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Attestation engagements
Prospective financial statements
Agreed upon procedures engagements
Review and compilation services
Review of interim financial info for public
companies
Attestation Engagements
Def: auditor and mgmt or a 3rd party user agreed that the
audit will be limited to certain specific audit procedures
Eg. Perform agreed-upon procedures on the gross
sales account for a lease agreement. Usually
performed for retail stores when the store leases from
the building owner on the basis of a percent of gross
sales.
Are also carried out on non-financial statement subject
matter
Eg. For a mutual fund in calculating the internal rate of return, beta
risk for measuring volatility, & other relevant info. Important to
investors.
Here, auditor provides a report of the factual findings of agreed upon
procedures & NO ASSURANCE is expressed
Agreed-upon procedures (2)
Procedures & evidence
Inquiry and analysis
Re-computation, comparison and other clerical accuracy checks
observation
Inspection
Obtaining confirmation
Report the findings
Identify specific information that the agreed-upon procedures have
been performed
List the specific procedures performed
Describe the auditors factual findings details of errors and
exceptions found
A statement that the report is restricted to those parties that have
agreed to the procedures performed
Review and Compilation Services
Partnership or sole proprietors may have their FS
reviewed or compiled by an auditor instead of having
them audited
Companys mgmt may believe that an audit is
unnecessary because of the active involvement of
owners and the company may not have significant
amount of debt or other regulatory requirement
Review provide limited assurance
Compilation provides no expressed assurance
Less evidence is required for these services and they can
be provided at a lower fee than an audit
Because these services provide less assurance, it is
important the accountant establish understanding with
client in written engagement letter
Review services (1)
1. The objective is to state whether anything has 1. The objective is to express an opinion whether
come to the auditors attention that causes him to the financial statements give a true and fair view.
believe that the financial statements do not
present a true and fair view.
3. Provides limited assurance (lower than 3. Provides reasonable but not absolute
assurance provide by audit). assurance.
4. Auditors to comply with auditing standards 4. Auditors apply approved standards on auditing
applicable to review engagements. as performance criteria.
Form of Report:
Compilation with full disclosure : disclosures in accordance
with approved acctg stds the same for audited FS or
reviews. Refer Figure 25-11
Compilation that omits substantially all disclosures : report
indicates the lace of disclosures and the absence of
disclosures is not with the intent to mislead users. This type
of statement is expected to be used for mgmt purposes only.
Refer Figure 25-12
Compilation that departs from approved acctg standards :
accountant has to draw attention to this fact. Refer Figure
25-13
Compilation without independence : in the compilation report
should include in last para we are not independent with
respect to ABC Sdn Bhd
Compilation vs Review
Compilation Review
Objective Presenting in the form of performing inquiry and
financial statements, analytical procedures that
information that is the provide the accountant with
representation of a reasonable basis for
management, without expressing limited
undertaking to express any assurance that there are no
assurance on the material modifications that
statements should be made to the
statements in order for
them to be in conformity
with GAAP