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Wajid . Keng
audotsetoap
tahan
Attestation, Audit Related
Services and Non-Audit
Services

TOPIC 1

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 client company hired audit firm
-

Assurance services opinion

Def for assurance services →provide
● An independent professional service that improves the
quality of information for decision-makers.
● Types of assurance service
perkhidmatan Penge Sanam

-Attestation service/engagement- a consulting kebolehpercayaah

service in
which CA expresses a conclusion about the reliability of a
written statement that is the responsibility of someone else.
Include non financial information
-Web trust & system trust
Special purpose audit engagements
• Attestation engagements:-
=

-The examination of prospective financial info

-Engagements to review FS dipersetuyvi
-Engagements to perform agreed-upon
-Engagements to compile financial info
©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0
 Bakal
Issued audit
→

Prospective Financial Statements

-predicted or expected FS in some future period
① Ramadan
2 types – Forecasts (prospective FS that present an entity’s expected
Financial positions, results of operations and cash flows, to the best of the
responsible
Party’s knowledge and belief. E.g.
and protection tg required by bank as part of loan application.
requiredby
② and projections
Use of prospective financial statements
-2 categories – general (public) or limited (bank)

Types of engagements

Examination of prospective financial statements

On
can
25 - 0
©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder

and other
parties
give
opinion
→ to

that information
 Prospective Financial Statements
-predicted or expected FS in some future period

● Types – (1) Forecasts -prospective FS that present an entity’s expected

financial positions, results of operations and cash flows, to the best of the
responsible party’s knowledge and belief. E.g. required by bank as part
of loan application.
Unturon
(2) Projections - prospective FS that present an entity’s expected
financial positions, results of operations and cash satuatay
flows, to the best of thehipotesis
lebih andaian
responsible party’s knowledge and belief, given one or more hypothetical
assumptions. E.g. The preparation of projected FS assuming that the
comp is able to increase the price of its primary product by 10% with no
reduction in units products sold.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Prospective Financial Statements (con’t)

● Use of prospective financial statements

-2 categories – general (third party) or limited (third party by
with whom the responsible party is negotiating directly)
t pihak
... ketiga yang mana pihak yang
bertanggungjawab berunding secara
langsung)

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Review and Compilation Services
lower compact to audit

The standards for compilations and

reviews of financial statements are called...

Statements on Standards for Accounting

and Review Services (SSARS)

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

① Review Services
-
.

A review service (SSARS review) engagement

is designed to allow the accountant to express
limited assurance that the financial statements
are in accordance with GAAP.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Form of Report w

1. The first paragraph is similar to an audit report

except for its reference to a review service
rather than an audit.

2. The second paragraph notes that a review

consists primarily of inquiries and
analytical procedures.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Failure to Follow GAAP

If a client has failed to follow GAAP in

a review engagement, a modification
of the report is needed.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

② Compilation Services
compile the fs

A compilation service engagement is defined in

SSARS as one in which the accountant presents
to a client or third party financial statements that
the accountant has prepared.

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

tkbagi opinion theft

compile
just

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Requirements for Compilation

• Establish an understanding with the client about

the nature and limitations of the services to be
performed and a description of the report.

memiliki
• Possess knowledge about the accounting
principles and practices of the client’s industry.

}
• Know the client; the nature of the client’s analysis
do Tent
business transactions; and the basis, form, of the
and content of the financial statements.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Requirements for Compilation
• Make inquiries to determine whether
the client’s information is satisfactory.

• Read the compiled financial statements

and be alert for any obvious omissions
or errors in arithmetic and GAAP.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Form of Compilation Report

Compilation with full disclosure:

It requires disclosures in accordance with GAAP.

✗ dedohremvg
Compilation that omits substantially all disclosures:
This type of statement is usually expected to be
used primarily for management purposes only.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Form of Compilation Report Tatton
tkrndepqnmdp.ci
do
even can
→
Compilation without independence:
A CPA firm can issue a compilation report even
if it is not independent with respect to the client,
as defined by the Code of Professional Conduct.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Agreed-Upon Procedures
Engagements
The audit is limited to certain specific
audit procedures.

These are referred to as procedures

and findings engagements.

The SASs deal with financial statement

items, whereas the SSAEs deal with
nonfinancial statement subject matter.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Procedures Suggested for Review
Engagements
Obtain knowledge of the accounting
principles of the client’s industry.

Obtain knowledge of the client.

Make inquiries of management.

Perform analytical procedures.

Obtain letter of representation.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Make Inquires of Management

1. Inquire as to the company’s procedures for

recording, classifying, and summarizing
transactions and disclosing information
in the statements.
2. Inquire into actions taken at meetings of
stockholders and the board of directors.
3. Inquire of persons having responsibility
for financial and accounting matters.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Form of Report

3. The third paragraph expresses limited assurance

in the form of a negative assurance that “we are
not aware of any material modifications that
should be made to the financial statements.”

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Interim Financial Information for
Public Companies

The SEC requires quarterly financial statements

to be reviewed by the company’s external auditor
prior to the company’s filing of the Form 10Q.

Like reviews under SSARS, a review for a public

company does not provide a basis for expressing
a positive form opinion.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Interim Financial Information for
Public Companies

The review is conducted according to the

standards of the PCAOB, and there is no
reference to the SSARS in a review report.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Other Comprehensive Basis
of Accounting
Cash or modified cash basis

Basis used to comply with the requirements

of a regulatory agency

Income tax basis

A definite set of criteria having substantial

support

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Reporting Requirements

Introductory paragraph

Scope paragraph

Middle paragraph stating the accounting basis

Opinion paragraph

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 WebTrust Services

In a WebTrust assurance services engagement,

a client engages a CPA to provide reasonable
assurance that a company’s Web site complies
with certain Trust Services principles and criteria
for one or more aspects of e-commerce activities.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 WebTrust Services

The WebTrust service is a specific service

developed under the broader Trust Services
principles and criteria jointly issued in 2003
by the AICPA and CICA.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Five Trust Services Principles
The system is protected against
Security unauthorized access
(both physical and logical).
The system is available for operation
Availability
and use as committed or agreed.
Processing System processing is complete,
integrity accurate, timely, and authorized.
Personal information obtained as a result of
Online
e-commerce is collected, used, disclosed,
privacy
and retained as committed or agreed.
Information designated as confidential
Confidentiality
is protected as committed or agreed.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 SysTrust Services

In a SysTrust engagement, the SysTrust

licensed accountant evaluates a
company’s computer system using
Trust Services principles and criteria.

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 Types of Engagements and
Related Reports

Type of Amount of Level of Form of

Engagement Evidence Assurance Conclusion Distribution

meluas
Examination
Extensive High Positive General
Keta ra
Review
Significant Moderate Negative General
berbezg
-

Agreed-upon
Varying bestVarying Findings Limited
procedures
→ other services

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0

 NON-AUDIT SERVICES

HOT TOPIC AFTER ENRON-

ANDERSEN DEBACLE

CONSULTATION? UK?

WHY?

Tax-Recurring and non-recurring

©2006 Prentice Hall Business Publishing, Auditing 11/e, Arens/Beasley/Elder 25 - 0
 Assurance Services

ypÉs \ J
Attestation
→
forecasts ex : bank
web trust & system trust
① prospective
I
comp .

projective ex can
:

increase

✓
the price ✓
trust
limited 5
general
cthird party ) Cthird party ) ① security
negotiating
②
-

availability
directly

③ processing integrity
② review and compilation ④ online privacy
( SSARS? ③ confidentiality
t
.

express limited compile the

assurance document ex : FS

③ Agreed -

to
Upon Procedures

procedures
and finding engagement
① obtain knowledge client's industry
② obtain knowledge client
③ make inquiries
④ perform analytical procedures
⑤ obtain letter of representation