Other Assurance Services

1. Other Assurance Services Chapter 25

2. Review and Compilation Services The standards for compilations and reviews of financial statements are called Statements on Standards for Accounting and Review Services (SSARS).

3. Relationship Between EvidenceAccumulation and Assurance Attained High (Audit) Level of Assurance Attained Moderate (Review) None (Compilation) Minimal (Compilation) Significant (Review) Extensive (Audit) Amount of Evidence Accumulated

4. 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.

5. Procedures Suggestedfor Reviews • Obtain knowledge of the accounting • principles of the client’s industry • Obtain knowledge of the client • Makeinquiries of management • Perform analytical procedures • Obtain letter of representation

6. Make Inquires of Management 1. Discover 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. Ask if each account on the financial statements was prepared in conformity with GAAP.

7. We have reviewed the accompanying balance sheet of XYZ Company as of December 31, 199X, and the related statements of income, retained earnings, and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants All information included in these financial statements is the representation of the management of XYZ Company. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole Accordingly, we do not express such an opinion 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 generally accepted accounting principles

8. Compilation Services A compilation service engagement is defined in SSARS as one in which accountants present to a client or third party, financial statements that the accountant has prepared. The CPA firm does not express any assurance on the statements.

9. 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 • Possess knowledge about the accounting • principles and practices of the client’s industry • Know the client, including the nature of its • business transactions, accounting records, • and content of its financial statements

10. Requirements for Compilation • Read the compiled financial statements • and be alert for any obvious omissions • or errors in arithmetic and GAAP

11.    We have compiled the accompanying balance sheet of XYZ Company as of December 31, 1 99X, and the related statements of income, retained earnings, and cash flows for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

12. Form of Compilation Report 1.Compilation with full disclosure 2. Compilation that omits substantially all disclosures 3.Compilation without independence

13. Attestation Engagements • Attestation standards • Types of attestation engagements • Levels of service

14. Types of Engagements and Related Reports Type of Engagement Amount of Evidence Level of Assurance Form of Conclusion Distribution Examination Review Agreed-upon procedures Extensive Significant Varying High Moderate Varying Positive Negative Findings General General Limited

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

16. SysTrust Services In a SysTrust engagement, the SysTrust licensed CPA evaluates a company’s computer system using Trust Services principles and criteria. The report may address a single Trust Servicesprinciple or any combination of principles.

17. Prospective Financial Statements • Forecasts and projections • Use of prospective financial statements • Types of engagements • Examination of prospective financial statements

18. 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 matters.

19. SPECIAL REPORTS

20. Other Audits or Limited Assurance Engagements • Other comprehensive basis of accounting • Specified elements, accounts, or items • Debt compliance letters and similar reports

21. Other ComprehensiveBasis 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

22. We have audited the accompanying statement of assets and liabilities arising from cash transactions as of XYZ Company as of December 31, 1 99X, and the related statements of revenue collected and expenses paid for the year then ended These financial statements are the responsibility of the Company’s management Our responsibility is to express an opinion on these financial statements based on our audit. Standard scope paragraph As described in Note 1, these financial statements were prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than GAAP. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities arising from cash transactions of XYZ Company as of December 31, 1 99X, and the revenue collected and expenses paid during the year then ended, on the basis of accounting described in Note 1.

23. Specified Elements,Accounts, or Items Auditors are often asked to audit and issue reports on specific aspects of financial statements.

24. Specified Elements,Accounts, or Items Two differences in these types of audits: 1. Materiality is defined in terms of the elements, accounts, or items being audited rather than for the overall statements. 2. The first standard of reporting under GAAS does not apply.

25. Debt Compliance Lettersand Similar Reports The engagement and report should be limited to compliance matters the auditor is qualified to evaluate. The auditor should provide a debt compliance letter only for a client for whom the auditor has done an audit of the overall financial statements.

26. Debt Compliance Lettersand Similar Reports The auditor’s opinion is in the form of a negative assurance, stating that nothing came to the auditor’s attention that would lead the auditor to believe there was noncompliance.

27. Compliance Reports In connection with our audit, nothing came to our attention that caused us to believe that the Company was not in compliance with any of the terms, covenants, provisions, or conditions of Section 8 to 15, inclusive, of the Indenture dated July 21, 199X, with Banco Popular de Puerto Rico However, our audit was not directed toward obtaining knowledge of such noncompliance.

28. End of Chapter 25