What is provided in a report based on an agreed upon procedures engagement quizlet?

Inhaltsverzeichnis Show

What is provided in a report based on an agreed upon procedures engagement?
What is the objective of an agreed upon procedures engagement?
What is agreed upon procedures in auditing?
What is the nature of procedures performed in an agreed upon procedures engagements?
Which of the following should not be included in an accountant's standard report based upon the compilation of an entity's financial statements?

Century 21 Accounting: General Journal

11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman

1,009 solutions

Fundamentals of Financial Management, Concise Edition

10th EditionEugene F. Brigham, Joel Houston

777 solutions

Essentials of Investments

9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie

689 solutions

Accounting: What the Numbers Mean

9th EditionDaniel F Viele, David H Marshall, Wayne W McManus

338 solutions

7. In an engagement to examine prospective financial information, the auditor should obtain sufficient appropriate evidence as to whether:

I. Management's best-estimate assumptions on which the prospective financial information is based are not unreasonable and, in the case of hypothetical assumptions, such assumptions are consistent with the purpose of the information.
II. The prospective financial information is properly prepared on the basis of the assumptions.
III. The prospective financial information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions or hypothetical assumptions.
IV. The prospective financial information is prepared on a consistent basis with historical
financial statements, using appropriate accounting principles.
a. I,II,III and IV b. I,II and III c. I and II d. I,II and IV

Agreed Upon Procedures Engagement

-practitioner is engaged by the client to issue a report of findings based on specific agreed-upon procedures

-client assumes responsibility for whether the procedures are sufficient

-attestation standards apply

-written assertion isn't required

-doesn't provide an opinion or negative assurance

Conditions of Agreed Upon Procedures:

I: Independence of practitioner
A: Agreement of parties
M: Measurability & consistency
S: Sufficiency of procedures
U: Use of report is restricted 2 specific parties
R: Responsibility 4 subject matter "either client or a 3rd party client names"
E: Engagements 2 perform agreed-upon procedures on FS

Agreed Upon Procedures Reporting:

-title "independence"
-signature
-date
-identification of specific parties, subject matter, character of engagement & responsible party
statement that subject matter is responsibility of responsible party
-statement that procedures performed were those agreed to by specified parties

Agreed Upon Procedures Reporting:
Part 2

-statement: sufficiency of procedures is solely responsibility of specified parties &a disclaimer of that responsibility

-statement: engagement was conducted in accordance w/ attestation standards
list of procedure performed & related finding

-if needed description of assistance provided by specialist

Agreed Upon Procedures Reporting Requirements
Part 3

-statement: practitioner didn't conduct an examination, disclaimer of opinion on subject matter

-statement: if practitioner had performed other procedures other matters might've come to his attention

-statement of restrictions on use of report
if needed reservation or restriction for procedure or finding

Explanatory Language

practitioner may use in regards to:
*disclosure of stipulated facts, assumptions or interpretations

*description of condition of records, controls or data to which procedures were applied

*explanation that practitioner has no responsibility to update his report

explanation of sampling risk

Prospective Financial Statements

-forward-looking
-based on projections rather than past events

Types of Prospective Financial Statements

1. financial forecast
2. financial projection

Financial Forecast

based on expected conditions and expected course of action

Financial Projection

based on hypothetical assumptions

Uses of Prospective Financial Statements

General use - ONLY financial forecast

Limited use - specified parties financial forecast and financial projection

Engagement Types for Prospective Financial Statements

1. compilation
2. examination
3. agreed-upon procedures
4. preparation

NO review

Compilation of Prospective Financial Statements:

Independence is NOT required, BUT a lack of should be disclosed:

Purpose:
-proper assembling of financial data based on responsible party's assumption

-NO assurance given

-accountant isn't required to gather evidence but should be aware of obvious inappropriate assumptions

-can't issue a report if entity fails to disclose a summary of significant assumptions

Contents of a Compilation Report:

-Identification of prospective Financial Statements by responsible party.

-practitioner has compiled FS in accordance with AICPA attestation standards

-compilation is limited in scope & doesn't provide assurance or opinion

-prospective results may not be achieved

-that practitioner assumes no responsibility to update report for subsequent events

-signature of practitioner's firm & date of report

Additional Items for Compilation Report of a Financial Projection

-description of the purpose of the projection
-reference to the hypothetical assumption
-paragraph restricting use

Examination of Financial Statements

Purpose: to express an opinion on whether statements are presented in conformity with AICPA guidelines or the underlying assumptions provide a reasonable basis for the prospective statements
independence required

sufficient evidence must be obtained

Contents of a Examination Report:
Part 1

-title "independent"
-signature of practitioner's firm
-date of report
-identification of prospective FS by responsible party
-identification of responsible party & a statement that prospective FS r responsibility of responsible party

Statements:
1. practitioner's responsibility to express an opinion based on his examination

2. examination was conducted in accordance with AICPA attestation standard

3. practitioner believes the examination provides a reasonable basis for his opinion

4. practitioner assumes no responsibility to update report for subsequent events

Contents of a Examination Report:
Prospective FS

Opinion that:
-prospective FS are presented in conformity with AICPA guidelines &,
-underlying assumptions provide a reasonable basis for forecast or projection

-prospective results may not be achieved
for projection include purpose

-paragraph restricting use

Modifications to Opinion for Examination

1. AICPA guidelines not followed = qualified or adverse
2. Significant assumptions not disclosed = adverse
3. Basis not reasonable = adverse
4. Scope limitation = disclaimer

Additional Items for Examination Report of a Financial Projection

-Description of the purpose of the projection
-Reference to the hypothetical assumption
-Paragraph restricting use

Agreed-Upon Procedures for Prospective Financial Statements Requirements

-must include a summary of significant assumptions
I-AM-SURE
-reference to prospective financial statements
-disclaimer on opinion
-financial results may not be achieved
-statement that the practitioner assumes no responsibility to update the report for subsequent events

Partial Information

not appropriate for general use
excludes one of
- sales
- gross profits
- unusual or infrequent itemes
- income tax expense
- discontinued operations
- income from continuing operations
- net income
- earnings per share
- significant changes in financial position

Pro Forma Financial Statements:

May be used to determine the effect of a future or hypothetical event by showing how it might have affected historical financial statements

-may be 1. Examined or 2. Reviewed

-practitioner should obtain an understanding of the event

-practitioner should obtain written representations from management

-refer to the financial statements from which the historical financial information was derived

What is provided in a report based on an agreed upon procedures engagement?

Agreed-Upon Procedures (AUP) Engagements: the practitioner provides a report based on factual findings regarding financial information—no assurance is expressed. The report is not distributed publicly—it is restricted to those parties that have agreed to the procedures.

What is the objective of an agreed upon procedures engagement?

The objective of an agreed-upon procedures engagement is for the auditor to carry out procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.

What is agreed upon procedures in auditing?

An agreed-upon procedure is a standard a company or client outlines when it hires an external party to perform an audit on a specific test or business process. The procedures, which are called audit standards, are designed and agreed upon by the entity conducting the audit, as well as any appropriate third parties.

What is the nature of procedures performed in an agreed upon procedures engagements?

An agreed-upon procedures engagement involves the performance of procedures of an assurance nature from which no conclusion or opinion is expressed by the member, and no assurance is provided to intended users. Instead only factual findings obtained as a result of the procedures performed are reported.

Which of the following should not be included in an accountant's standard report based upon the compilation of an entity's financial statements?

Which of the following should not be included in an accountant's standard report based upon the compilation of an entity's financial statements? A statement that the accountant does not express an opinion but expresses only limited assurance on the financial statements.