Module A
Other Public Accounting Services
ACCT 4080
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1. Assurance Services
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Risk assessment
Business performance measurement
Information systems reliability
Electronic commerce
Third party reimbursement maximization
XBRL reporting
Customer satisfaction surveys
ACCT 4080
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2. Compilation and Review
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Performed by an “accountant”
Levels of assurance
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Audit
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Review
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no assurance (Disclaimer of Opinion)
Preparation of Financial Statements (independence not required)
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limited assurance (moderate) (negative)
Compilation (independence not required)
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positive assurance (reasonable assurance)
no assurance and no report
Applicable standards
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ACCT 4080
SSARSs (AR)
SSARS No. 21 – new clarified standards became effective in late December 2015
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2. Compilation & Review
(continued)
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Preparation of financial statements
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Objective
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prepare financial statements pursuant to a specified financial reporting framework (FRF)
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no report issued
Requirements
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ACCT 4080
if accountant is not satisfied client understands and can abide by preconditions for
accepting engagement, accountant should discuss with management - if changes
cannot be made to satisfy the accountant, the accountant should not accept the
engagement
engagement letter required
accountant should obtain understanding of the FRF and significant accounting policies
intended to be used in the preparation of f/s
accountant should prepare f/s using the records, documents, explanations, and other
information provided by management
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2. Compilation & Review
(continued)
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Preparation of financial statements
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Requirements
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ACCT 4080
management must accept responsibility for judgments accountant determines necessary
to prepare f/s
if accountant becomes aware that records, documents, explanations, or other
information used in preparation of f/s are incomplete, inaccurate, or otherwise
unsatisfactory, accountant should 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), accountant should disclose the material
misstatement in the financial statements
if accountant prepares f/s that omit substantially all disclosures required by the FRF,
accountant should disclose such omission in f/s (unless omission was to mislead users)
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2. Compilation & Review
(continued)
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Compilation of financial statements
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ACCT 4080
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
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2. Compilation & Review
(continued)
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To compile financial statements, the accountant:
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ACCT 4080
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 the records, documents,
explanations, or other information used in preparation of f/s
are incomplete, inaccurate, or otherwise unsatisfactory,
accountant should bring that to attention of management
and request additional or corrected information
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2. Compilation & Review
(continued)
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To compile financial statements, the accountant:
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if becomes aware during the course of engagement that f/s do not
adequately refer to applicable FRF or are misleading, accountant should
propose appropriate revisions to management
should withdraw from the engagement and inform management of the
reasons if
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ACCT 4080
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
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2. Compilation & Review
(continued)
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Okay if not independent
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add statement as last paragraph in report
Okay if financial statements omit disclosures
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as long as not done to mislead users
report must include statement that
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client elected to omit disclosures
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if had been included disclosures might have influenced users
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f/s not intended for those who are not informed about such
matters
Must issue report
ACCT 4080
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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
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2. Compilation & Review
(continued)
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Review of financial statements
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ACCT 4080
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
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2. Compilation & Review
(continued)
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To review financial statements, the accountant:
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ACCT 4080
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 written engagement letter
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2. Compilation & Review
(continued)
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To review financial statements, the accountant:
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ACCT 4080
should obtain understanding of the client’s industry and business
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but no evaluation of internal control
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knowledge of business must include knowledge of accounting principles and practices
should apply analytical procedures
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should include comparing f/s to prior year
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comparing amounts and ratios to expectations developed by accountant
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comparing disaggregated revenue data
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investigate fluctuations or relationships that are inconsistent with other information
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2. Compilation & Review
(continued)
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To review financial statements, the accountant:
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should inquire of management
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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
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read the f/s
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should reconcile f/s to underlying accounting records
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should obtain written management representations
ACCT 4080
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2. Compilation & Review
(continued)
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To review financial statements, the accountant:
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ACCT 4080
if becomes aware that the records, documents,
explanations, or other information used in preparation of f/s
are incomplete, inaccurate, or otherwise unsatisfactory,
accountant should bring that to attention of management
and request additional or corrected information
if believe f/s are materially misstated must perform
additional procedures
f/s must contain all disclosures
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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
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3. Review of Interim Fin Stmts
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Review of interim financial statements
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Required for issuers by the SEC
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Auditor can only perform review if
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ACCT 4080
Reviews of interim statements follow the SASs
(AU-C § 930), not SSARSs
have audited latest financial statements
or are in process of auditing latest fin stmts
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4. Attestation Engagements
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Definition of attest engagement
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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
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ACCT 4080
examinations
reviews
agreed-upon procedures
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4. Attestation Engagements
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Levels of assurance
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examination
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review
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limited (moderate) level of assurance
not allowed on certain engagements
agreed upon procedures
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similar to an audit
high level of assurance (reasonable assurance)
assurance depends on procedures performed
Applicable standards
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ACCT 4080
SSAEs (AT)
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4. Attestation Engagements
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Types of attestation subject matter
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ACCT 4080
Agreed Upon Procedures Engagements (AT 201)
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scope less than audit
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report – no opinion or negative assurance (list procedures and findings)
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limited use report
Financial Forecasts and Projections (AT 301)
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definitions
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limited use reports (except some forecasts can be general use report)
Reporting on Pro Forma Financial Information (AT 401)
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definitions
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limited use reports
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4. Attestation Engagements
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Types of attestation subject matter
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Reporting on an Entity’s Internal Control over Financial Reporting (AT 501)
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no reviews
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mostly same as PCAOB standards
Compliance Attestation (AT 601)
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no reviews
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Management’s Discussion and Analysis (AT 701)
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Service Organizations (AT 801)
ACCT 4080
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SOC 1, SOC 2 (security), SOC 3 (trust services)
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Type 1 and Type 2 reports
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5. Special Reports
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Follow SASs (auditing standards)
Special Purpose Framework Statements (SPF), AU-C 800
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Specific elements, accounts, or items in a financial statement, AU-C 805
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previously called OCBOA statements
regulatory basis
tax basis
cash basis
modified cash basis
no piecemeal reports
Reporting on application of accounting principles (opinion shopping),
AU-C 915
ACCT 4080
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Review Questions for Discussion
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A.3
A.5
A.6
A.7
A.9
A.13
A.12
ACCT 4080
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