...What Is the Difference Between a Compilation, a Review and an Audit? Comparative Overview The level of service is determined by your needs as the client, and what your creditors and/or investors require. The higher the level of service required, the more time the CPA needs to complete the engagement and therefore the more costly the engagement. While privately held companies opt for compiled or reviewed statements, credit agreements with lenders often require audited statements. Compilation • Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements. • In a compilation engagement, the accountant assists management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. • In a compilation, the CPA must comply with Statements on Standards for Accounting and Review Services (SSARSs), which require the accountant to have an understanding of the industry in which the client operates, obtain knowledge about the client, and read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors. • A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding...
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...Answer: (i) The draft audit report of Willis Sdn Bhd for the year ended 30 August 2010 has contains a disclaimer of audit opinion. A disclaimer opinion is used only when the auditor is unable to satisfy sufficient appropriate audit evidence on which to base the opinion, and where the possible effect on the financial statements of undetected misstatements could be both material and pervasive. This draft audit report produced by audit senior and as a result it shows the restriction imposed on management work to find necessary audit evidence, the limited of evidence to support the capitalization of intangible asset which is research and development costs. After identify the scope that has been imposed, it was a limitation on condition-imposed. The results of trials on the developing a new drug would be a crucial element for audit work, the development costs will effect to future economic benefit if the necessary results not shown, the correct accounting treatment is impossible to be concluded. In the audit report, there is no explanation for the limitation of condition-imposed. If the auditor modifies the audit opinion, the matter giving rise to the modification should be disclosed in a paragraph of the audit report. Otherwise, the report should explained that management restrict to carry out the results of drug trials, and this will make audit firm unable to obtain whether there are necessary adjustments of the intangible asset. There are uncertain to explain the...
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...Accountants’ Reports 1. (N95,62) Which of the following statements is a basic element of the auditor’s standard report? a. The disclosures provide reasonable assurance that the financial statements are free of material misstatement. b. The auditor evaluated the overall internal control structure. c. An audit includes assessing significant estimates made by management. d. The financial statements are consistent with those of the prior period. 2. (N95,68) The fourth standard of reporting requires the auditor’s report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed. The objective of the fourth standard is to prevent a. An auditor from expressing different opinions on each of the basic financial statements. b. Restrictions on the scope of the audit, whether imposed by the client or by the inability to obtain evidence. c. Misinterpretations regarding the degree of responsibility the auditor is assuming. d. An auditor from reporting on one basic financial statement and not the others. 3. (N95,78) March, CPA, is engaged by Monday Corp., a client, to audit the financial statements of Wall Corp., a company that is not March’s client. Monday expects to present Wall’s audited financial statements with March’s auditor’s report to 1st Federal Bank to obtain financing in Monday’s attempt to purchase Wall. In these circumstances, March’s auditors report would usually...
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...principal auditor decides not to refer to the audit of another CPA who audited a subsidiary of the principal auditor's client. After making inquiries about the other CPA's professional reputation and independence, the principal auditor most likely would: a. Add an explanatory paragraph to the auditor's report indicating that the subsidiary's financial statements are not material to the consolidated financial statements. b. Document in the engagement letter that the principal auditor assumes no responsibility for the other CPA's work and Opinion. c. Obtain written permission from the other CPA to omit the reference in the principal auditor's report. d. Contact the other CPA and review the audit programs and audit documentation pertaining to the subsidiary. Explanation Choice "d" is correct. When the principal auditor decides not to make reference to the audit of the other auditor, in addition to satisfying himself or herself as to the other auditor's professional reputation and independence, he or she should visit the other auditor, discuss the audit procedures, and/or review the audit programs and audit documentation of the other auditor. Choice "a" is incorrect. The principal auditor may decide not to make reference to the other auditor e\€n when the portion of the financial statements audited by the other auditor is material. When the auditor takes this position, he or she should not state in his report that part of the audit was made by another auditor. Choice "b" is...
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...Andy Mandel 5/21/13 1. a. In my opinion, on a scale of 0-100 where 0 is “absolutely will remain in existence” and 100 is “absolutely will fail”, the term “substantial doubt” to me would be the number 65. I chose this number because as an investor, I would consider this the threshold between possible and likely. In my mind, anything above 65 would create more than substantial doubt that the company is in trouble and would have to use extraordinary measures to fix their situation. b. After the auditor determines that substantial doubt exists about the client’s ability to continue as a going-concern, he should talk to management about what they plan on doing about it and how effective their plan will be if they can even be implemented. c. The auditor should focus on elements of management’s plan that would play a significant role in overcoming the adverse conditions causing the going-concern. Not only should the auditor look for these specific elements of management’s plan, but he should also consider how accurate management’s assertions about the effectiveness of their plan will be. For example, if the plan is to sell assets, the auditor should consider the marketability of the asset and what the company will likely get for its disposition. d. If the auditor still doubts the company’s ability to continue as a going-concern, he is to put an explanatory paragraph after the opinion paragraph using the words “substantial doubt” and “going concern”. e. If, after reviewing...
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...Gaviola, Harold Dave B. BSA-V Assignment in COMED421/0180/8:30-9:30PM PSA 401: Auditing in a Computer Information Systems Environment - The increasing availability of computer-based accounting systems that is capable of meeting both functional and economic circumstances of even the smallest entity impacts on the audits of those entities. Small entities’ accounting systems often make use of personal computers. Philippine Auditing Practice Statement 1001, “CIS Environments—Stand-Alone Personal Computers” gives additional guidance regarding the special considerations of such an environment. - Small entities are likely to use less sophisticated hardware and software packages than large entities (often “packaged” rather than developed “in house”). Nevertheless, the auditor has sufficient knowledge of the computer information system to plan, direct, supervise, and review the work performed. The auditor may consider whether specialized skills are needed in an audit. - Because of the limited segregation of duties, the use of computer facilities by a small entity may have the effect of increasing control risk. For example, it is common for users to be able to perform two or more of the following functions in the accounting system. • Initiating and authorizing source documents. • Entering data into the system. • Operating the computer. • Changing programs and data files. • Using or distributing output. • Modifying the operating systems. - The use of computer information...
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...challenges in financial reporting and auditing, and in the surrounding environment. For example, today’s financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust. So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future. The Beginning of a New Era I am pleased – indeed proud – to announce that in July the IAASB published its Exposure Draft “Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs).” The IAASB...
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...rates in sales and profits to continue attracting capital from outside investors and creditors, Hirsch and his associates began using several creative accounting techniques to window dress USSC's financial statements. In 1985, the Securities and Exchange Commission (SEC), after a lengthy investigation, concluded that USSC management had deliberately and materially overstated the profits of the company for the period 1979-1982. USSC was ordered to revise and reissue its financial statements for those years, resulting in a $26 million reduction in its previously reported earnings. Additionally, Hirsch and other USSC executives were forced to repay large bonuses they had earned on the overstated profits. Ernst & Whinney, USSC's independent audit firm during the late 1970s and early 1980s, was criticized by the SEC for failing to discover the various methods used to manipulate the company's reported operating results. Among these schemes were recording shipments of product to sales employees as consummated sales transactions, improperly capitalizing litigation expenses in a patent account, and retaining the cost of retired assets in the company's financial records. The principal focus of the SEC investigation and its subsequent enforcement release for the...
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...403 Week 2 , The annual audit of Midwestern Manufacturing revealed that sales were accidentally being recorded as revenue when the goods were ordered, instead of when they were shipped. Assuming the amount in question is material and the client is unwilling to correct the error, the CPA should issue: An unqualified opinion or adverse opinion. A qualified “except for” opinion or disclaimer of opinion. A qualified “expect for” opinion or adverse opinion. An unqualified opinion with an explanatory paragraph Under which of the following circumstances would a disclaimer of opinion not be appropriate? The auditor is unable to determine the amounts associated with an employee fraud scheme. Management does not provide reasonable justification for a change in account principles. The client refuses the auditor permission to confirm certain accounts receivable or apply alternative procedures to verify their balances. The chief executive officer is unwilling to sign the management representation letter. The opinion paragraph of a CPA’s reports states: “ In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly, in all material respects…” This paragraph expresses a(n) Unqualified opinion Unqualified opinion with explanatory paragraph Qualified opinion Adverse opinion 3-28 For the following independent situations, assume that you are the audit partner on theengagement: ...
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...Auditing and Assurance Standards Council Philippine Auditing Practice Statement 1003Ph GUIDANCE IN DEALING WITH REPORTS REQUIRED BY THE SEC RELATING TO INCREASE IN AUTHORIZED CAPITAL STOCK OF A CORPORATION PAPS 1003Ph PHILIPPINE AUDITING PRACTICE STATEMENT 1003Ph GUIDANCE IN DEALING WITH REPORTS REQUIRED BY THE SEC RELATING TO INCREASE IN AUTHORIZED CAPITAL STOCK OF A CORPORATION CONTENTS Paragraph Introduction………………………………………………………………… 1-2 Objective…………………………………………………………………… 3 Types of Engagements that May be Performed…………………………….. 4-14 Acceptance of an Engagement Relating to Increase in Authorized Capital Stock……………………………………………….. 15-16 Defining the Terms of an Engagement to Perform Agreed-Upon Procedures………………………………………………………………. 17-20 Reporting on Agreed-Upon Procedures Engagements……………………… 21-23 Wording of the Auditor’s Representation Letter to Accompany the Agreed-Upon Procedures Report……………………………………. 24-25 Effective Date……………………………………………………………….. 26 Appendix 1: Required SEC Procedures Relating to an Application for Increase in Authorized Capital Stock as Contained in SEC Memorandum Circular No. 6, Series of 2008 Appendix 2: Example Auditor’s Reports on Agreed-Upon Procedures Engagements Appendix 3: Illustrative Auditor’s Representation Letters 2 PAPS 1003Ph Philippine Auditing Practice Statements (PAPS or Statements) are issued by the Auditing Standards and Assurance Council...
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... Issues 1 Facts 2 Analysis 5 Conclusions/Recommendation 12 References/Bibliography 14 Issues 1. What audit procedures that, if employed by Ernst & Whinney during the 1981 USSC audit, might have detected the overstatement of the leased and loaned assets account that resulted from the improper accounting for asset retirements? 2a. For USSC to extend the useful lives of several of its fixed assets and adopt a salvage value for many of these same assets for the first time, are these changes permissible under generally accepted accounting principles? 2b. Assuming these changes had a material effect on USSC’s financial condition and results of operations, how should the changes have been disclosed in the company’s financial statements? 2c. How should these changes have affected Ernst & Whinney’s 1981 audit opinion? 3a. What are the common sized financial statements for USSC for the period 1979-1981? 3b.What are the results of computed key liquidity, solvency, activity and profitability ratios for 1980 and 1981? 3c. What are the high risk financial statement items for the 1981 USSC audit? 4a. What factors in the auditor-client relationship create a power imbalance in favor of the client? 4b. What measures in the profession could have been taken to minimize the negative consequences of this power imbalance? 5a. In your opinion, did Hope satisfactorily investigate the possibility that there were additional suspicious tooling charges being paid and...
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...Compilation of Financial Statements 2011 AR Section 80 Compilation of Financial Statements Issue date, unless otherwise indicated: December 2009 See section 9080 for interpretations of this section. Source: SSARS No. 19 .01 This section establishes standards and provides guidance on compilations of financial statements. The accountant is required to comply with the provisions of this section whenever he or she is engaged to report on compiled financial statements or submits financial statements to a client or to third parties. Establishing an Understanding .02 The accountant should establish an understanding with management regarding the services to be performed for compilation engagements1 and should document the understanding through a written communication with management. Such an understanding reduces the risks that either the accountant or management may misinterpret the needs or expectations of the other party. For example, it reduces the risk that management may inappropriately rely on the accountant to protect the entity against certain risks or to perform certain functions that are management's responsibility. The accountant should ensure that the understanding includes the objectives of the engagement, management's responsibilities, the accountant's responsibilities, and the limitations of the engagement. In some cases, the accountant may establish such understanding with those charged with governance. .03 An understanding with management and...
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...Ocean view Marine Company for the year ended December 31, 2015. Services and Related Report As you have requested, we will audit the financial statements of Oceanview Marine Company, which comprise the balance sheet for December 31, 2015, and the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. These reviews will be conducted in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. We will communicate to you any matters that we believe may require material modifications to make it conform with GAAP. Our audit will be conducted with the objective of our expressing an opinion on the financial statements. We will issue a written report upon completion of our audit of Oceanview Marine Company’s financial statements. Our report will be addressed to the board of directors of Oceanview Marine Company. We cannot provide assurance than an unqualified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph. We may reserve the right to decline is issue a report due to any reason caused by your party. Should such situation arise, we will notify you in writings. Our Resposibilities and Limitations An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures...
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...our shareholders do not approve Proposal 11, the Audit Committees will consider the selection of another accounting firm for 2016 and future years.” (Proxy Statement Pg. 26 Proposal 10 and 11) 4a-4b The Audit Fees for 2014 and 2013 were for professional services including, integrated audit of Carnival Corporation & plc’s Consolidated Financial Statements, systems of internal control of financial statements, audits of IFRS financial statements, statutory audit of various international subsidiaries, consents, registration statements, and other agreed-upon procedures. The Audit-Related Fees for 2013 for services performed on pension plans and 2014 was used for the review of our sustainability report. Tax Fees for 2014 and 2013 were for International Tax Research. All other Fees for 2014 and 2013 were for consulting services and digital advertising due to PricewaterhouseCoppers LLP’s acquisition of an existing service provider, all services were approved by the Audit Committees, so the Audit Committees didn’t rely on the “de minimis” exception, Rule 2-01(c)(7)(i)(C) under Regulation S-X (Proxy statement PG. 79) | 2014 | 2013 | Audit Fees | $5.3 | $5.6 | Audit-Related Fees | 0.0* | 0.0* | Tax Fees | 0.0* | 0.0* | All other Fees | 2.3 | 0.1 | Total | $7.9 | $5.7 | (*) Less than $50,000 4c Since 2003, the Audit Committees Adopted Key Policies and Procedures. With pre-approval of audit and permissible non-audit services must be provided by independent registered...
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...standard unqualified audit report and explain the meaning of each part.How do the parts compare with those found in a qualified report? Seven part of a standard unqualified audit report: 1. Report title Auditing standards required that the report be titled and that the title include the word independent.The requirement that the title include the word independent is intended to convey to users that the audit was unbiased in all aspects. 2. Audit report address The report is usually addressed to the company,its stockholders , or the board of directors.In recent years,it has become customary to address the report to the board of directors and stockholders to indicate that the auditor is independent of the company. 3. Introductory paragraph The first paragraph of the report does three things.First,it makes the simple statement that the CA firm has done an audit.Second,it lists the financial statement that were audit.Third,the introductory paragraph states that the statements are responsibility of management and that the auditor’s responsibility of management and that the auditor’s responsibility is to express an opinion on the statements based on an audit. 4. Scope paragraph The scope paragraph is a factual statement about what the auditor did in the audit. 5. Opinion paragraph The final paragraph in the standard standard report states the auditor’s conclusion based on the results of the audit.The opinion paragraph is stated as an opinion rather than as a statement...
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