* Significant changes in financial position

Question 23

Section 19.5: Prospective Financial Information (AT-C 305)

What are the conditions that a practitioner must meet to perform an engagement of agreed-upon procedures?

Answer 23

• The practitioner determines that the procedures can be designed, performed and reported in accordance with the established guidelines.
• The engaging party agrees to the procedures
• The engaging party acknoweldges the appropriateness of the procedures.
• The procedures are expected to result in reasonable findings
• The practitioner agrees to the engaging party’s thresshold of exceptions.

Question 24

Section 19.5: Prospective Financial Information (AT-C 305)

What is included in an agreed-upon procedure report for financial projection and forecasts?

Answer 24

• The report includes both a disclosure and a conclusion
• Includes a statement that the report may suitable for an intended use and not for general use.

Question 25

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What are the objectives of performing an examination or review of pro forma financial statements?

Answer 25

* Whether management's assumptions provide a reasonable basis for presenting significant effects directly attributable to the transaction or event being reported on. * Whether the pro forma adjustments are appropriate and properly applied to the historical amounts.

Question 26

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What is the objective of pro forma financial information?

Answer 26

Pro Forma financial information uses historical financial information to show what might have been reported if the transaction or event occurred at an earlier date.

Question 27

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What are examples of pro forma financial transactions?

Answer 27

* Business combination * Disposal of a segment * Change in the status of an entity * Change in capitalization

Question 28

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What is included in a review report of pro forma financial information?

Answer 28

* Identification of pro forma information * Reference to the financial statements that were used * If the financial statements were audited or reviewed * That the review was made in accordance with AICPA standards * A review is substantially less in scope than an audit * No opinion is expressed * The objective of PFFI and its limitations * The practitioner's conclusion providing limited assurance

Question 29

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What are the conditions that must be met in regard to the historical financial statements when reporting on pro forma financial information?

Answer 29

* For an examination, which is similar to an audit, the related historical financial statements must have been audited. * For a review, the related historical financial statements must have been either audited or reviewed.

Question 30

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What is the objective of a compilation?

Answer 30

To apply accounting and financial expertise to assist management in the presentation of the financial statements without providing any assurance on the finanacial statements.

Question 31

# Section 19.6: Reporting on Pro Forma Financial Information (AT-C 310) What are the requirements of an accountant in a compilation?

Answer 31

* Independence * Report on the financial statements * Disclaim any assurance * Disclose any lack of independence * Associate their name with the statements

Question 32

# Section 19.7: Compliance Attestation (AT-C 315) What is included in a compliance attestation engagement?

Answer 32

* Compliance with specified requirements (i.e. laws, regulations, rules, contracts, grants, etc.) * In an compliance engagement for agreed-upon procedure, effective of internal control over compliance with specified requirements. * Performance of procedures to provide reasonable assurance of detecting material noncompliance.

Question 33

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) What reports may be generated for attestation services on MD&A?

Answer 33

* Examination * Agreed-upon Procedures * Reviews

Question 34

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) How is the MD&A information presented?

Answer 34

MD&A may be presented in an annual report or other documents filed with the SEC. MD&A explains the actions, activities and intentions of management

Question 35

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) What is the completeness assertion with respect to MD&A?

Answer 35

Descriptions of transactions and events in order to understand the entity's: * Financial condition * Changes to the transactions or events * Results of operations * Capital committments included in the MD&A

Question 36

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) What is the consistency assertion releated to MD&A?

Answer 36

* The MD&A is a written assertion that may be examined or reviewed by the practitioner. * Whether the historical financial statement amounts are accurately derived from statements and related records. * Reported transactions, events and explanations are consistent with the statements. * Nonfinancial data have been accurately derived from related records.

Question 37

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) What are the assertions related to MD&A?

Answer 37

* Occurrence * Consistency with the financial statements * Completeness * Presentation and disclosure

Question 38

# Section 19.8: Management’s Discussion and Analysis (AT-C 395) What is MD&A Control Risk?

Answer 38

In relation to MD&A, control risk is the risk that material misstatements may occur because the entity's internal control did not detected the MD&A misstatement in a timely manner.