other assurance services

©2010 Prentice Hall Business Publishing, ©2010 Prentice Hall Business Publishing, Auditing 13/e,Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 25 - 1

Other Assurance ServicesOther Assurance Services

Chapter 25Chapter 25

©2010 Prentice Hall Business Publishing, ©2010 Prentice Hall Business Publishing, Auditing 13/e,Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 25 - 25 - 22

The standards for compilations andreviews of financial statements arecalled Statements on Standardsfor Accounting and ReviewServices (SSARS).

Review and Compilation Review and Compilation ServicesServices


Relationship Between EvidenceRelationship Between EvidenceAccumulation and Assurance AttainedAccumulation and Assurance Attained

Lev

el o

fA

ssu

ran

ce A

ttai

ned

None(Compilation)

Moderate(Review)

High(Audit)

Minimal(Compilation)

Significant(Review)

Extensive(Audit)

Amount of Evidence Accumulated


A review service (SSARS review) engagementis designed to allow the accountant to expresslimited assurance that the financial statementsare in accordance with GAAP.

Review ServicesReview Services


Procedures SuggestedProcedures Suggestedfor Reviewsfor Reviews

Obtain knowledge of the accountingprinciples of the client’s industry

Obtain knowledge of the client

Make inquiries of management

Perform analytical procedures

Obtain letter of representation


1. Discover the company’s procedures forrecording, classifying, and summarizingtransactions and disclosing informationin the statements.

2. Inquire into actions taken at meetings ofstockholders and the board of directors.

3. Ask if each account on the financialstatements was prepared in conformitywith GAAP.

Make Inquires of ManagementMake Inquires of Management


We have reviewed the accompanying balance sheet of XYZ Company as of December 31, 199X, and the related statements of income, retained earnings, and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants All information included in these financial statements is the representation of the management of XYZ Company.

A review consists principally of inquiries of company personnel and analytical procedures applied to financial data It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole Accordingly, we do not express such an opinion

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles


Compilation ServicesCompilation Services

A compilation service engagement is defined in SSARS as one in which accountants presentto a client or third party, financial statements thatthe accountant has prepared.

The CPA firm does not express any assurance on the statements.


Possess knowledge about the accountingprinciples and practices of the client’s industry

Know the client, including the nature of itsbusiness transactions, accounting records,and content of its financial statements

Requirements for CompilationRequirements for Compilation

Establish an understanding with the client aboutthe nature and limitations of the services to beperformed and a description of the report


Read the compiled financial statementsand be alert for any obvious omissionsor errors in arithmetic and GAAP

Requirements for CompilationRequirements for Compilation


We have compiled the accompanying balance sheet of XYZ Company as of December 31, 1 99X, and the related statements of income, retained earnings, and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial statements information that is the representation of management We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.


1. Compilation with full disclosure

2. Compilation that omits substantially all disclosures

Form of Compilation ReportForm of Compilation Report

3. Compilation without independence


Attestation standards

Types of attestation engagements

Levels of service

Attestation EngagementsAttestation Engagements


Types of Engagements and Types of Engagements and Related ReportsRelated Reports

Examination

Review

Agreed-uponprocedures

Extensive

Significant

Varying

High

Moderate

Varying

Positive

Negative

Findings

General

General

Limited

Type ofEngagement

Amount ofEvidence

Level ofAssurance

Form ofConclusion Distribution


In a WebTrust attestation engagement, aclient engages a CPA to provide reasonableassurance that a company’s Web site complieswith certain Trust Services principles and criteriafor one or more aspects of e-commerce activities.

WebTrustWebTrust Services Services


In a SysTrust engagement, the SysTrustlicensed CPA evaluates a company’scomputer system using Trust Servicesprinciples and criteria.

SysTrustSysTrust Services Services

The report may address a single Trust Services principle or any combinationof principles.


Prospective Financial Prospective Financial StatementsStatements

Forecasts and projections

Use of prospective financial statements

Types of engagements

Examination of prospective financial statements


The audit is limited to certain specificaudit procedures.

Agreed-Upon Procedures Agreed-Upon Procedures EngagementsEngagements

These are referred to as proceduresand findings engagements.

The SASs deal with financial statementitems, whereas the SSAEs deal withnonfinancial statement matters.


SPECIAL REPORTSSPECIAL REPORTS


Other Audits or Limited Other Audits or Limited Assurance EngagementsAssurance Engagements

Other comprehensive basis of accounting

Specified elements, accounts, or items

Debt compliance letters and similar reports


Other ComprehensiveOther ComprehensiveBasis of AccountingBasis of Accounting

Cash or modified cash basis

Basis used to comply with therequirements of a regulatory agency

Income tax basis

A definite set of criteria havingsubstantial support


We have audited the accompanying statement of assets and liabilities arising from cash transactions as of XYZ Company as of December 31, 1 99X, and the related statements of revenue collected and expenses paid for the year then ended These financial statements are the responsibility of the Company’s management Our responsibility is to express an opinion on these financial statements based on our audit.

Standard scope paragraph

As described in Note 1, these financial statements were prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than GAAP.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities arising from cash transactions of XYZ Company as of December 31, 1 99X, and the revenue collected and expenses paid during the year then ended, on the basis of accounting described in Note 1.


Auditors are often asked to audit and issuereports on specific aspects of financialstatements.

Specified Elements,Specified Elements,Accounts, or ItemsAccounts, or Items


1. Materiality is defined in terms of the elements,accounts, or items being audited rather thanfor the overall statements.

Specified Elements,Specified Elements,Accounts, or ItemsAccounts, or Items

2. The first standard of reporting under GAAS does not apply.

Two differences in these types of audits:


The engagement and report should belimited to compliance matters theauditor is qualified to evaluate.

The auditor should provide a debtcompliance letter only for a clientfor whom the auditor has done anaudit of the overall financial statements.

Debt Compliance LettersDebt Compliance Lettersand Similar Reportsand Similar Reports


The auditor’s opinion is in the form of anegative assurance, stating that nothingcame to the auditor’s attention that wouldlead the auditor to believe there wasnoncompliance.

Debt Compliance LettersDebt Compliance Lettersand Similar Reportsand Similar Reports


Compliance Reports

In connection with our audit, nothing came to our attention that caused us to believe that the Company was not in compliance with any of the terms, covenants, provisions, or conditions of Section 8 to 15, inclusive, of the Indenture dated July 21, 199X, with Banco Popular de Puerto Rico However, our audit was not directed toward obtaining knowledge of such noncompliance.

©2010 Prentice Hall Business Publishing, ©2010 Prentice Hall Business Publishing, Auditing 13/e,Auditing 13/e, Arens//Elder/Beasley Arens//Elder/Beasley 25 - 28

End of Chapter 25End of Chapter 25

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