BA 427 – Assurance and
Attestation Services
Lecture 18
The Types of Services Offered by
Public Accounting Firms
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
Accounting and Bookkeeping Services
Tax Services
Management Consulting Services
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
Accounting and Bookkeeping Services
Tax Services
Management Consulting Services
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
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Independent professional services that
improve the quality of information for
decision-making.
There are numerous providers of some of
these services. Examples include the
Better Business Bureau, Consumers
Union, organizations that certify whether
growers satisfy organic food standards.
Lecture 18 – Services Offered
by Public Accounting Firms
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Types of Assurance Services
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Attestation services
 Auditor is attesting to another party’s
assertion
 Auditor must issue a written report
Other assurance services
 The auditor need not issue a report
 There might not be an assertion by
another party
 Accounting firms compete with other
providers
Lecture 18 – Services Offered
by Public Accounting Firms
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Attestation Services
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The practitioner is engaged to issue an
examination report, a review report, or an
agreed-upon procedures report on
subject matter, or an assertion about the
subject matter, that is the responsibility
of another party.
Lecture 18 – Services Offered
by Public Accounting Firms
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Types of Attestation Services
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Audits of financial statements
Reviews of financial statements
Attestation related to internal controls
over financial reporting
Attestation related to prospective
financial statements
WebTrust, for web-based business
transactions assurance
SysTrust, for assurance on I/S reliability
Many other types of attest services
Lecture 18 – Services Offered
by Public Accounting Firms
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Attestation Services
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11 Attestation Standards
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Issued by the Auditing Standards Board
Analogous to the ten Generally Accepted
Auditing Standards (GAAS)
Additional guidance provided by SSAE’s
(Statements on Standards for Attestation
Engagements)
Audit Services
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10 Generally Accepted Auditing Standards
Lecture 18 – Services Offered
by Public Accounting Firms
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Audits of Financial Statements
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The objective of an independent, external
audit in accordance with GAAS is to express
an opinion on whether an entity’s financial
statements present fairly, in all material
respects, its financial position, results of
operations, and cash flows in conformity
with GAAP.
The auditor’s responsibility for the financial
statements is confined to the expression of
an opinion.
Lecture 18 – Services Offered
by Public Accounting Firms
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Reviews of Financial Statements
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A Review provides limited assurance
concerning GAAP for nonpublic companies.
The scope of a review is significantly less
than the scope of an audit.
The opinion is in the form of negative
assurance.
Review procedures consist of inquiries and
analytical procedures.
The auditor should obtain a Letter of
Representations
Lecture 18 – Services Offered
by Public Accounting Firms
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Reviews of Financial Statements
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A Review typically would not include any of
the following procedures:
 An evaluation of internal controls
 An assessment of control risk
 Testing of accounting records
 Obtaining evidence that corroborates
management’s representations
Lecture 18 – Services Offered
by Public Accounting Firms
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Reviews of Financial Statements
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If the auditor becomes aware that
information being provided for the F/S is
incorrect or incomplete, the auditor should
obtain additional or corrected information,
or withdraw from the engagement.
Lecture 18 – Services Offered
by Public Accounting Firms
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Attestation related to internal
controls over financial reporting
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Required for large financial institutions by
the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA).
Required for public companies under
Section 404 of Sarbanes-Oxley.
“Auditing Standards” for this attest
engagement are established by the PCAOB.
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Auditing Standard No. 2 (AS #2)
Lecture 18 – Services Offered
by Public Accounting Firms
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Attestation Related to Prospective
Financial Statements
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Financial Forecast: prospective F/S based
on management’s best guess of the future.
Financial Projection: prospective F/S
based on one or more hypothetical
assumptions.
 Might provide point estimates or ranges.
 Projections are Limited Use, not
General Use statements.
Lecture 18 – Services Offered
by Public Accounting Firms
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Attestation Related to Prospective
Financial Statements
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These types of services are viewed as a
significant market opportunity, but at high
risk for creating an “expectations gap.”
The only permissible services for Prospective
Financial Statements are:
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An Examination
A Compilation
Agreed-upon Procedures
Lecture 18 – Services Offered
by Public Accounting Firms
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Other Assurance Services
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Could cover almost anything, including the
reliability of
 the determination of lottery and contest
winners
 controls over data security and data
back-up procedures
 customer survey data; mystery shopping
 Fraud and illegal acts risk assessment
 Compliance with entertainment royalty
agreements
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
Accounting and Bookkeeping
Services
Tax Services
Management Consulting Services
Lecture 18 – Services Offered
by Public Accounting Firms
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Accounting and Bookkeeping
Services
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Preparation of financial statements for small
clients (including compilation services)
AICPA independence standards allow
auditors to provide these services to attest
clients; SEC independence rules do not.
Lecture 18 – Services Offered
by Public Accounting Firms
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Auditors’ Services Related to
Financial Statements
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Hence, auditors can be associated with
the dissemination of a set of financial
statements in one of three ways:
 An Audit
 A Review
 A Compilation
Lecture 18 – Services Offered
by Public Accounting Firms
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Compilations
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Also called “write-up services”
The auditor should obtain a general
understanding of the nature of the client’s
business, industry, and the accounting
principles and practices used in the
industry.
The auditor does not have to make
inquiries or perform other procedures to
verify, corroborate, or review information.
Lecture 18 – Services Offered
by Public Accounting Firms
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Compilations
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If the auditor becomes aware that
information being provided for the F/S is
incorrect or incomplete, the auditor
should obtain additional or corrected
information, or withdraw from the
engagement.
Lecture 18 – Services Offered
by Public Accounting Firms
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Compilations
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The auditor should read the compiled
financial statements and consider whether
the statements appear to be in
appropriate form and free of obvious
material errors, such as clerical mistakes
or mistakes in the application of GAAP.
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
Accounting and Bookkeeping Services
Tax Services
Management Consulting Services
Lecture 18 – Services Offered
by Public Accounting Firms
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Tax Services
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Tax Preparation
Tax Planning
Accounts for 25% to 40% of revenue for
most medium to large accounting firms.
Many large companies maintain their own
tax planning and tax compliance
departments.
Lecture 18 – Services Offered
by Public Accounting Firms
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Assurance Services
Accounting and Bookkeeping Services
Tax Services
Management Consulting Services
Lecture 18 – Services Offered
by Public Accounting Firms
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Management Consulting Services
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Also called Management Advisory
Services, or MAS
Examples:
 Financial systems design and
implementation
 Risk management advising
 Mergers and acquisitions (M&A) work
 Actuarial benefit consulting services
 Internal audit services
Lecture 18 – Services Offered
by Public Accounting Firms
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Management Consulting Services
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AICPA independence standards allow
auditors to provide these services to
attest clients; Sarbanes-Oxley and SEC
independence rules generally do not.
Lecture 18 – Services Offered
by Public Accounting Firms
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Governmental Audits
 The GAO issues government auditing
standards (the Yellow Book)
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Also called GAGAS for Generally Accepted
Government Auditing Standards.
Originally issued in 1972, updated as
recently as 2007.
Includes the ten GAAS standards, with
extensive additional guidance and
requirements.
Lecture 18 – Services Offered
by Public Accounting Firms
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Types of Governmental Engagements:
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Financial statement audits
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Other financial audits
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Scope is greater, and auditor’s responsibility is
greater, than for a conventional business audit.
E.g.: special reports, interim financial
information
Attestation engagements
Performance audits
Lecture 18 – Services Offered
by Public Accounting Firms
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Single Audit Act
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1984, amended in 1996
Applies to nonfederal entities that receive
federal awards in excess of $500,000 from
multiple federal programs.
Allows all federal agencies to rely on a
single audit of the grant recipient.