Special Reports & Accounting & Review Services

1. Special Reports & Accounting & Review Services Key Points for this Course: • Refresh Attest Function • Non-Audit Levels of F.S. Engagements

2. Most Common F.S. Engagements • Audits (Examinations) (Attest) • Reviews (Attest) • Compilations (Attest, but not assurance) (Attest engagement per SSARS 19 effective for periods ending on/after 12/15/2010, but not an assurance engagement.)

3. Professional StandardsReviews and Compilations Reviews of Interim F.S. - Public Company • AU 722 (SAS 100) (Must reference PCAOB standards which incorporates this AIPCA Section.) Reviews of Interim F.S. – Company with Audited F.S. • AU 722 (AU-C 930) Reviews & Compilations of F.S. • Statements on Standards for Accounting & Review Services (SSARS) (AR Section of AICPA’s Professional Standards)

4. Professional StandardsReviews and Compilations AU 722 (AU-C 930) • If latest annual F.S. were audited and • Engaged to audit current annual F.S. or Expect to audit current annual F.S. and audited last year and • Client uses same financial reporting framework for both the interim and annual F.S. (Also applies to most condensed F.S.)

5. Professional StandardsReviews and Compilations AU 722 (AU-C 930) • If latest annual F.S. were audited and • Engaged to audit current annual F.S. or Expect to audit current annual F.S. and audited last year and • Client uses same financial reporting framework for both the interim and annual F.S. (Also applies to most condensed F.S.)

6. Reviews - Minimum Procedures • Establish & document through a written communication with Mgmt, an understanding with mgmt regarding services to be performed. (engagement letter) • Gain understanding of the client’s industry. • Gain knowledge of the client. • Read F.S. for obvious errors or omissions. • Assess risks of material misstatements. • Perform analytical procedures & ask about significant variances.

7. Reviews - Minimum Procedures(con’t) • Inquire of members of mgmt who have responsibility for financial & accounting matters. (next 2 slides) • Inquire concerning actions taken at meetings of stockholders, the board of directors, committees of the board of directors that may affect F.S. • Obtain reports from other accountants engaged to audit or review the financial statements of significant components of the reporting entity, its subsidiaries, and other investees. • Follow up on CPA Observations/Concerns. • Obtain management representation letter (class web site) • Assess Going Concern risks, seek mgmt conclusions & adequacy of F.S. reporting or disclosure for GAAP compliance.

8. Reviews - Client Inquiries • Whether the financial statements have been prepared in conformity with the applicable financial reporting framework • The entity's accounting principles and practices and the methods followed in applying them and the entity’s procedures for recording, classifying, and summarizing transactions and accumulating information for disclosure in the financial statements • Unusual or complex situations that may have an effect on the financial statements • Significant transactions occurring or recognized near the end of the reporting period • The status of uncorrected misstatements identified during the previous engagement

9. Reviews - Client Inquiries (con’t) • Questions that have arisen in the course of applying the review procedures • Events subsequent to the date of the financial statements that could have a material effect on the financial statements • Their knowledge of any fraud or suspected fraud affecting the entity involving management or others where the fraud could have a material effect on the financial statements (for example, communications received from employees, former employees, or others) • Significant journal entries and other adjustments • Communications from regulatory agencies

10. Review Report – 1st Paragraph We have reviewed the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. A review includes primarilyapplying analytical procedures to management’s (owners’) financial data and making inquiries of company management (owners). A review is substantiallyless in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I (we) do not express such an opinion.

11. Review Report – 2nd Paragraph Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

12. Review Report - 3rd Paragraph Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require me (us) to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report.

13. Review Report – 4th Paragraph 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 accounting principles generally accepted in the United States of America.

14. Compilations - Minimum Procedures • Establish & document through a written communication with Mgmt, an understanding with mgmt regarding services to be performed. (engagement letter) • Gain understanding of the client’s industry. • Gain knowledge of the client. • Read F.S. for obvious errors or omissions. • Request & consider mgmt’s response & corrections to CPA observations. • Assess Going Concern risks, seek mgmt conclusions & adequacy of F.S. reporting or disclosure for GAAP compliance.

15. Compilation Report - 1st Paragraph We have compiled the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. We have notaudited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America.

16. Compilation Report - 2nd Paragraph Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

17. Compilation Report – 3rd Paragraph Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist 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.

18. Compilation Report – Other Paragraphs Management has elected to omit substantially all of the disclosures required by accounting principles generally accepted in the United States of America. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the company’s financial position, results of operations, and cash flows. Accordingly, the financial statements are not designed for those who are not informed about such matters. We are not independent with respect to XYZ Company. (Reason may be disclosed.)