Engagements

Question 1

What are the possible engagements that can be performed under Statements on Standards for Accounting and Review Services (SSARS)?

Answer 1

SSARS governs NON-AUDIT FINANCIAL engagements. Independence required for review since assurance is given.

PREPARATION: No assurance, no report issued; preparing financial statements based on management’s information.

COMPILATION: No assurance, report issued; compiling financial statements without expressing assurance.

REVIEW: Limited assurance, report with conclusion issued; reviews of historical financial statements of nonissuers using inquiry and analytical procedures.

Question 2

What are the possible engagements that can be performed under Statements on Standards for Attestation Engagements (SSAE)?

Answer 2

SSAE governs NON-FINANCIAL engagements where some level of attestation is required. INDEPENDENCE is required.

AGREED-UPON PROCEDURES (AUP): Perform specific procedures agreed with the client; no assurance is provided, only a report of factual findings.

REVIEW: Provide limited assurance with a conclusion on subject matter other than historical financial statements.

EXAMINATION: Provide reasonable assurance with an opinion on subject matter or assertions other than historical financial statements.

Question 3

What is the auditor’s primary objective in a review?

Answer 3

Determine whether MATERIAL MODIFICATIONS should be made for the information to conform with GAAP.

Question 4

What are the auditor’s primary objectives in an audit?

Answer 4

1. Obtain reasonable (not absolute) assurance.
2. Detect material misstatements due to error or fraud.
3. Express an opinion on the fair presentation of the financial statements “FAIRLY STATED”.
4. Report findings according to auditing standards.

Question 5

Can an auditor perform a Preparation for an issuer?

Answer 5

NO - SSARS engagements (preparation, compilation, review) apply only to non-issuers.

Issuers are subject to PCAOB standards, and preparation or compilation engagements by the auditor are not allowed because they impair independence.

Question 6

Can an auditor perform a Compilation for an issuer?

Answer 6

NO - SSARS engagements (preparation, compilation, review) apply only to non-issuers.

Issuers are subject to PCAOB standards, and preparation or compilation engagements by the auditor are not allowed because they impair independence.

Question 7

Can an auditor perform a SSARS Review for an issuer?

Answer 7

NO - SSARS engagements (preparation, compilation, review) apply only to non-issuers.

Issuers are subject to PCAOB standards, and preparation or compilation engagements by the auditor are not allowed because they impair independence.

Question 8

Can an auditor perform a full-year Review for an issuer?

Answer 8

NO - an auditor can perform a PCAOB review for an issuer, but ONLY FOR INTERIM financial statements.

Question 9

Can an auditor perform a SSARS Preparation of FS and then an audit of the same FS for a nonissuer?

Answer 9

YES - performing a preparation engagement does not impair independence needed for the audit.

Question 10

Can an auditor perform AUP for an issuer and then in the same year perform an audit?

Answer 10

YES - Performing both AUP and audit in the same year is allowed as long as independence is maintained for the audit. There is no prohibition against performing multiple attest engagements for the same client in the same year.