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2009 A-2 Class Notes
2009 A-2 Class Notes
2009 A-2 Class Notes
AUDITING 2
A.
A CPA firm must adhere to a sound system of quality control no matter what level of
service they provide.
a.
B.
(1)
(2)
(3)
(4)
(5)
b.
The type of policies that a firm establishes will vary based on its size, structure,
complexity, etc., as well as on cost-benefit considerations.
c.
SPECIAL REPORTS
1.
2.
C.
OCBOA: Other comprehensive basis of accounting (e.g., cash basis, tax basis,
etc.) This is a positive assurance report. Questions often focus on the
required explanatory paragraph.
b.
c.
d.
e.
Be aware of how the format of each special report differs from the three paragraphs
of the standard unqualified report.
Statements on Standards for Accounting and Review Services (SSARS) govern the
performance of compilations and reviews.
2.
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The auditor is required to have an understanding with the client regarding the service
being provided, and this understanding should be documented. An engagement
letter is the best way to document the understanding.
4.
b.
5.
6.
The accountant must perform the following procedures for this type of
engagement:
(1)
(2)
(3)
(4)
(5)
Draft the compilation report you must commit to memory the standard
report for a compilation, and you must know how to modify the standard
report if disclosures are omitted or if there are departures from GAAP.
A report is not required if FS are not expected to be used by a third party (but
an engagement letter must be used instead).
b.
The accountant must perform the following procedures for this type of
engagement:
(1)
(2)
(3)
(4)
5)
(6)
(7)
(8)
Draft the review report you must commit to memory the standard report
for a review, and you must know how to modify the standard report if
there are departures from GAAP.
c.
During a review of a nonissuer, the auditor is not responsible for testing internal
control, performing audit tests, or assessing fraud risk.
d.
e.
A change in the type of engagement is okay if it is for the right reasons (e.g.,
change in client requirements).
b.
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D.
E.
c.
d.
Know how to report when one period is audited and the other period is not.
Note that this typically applies to public companies (issuers) and falls under auditing
standards (PCAOB standards), not SSARS.
2.
The accountant must perform the following procedures for this type of engagement:
a.
b.
Obtain sufficient knowledge of the entity's business and its internal control
(note this is different than a review under SSARS).
c.
d.
e.
f.
g.
h.
Draft the review report - You must commit to memory the standard report for a
review (note that it is different than the review report under SSARS).
3.
Know how to modify the standard report if there are departures from GAAP.
4.
Comfort Letter
a.
b.
c.
A comfort letter:
(1)
(2)
(3)
ATTEST ENGAGEMENTS
1.
2.
The standards for attestation engagements are very similar to GAAS, but not
identical.
a.
b.
There are two fieldwork standards: planning and supervision, and evidence.
c.
There are four reporting standards: identify the assertion/subject matter and
the type of service, express a conclusion, disclose any reservations about the
engagement, and (in certain circumstances) restrict use of the report.
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4.
Agreed-upon procedures
b.
c.
d.
e.
Compliance engagements
f.
Trust Services
The following trust services are also considered attest engagements.
a.
b.
5.
Like GAAS audits, attest engagements require an understanding with the client,
appropriate documentation, and inquiry regarding subsequent events.
6.
7.
b.
8.
The following conditions must exist for an auditor to accept this type of
engagement:
(1)
(2)
(3)
(4)
(5)
(6)
The client (or in some cases a third party) is responsible for the subject
matter.
(7)
Financial forecast know the definition ("best guess") and that forecasts are
available for general (or restricted) use.
b.
Financial projection know the definition ("what would happen if") and that
projections are restricted use.
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The auditor can perform the following types of engagements with regard to
prospective financial statements.
(1)
(2)
(3)
(2)
The report should reference the financial statements from which the
historical financial information was derived.
b.
c.
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