Assurance and Other Public Accounting Services

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Module A

• Assurance and Other Public Accounting Services

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1. Assurance Services

• Risk assessment
• Business performance measurement
• Information systems reliability
• Electronic commerce
• Health care performance measurement
• Elder care plus
• Web Trust

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2. Association with Financial Statements

• AR 100.07
• The accountant should not submit unaudited
  financial statements of a nonpublic entity to his
  or her client or others unless, as a minimum, he
  or she complies with the provisions of the
  statement applicable to a compilation engagement

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2. Association with Financial Statements
(continued)

• If the statements are intended for the use by
  third parties, a compilation report must be
  issued (AR 100.11)
• If the statements are not intended to be used by
  third parties, the accountant may issue a
  compilation report, or print on every page of the
  statements Restricted for Management Use Only

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2. Association with Financial Statements
(continued)

• Submission of financial statements is defined as
  presenting financial statements
• generated, either manually or through the use of
  computer software
• modified by materially changing client-prepared
  financial statements

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2. Association with Financial Statements
(continued)

• The following services do not constitute a
  submission of financial statements
• reading client-prepared financial statements
• typing or reproducing client-prepared financial
  statements
• proposing correcting journal entries
• preparing standard monthly journal entries

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2. Association with Financial Statements
(continued)

• providing a client with a financial statement
  format that does not include dollar amounts
• advising a client about the selection or use of
  computer software that the client will use to
  generate statements
• providing the client with the use of or access to
  computer hardware or software that the client
  will use to generate statements

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3. Compilation and Review

• Definitions
• Nonpublic entity. A nonpublic entity is any
  entity other than (a) one whose securities trade
  in a public market either on a stock exchange or
  in the over-the-counter market, (b) one that
  makes a filing with a regulatory agency in
  preparation for the sale of its securities in a
  public market, or (c) a subsidiary, or other
  entity controlled by an entity covered by (a) or
  (b).

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3. Compilation Review (continued)

• Compilation of financial statements. Presenting
  in the form of financial statements, information
  that is the representation of management, without
  undertaking to express any assurance on the
  statements.

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3. Compilation Review (continued)

• To compile financial statements, the accountant
  should possess
• a general understanding of the nature of the
  entity's business transactions, the form of its
  accounting records, the stated qualifications of
  its accounting personnel, the accounting basis on
  which the financial statements are to be
  presented, and the form and content of the
  financial statements.

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3. Compilation Review (continued)

• Review of financial statements.
• Performing inquiry and analytical procedures that
  provide the accountant with a reasonable basis
  for expressing limited assurance that there are
  no material modifications that should be made to
  the statements in order for them to be in
  conformity with generally accepted accounting
  principles or, if applicable, with another
  comprehensive basis of accounting.

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3. Compilation Review (continued)

• To review financial statements, the accountant
  should possess
• same as for a compilation, and a general
  understanding of the entity's organization, its
  operating characteristics, and the nature of its
  assets, liabilities, revenues, and expenses.
  Also, a general knowledge of the entity's
  production, distribution, and compensation
  methods, types of products and services,
  operating locations, and material transactions
  with related parties.

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3. Compilation Review (continued)

• The objective of a review differs significantly
  from the objective of a compilation.
• The objective of a review also differs
  significantly from the objective of an audit of
  financial statements in accordance with generally
  accepted auditing standards.

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Compilation Review (continued)

• Review of interim financial statements
• Required by the SEC
• Reviews of interim statements follow the SASs,
  not SSARSs
• Not required by GAAP

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4. Compilation Review Reports

• Compilation Report
• standard report
• when omitting all disclosures
• when not independent
• Review Report

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5. Attestation Engagements

• Agreed-upon procedures
• Financial forecasts, projections, and pro forma
  financial statements
• Reporting on internal control
• Compliance reports

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6. Special Reports

• OCBOA statements
• Regulatory basis
• Tax basis
• Cash basis
• Specific elements, accounts, or items in a
  financial statement
• Reporting on application of accounting principles
  (opinion shopping)
• Service organizations