Other Assurance
Services
Chapter 25
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Learning Objective 1
Distinguish AICPA attestation
standards from auditing standards and know the type of
engagements to which they apply.
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Attestation Engagements
Attestation standards
Types of attestation engagements
Levels of service
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Types of Engagements and
Related Reports
Type of
Engagement
Amount of
Evidence
Level of
Form of
Assurance Conclusion Distribution
Examination Extensive High
Positive General
Review
Significant Moderate Negative General
Agreed-upon
procedures Varying
Varying
Findings Limited
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Learning Objective 2
Understand the nature of
WebTrust assurance services.
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WebTrust Services
In a WebTrust assurance services engagement,
a client engages a CPA to provide reasonable
assurance that a company’s Web site complies
with certain Trust Services principles and criteria
for one or more aspects of e-commerce activities.
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WebTrust Services
The WebTrust service is a specific service
developed under the broader Trust Services
principles and criteria jointly issued in 2003
by the AICPA and CICA.
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Five Trust Services Principles
Security
Availability
Processing
integrity
The system is protected against
unauthorized access
(both physical and logical).
The system is available for operation
and use as committed or agreed.
System processing is complete,
accurate, timely, and authorized.
Personal information obtained as a result of
Online
e-commerce is collected, used, disclosed,
privacy
and retained as committed or agreed.
Information designated as confidential
Confidentiality
is protected as committed or agreed.
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Learning Objective 3
Understand the nature of
SysTrust assurance services.
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SysTrust Services
In a SysTrust engagement, the SysTrust
licensed accountant evaluates a
company’s computer system using
Trust Services principles and criteria.
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SysTrust Services
A licensed SysTrust accountant
may report on only one Trust Service
principle or any combination of principles.
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Learning Objective 4
Describe special engagements
to attest to prospective financial
statements.
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Prospective Financial Statements
Forecasts and projections
Use of prospective financial statements
Types of engagements
Examination of prospective financial statements
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Learning Objective 5
Describe agreed-upon procedures
engagements.
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Agreed-Upon Procedures
Engagements
The audit is limited to certain specific
audit procedures.
These are referred to as procedures
and findings engagements.
The SASs deal with financial statement
items, whereas the SSAEs deal with
nonfinancial statement subject matter.
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Learning Objective 6
Understand the level of assurance
and evidence requirements for
review and compilation services.
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Review and Compilation Services
The standards for compilations and
reviews of financial statements are called...
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Level of
Assurance Attained
Relationship between Evidence
Accumulation and Assurance Attained
High
(audit)
Moderate
(review)
None
(compilation)
Minimal
(compilation)
Significant
(review)
Extensive
(audit)
Amount of Evidence Accumulated
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Review Services
A review service (SSARS review) engagement
is designed to allow the accountant to express
limited assurance that the financial statements
are in accordance with GAAP.
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Procedures Suggested for Review
Engagements
Obtain knowledge of the accounting
principles of the client’s industry.
Obtain knowledge of the client.
Make inquiries of management.
Perform analytical procedures.
Obtain letter of representation.
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Make Inquires of Management
1. Inquire as to the company’s procedures for
recording, classifying, and summarizing
transactions and disclosing information
in the statements.
2. Inquire into actions taken at meetings of
stockholders and the board of directors.
3. Inquire of persons having responsibility
for financial and accounting matters.
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Form of Report
1. The first paragraph is similar to an audit report
except for its reference to a review service
rather than an audit.
2. The second paragraph notes that a review
consists primarily of inquiries and
analytical procedures.
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Form of Report
3. The third paragraph expresses limited assurance
in the form of a negative assurance that “we are
not aware of any material modifications that
should be made to the financial statements.”
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Failure to Follow GAAP
If a client has failed to follow GAAP in
a review engagement, a modification
of the report is needed.
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Compilation Services
A compilation service engagement is defined in
SSARS as one in which the accountant presents
to a client or third party financial statements that
the accountant has prepared.
The CPA firm does not express any assurance
on the statements.
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Requirements for Compilation
• Establish an understanding with the client about
the nature and limitations of the services to be
performed and a description of the report.
• Possess knowledge about the accounting
principles and practices of the client’s industry.
• Know the client; the nature of the client’s
business transactions; and the basis, form,
and content of the financial statements.
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Requirements for Compilation
• Make inquiries to determine whether
the client’s information is satisfactory.
• Read the compiled financial statements
and be alert for any obvious omissions
or errors in arithmetic and GAAP.
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Form of Compilation Report
Compilation with full disclosure:
It requires disclosures in accordance with GAAP.
Compilation that omits substantially all disclosures:
This type of statement is usually expected to be
used primarily for management purposes only.
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Form of Compilation Report
Compilation without independence:
A CPA firm can issue a compilation report even
if it is not independent with respect to the client,
as defined by the Code of Professional Conduct.
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Learning Objective 7
Describe special engagements
to review interim financial
information for public
companies.
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Interim Financial Information for
Public Companies
The SEC requires quarterly financial statements
to be reviewed by the company’s external auditor
prior to the company’s filing of the Form 10Q.
Like reviews under SSARS, a review for a public
company does not provide a basis for expressing
a positive form opinion.
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Interim Financial Information for
Public Companies
The review is conducted according to the
standards of the PCAOB, and there is no
reference to the SSARS in a review report.
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Learning Objective 8
Describe other audit and limited
assurance engagements related
to historical financial statements.
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Other Comprehensive Basis
of Accounting
Cash or modified cash basis
Basis used to comply with the requirements
of a regulatory agency
Income tax basis
A definite set of criteria having substantial
support
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Reporting Requirements
Introductory paragraph
Scope paragraph
Middle paragraph stating the accounting basis
Opinion paragraph
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Specified Elements, Accounts,
or Items
The specified elements, accounts, or items
must be identified.
The basis on which the specified elements,
accounts, or items are presented and the
agreements specifying the basis must
be described.
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Specified Elements, Accounts,
or Items
The source of significant interpretations made
by the client about the provisions of a relevant
agreement must be indicated and described.
If the specified element, account, or item is
presented on a basis that is not in conformity
with GAAP, a paragraph that restricts the
distribution of the report to those within
the entity and the parties to the contract
or agreement must be added.
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Debt Compliance Letters and
Similar Reports
The engagement and report should be
limited to compliance matters the
auditor is qualified to evaluate.
The auditor should provide a debt
compliance letter only for a client
for whom the auditor has done an
audit of the overall financial statements.
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Debt Compliance Letters and
Similar Reports
The auditor’s opinion is in the form of a
negative assurance, stating that nothing
came to the auditor’s attention that would
lead the auditor to believe there was
noncompliance.
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End of Chapter 25
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