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Wiley CPAexcel Exam Review 2014 Focus Notes: Auditing and Attestation by Ray Whittington

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Focus on: Accounting and Review Services—Module 6

ACCOUNTING AND REVIEW SERVICES

Accountants engaged to perform compilations or reviews of nonpublic companies must comply with Statements on Standards for Accounting and Review Services (SSARS)

Compilations

Accountants provide no assurance regarding financial statements in a compilation

  • Accountant presents information in the form of financial statements
  • Information is representation of management
  • SSARS consider compilations to be an attest engagement, but not an assurance engagement

Accountant does not gather evidence in relation to financial statements

  • Should read compiled financial statements
  • Determine if financial statements appear to be in appropriate form and free from obvious error

Nature of Compilations

Third-party use

  • Yes? Must issue a compilation report
    • State in report not an opinion and no assurance is provided
  • No?
    • Add a point in engagement letter indicating that the financial statements are not to be used by a third party.
    • Each page of financial statements includes “Restricted for Management’s Use Only.”
    • No compilation report is required.

Planning Compilations

  • Establish and document understanding with management in written agreement
  • Obtain management permission to talk to predecessor accountants who are required to respond
  • If unfamiliar with client business, can accept if competent before compilation
  • Independence not required
  • May use non-GAAP/inconsistent GAAP if basis/inconsistencies disclosed

Compilation ...

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